Tax Treatment of Native Title Benefits
SUMMARY OF CONSULTATION PROCESS

The Government announced on 6 June 2012 that it would confirm that income tax was not payable on certain native title benefits.
This measure was included in Tax Laws Amendment (No. 6) Bill 2012, which was introduced into Parliament on 28 November 2012. 
Consultation process
A consultation paper entitled ‘Native Title, Indigenous Economic Development and Tax’ was released for public comment between 18 May 2010 and 30 December 2010, during which consultation was suspended for the duration of the caretaker period.  The consultation paper examined three options to clarify the tax treatment of native title benefits: (i) an income tax exemption; (ii) a new exempt vehicle; and (iii) a native title withholding tax. 
33 submissions to the consultation paper were received, including one confidential submission.  Submissions were primarily supportive of an income tax exemption for native title agreements. 
Submissions to the consultation paper can be viewed by clicking the following link: http://www.treasury.gov.au/ConsultationsandReviews/Submissions/2010/Native-Title-Indigenous-Economic-Development-and-Tax/Submissions. 
Consultation on the draft legislation was conducted between 27 July 2012 and 24 August 2012.  Native title representative bodies and native title service providers were directly notified of the release of the exposure draft amendments and were encouraged to make submissions as appropriate. 
Submissions on the exposure draft will be available shortly on the Treasury website. 
Summary of key issues 
Key Issues and Responses
There was strong support in submissions made to the 2010 consultation paper for clarifying that certain native title benefits are not subject to income tax. 
Most submissions to the exposure draft supported the intent of the measure, but raised technical issues or sought to expand the application of the measure to other types of payments or activities. 
Suggestions to expand the application of the measure would be contrary to the intent of the measure, which is to clarify the tax treatment of certain native title benefits by confirming that they are not subject to income tax, and as such were not adopted.  
Two changes were made following comments raised in submissions to the exposure draft legislation. 
Following concerns raised in consultation about the applicability of the measure to native title agreements made under legislation where native title has yet to be determined or may not be determined, a change has been made to the definition of ‘native title benefit’ to ensure that benefits provided under such agreements are covered. 
A further change has been made to confirm that there are no capital gains tax implications arising from creating a trust that is an Indigenous holding entity over native title rights, transferring native title rights to an Indigenous holding entity or Indigenous person, or the surrendering, cancelling or similarly ending of native title rights.  
The structure of the provisions also changed since the exposure draft, but not the overall intent of the provisions.  
Changes were also made to the Explanatory Memorandum to better explain the intended operation of the measure.  

Feedback
Feedback on the consultation process for this measure can be forwarded to consultation@treasury.gov.au .  Alternatively, you can contact Jessica Mohr on 6263 3187.
Thank you to all participants in the consultation process.