The Taxation of Mining Payments to Traditional Owners: An Unfair Blunt Tool?

Abstract

An aspect of taxation law that receives little attention is the taxation of payments made by mining companies to Indigenous owners in return for the exploration and mining rights to their traditional lands. The current position in Australia is far from clear. Ultimately, this is because Australian taxation law concepts are entirely foreign and unsuitable in the context of communally held inalienable aboriginal/Native title. Moreover, it is contended that Australian taxation law does not promote justice and reconciliation but rather in this context operates as a blunt tool. To tax Indigenous communities as a result of acts that negatively impact on their traditional ownership is incongruous.On 18 May 2010 the Government announced the commencement of a national consultation on the tax treatment of Native title. The then Assistant Treasurer, Senator Nick Sherry recognised the need for greater clarity and increased certainty for native title holders on how the tax system and native title interact. The then Attorney General, Robert McClelland, noted the need to improve the management of benefits obtained through native title agreements and ensuring those agreements provide sustainable benefits for current and future communities. This coincided with the release by the government of Native Title, Indigenous Economic Development and Tax, to guide the national consultation. The outcome of the consultation process was the Tax Laws Amendment (2012 Measures No 6) Act 2013 (Cth) which renders certain payments to, or for the benefit of, Indigenous persons exempt from income tax. This paper critically evaluates the new provisions. It suggests that while the legislation may at first glance appear simple its focus is too narrow and its implementation will be complex. It ultimately concludes that while this is a positive step forward, the proposal does not go far enough. It considers an alternative model, an Indigenous Community/Economic Development Corporation (‘IEDC’), that would more effectively ensure all aboriginal/Native title payments to, or for the benefit of, Indigenous persons are exempt from income tax. This is appropriate given the history of uncompensated extinguishment of aboriginal title in Australia. The law should promote the ability of Indigenous communities to optimise the financial benefits stemming from aboriginal/Native title agreements.