Australia Announces Native Title Changes

by Mary Swire, Tax-News.com, Hong Kong

20 May 2010

The Australian government has commenced a national consultation on the tax treatment of native title, including the interaction of native title, indigenous economic development and the tax system.

Assistant Treasurer, Senator Nick Sherry, with the Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin and the Attorney General, Robert McClelland, have released a paper Native Title, Indigenous Economic Development and Tax to guide the national consultation.

"The Rudd government is actively considering ways to provide greater clarity and increased certainty for native title holders on how the tax system and native title interact," the Assistant Treasurer said. "This is a critical issue to address as the tax system can play a valuable role in supporting the resolution of claims and the management of benefits under native title agreements – both things will directly boost practical economic outcomes for Indigenous Australians."

The consultation paper sets out three possible approaches to reform: a tax exemption for native title payments; a new tax exempt vehicle; or a native title withholding tax.

"This is a great opportunity for all stakeholders to be involved in a national consultation on this important issue," added Sherry.

Macklin, said native title was critical to economic development in Indigenous communities.

"It is important to look closely at existing arrangements to make sure they are working effectively to harness the potential of native title payments to create employment and economic benefits over the long-term, for generations of Indigenous Australians," she observed.

McClelland also welcomed the paper, noting that: "Native title agreements can deliver real economic benefits to Indigenous communities."

"Addressing the tax treatment of native title complements other measures the Government is taking to improve the management of benefits obtained through native title agreements and ensuring those agreements provide sustainable benefits for current and future communities," McClelland said.

"Attempts have been made in the past to provide clarity on the tax treatment of native title but they weren't followed through. "A native title withholding tax was announced, but not implemented, by the previous government in 1998 for example," Sherry explained.

In addition to the three main policy proposals, the consultation paper also discusses how existing deductible gift recipient categories could be better adapted to reflect the needs of Indigenous communities and how non-legislative approaches, such as guidance materials, could be improved.

"This is an important chance for the whole community to have their views heard on this important set of issues and I strongly encourage widespread involvement," Sherry said.

The submission period for the consultation closes on July 2, 2010.

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