Receiving native title benefits – what it means for your tax obligations

Native title benefits are paid to recognise the rights and interests Aboriginal and Torres Strait Islander peoples have with their land and waters, which comes from their traditional laws and customs, under Australian law.

Tax and native title benefits

On 28 June 2013, Parliament passed laws that affect you if you are an Aboriginal or Torres Strait Islander person or an Indigenous holding entity and you receive a native title benefit. The new law says certain payments or non-cash benefits you receive in relation to your native title rights are not subject to tax, including capital gains tax. These laws apply retrospectively to cover native title benefits received from 1 July 2008.

These changes mean that:

  • native title benefits are now considered non-assessable non-exempt (NANE) income and are therefore not subject to income tax (however, income earned from investing a native title benefit is assessable as income)
  • any capital gains or losses made from transferring native title rights to an Indigenous holding entity or Indigenous person are disregarded
  • any capital gains or losses made from surrendering or cancelling native title rights are disregarded.

Example 1 – Individual receiving a native title benefit

Mae is an Aboriginal woman who lives in Western Australia. Every year, she receives a $100,000 native title benefit from a mining company. The mining company uses the land to mine for iron ore.

Mae is not taxed on this $100,000 because it is a native title benefit, which is NANE income and is not taxable.

Example 2 – Individual receiving an assessable native title benefit

ABC Enterprises Trust is paid a native title benefit of $500,000. This payment is part of the income of the trust. The trust is not an Indigenous holding entity because its beneficiaries are not limited to Aboriginal and Torres Strait Islander peoples.

The trustee provides non-cash benefits including training and education to David, who is an Indigenous beneficiary of the trust. The non-cash benefit the trust provides for David is not NANE, which means it is assessable income for David. As a result, the benefit David has received is subject to tax.

Example 3 – Native title benefits and interest income

ABC Enterprises Trust (ABC) and 123 Trust (123) are both Indigenous holding entities. 123 is a beneficiary of ABC.

In August 2012, ABC receives a native title benefit of $1 million from a mining company and decides to invest this money.

The investment earns $50,000 in interest in 2013. The trustee of ABC distributes $540,000 of its income to 123 on 30 June 2013. This amount is made up of:

  • $500,000 from the native title benefit
  • $40,000 of the interest from the investment.

The remaining $10,000 interest and the balance of the native title benefit are retained by ABC. In its 2012–13 trust return, ABC included all of the $50,000 interest received as part of its assessable income. However, it excluded the native title benefit received from its assessable income, as it is NANE.

ABC also completed the Statement of distribution item for its trust tax return reflecting the distribution of interest income to 123.

ABC is not liable for tax on that $40,000 interest distributed to 123. In effect, ABC will only pay tax on the $10,000 interest income it did not distribute.123 must include the $40,000 interest received as a beneficiary of the trust as assessable income in their 2012–13 tax return.

The $500,000 123 received as a native title benefit from ABC is NANE income, which is not taxable.

End of example

Administrative treatment

We accepted tax returns as lodged up until enactment of the legislation on 28 June 2013. Now that the new law is enacted, taxpayers will need to review their positions back to the 2008-09 income year. If you:

  • have returned income from a native title benefit – you can seek amendment and interest on overpayment will be paid
  • have not returned income from a native title benefit – you do not need to do anything more.

Find out more

For more information you can:

    Last modified: 01 Mar 2016QC 39678