Edited version of your private ruling

Authorisation Number: 1012579850256

Ruling

Subject: Income tax: non-assessable non-exempt income - native title benefit, indigenous holding entity

Question 1

Is the Charitable Trust (the Trust) an 'indigenous holding entity' under subsection 59-50(6) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Are the payments made to the Trust under the Project Development Agreement 'native title benefits' under subsection 59-50(5) of the ITAA 1997?

Answer

Yes. However, the native title benefits do not constitute non-assessable non-exempt income of the Trust under section 59-50 of the ITAA 1997.

This ruling applies for the following period:

Year ended 30 June 2014.

The scheme commences on:

1 July 2013.

Relevant facts and circumstances

Indigenous persons (the Applicants) acting for a group of indigenous people (the Indigenous group) registered native title claim (the claim) in relation to a particular area of land and waters (the claim area).

The claimed native title right of the Applicants' include rights to access, hold indigenous ceremonies and hunt, gather and fish within the land and waters the subject of the claim area (as well as other claimed communal rights).

The Federal Court determined that the Indigenous group held native title rights in the claim area.

The claim area falls within an area that an agreement exists between the State Government (the Government) and Mining Co Pty Ltd (Mining Co) (the Government Agreement). Mining Co is to undertake works at particular locations (the project area) within the claim area that will result in significant disturbance to the land.

In respect of the Government Agreement and in accordance with the requirements of Subdivision P of Division 3 of Part 2 of the Native Title Act 1993 (NTA), the Government issued notices to the Applicants and the Indigenous group relating to future acts relating to the project area that will affect and impact the claim area.

In respect of the Government Agreement and in accordance with the requirements of Subdivision P of Division 3 of Part 2 of the NTA, Mining Co entered into various connected agreements relating to the claim area (the NTA Agreements) with the Applicants and the Indigenous group, including ancillary agreements. Those ancillary agreements include an agreement between the Government, the Applicants, the Indigenous group and Mining Co.

Among other things, the NTA Agreements include that compensation payments will be made in full satisfaction and release of both the Government and Mining Co from obligations arising from existing or future native title claims in respect of the project area.

Under the NTA Agreements, Applicants and the Indigenous group consent and agree to certain acts necessary for the progress of works in the project area including the grant of certain titles, project approvals, the contemporaneous execution of a future act agreement and other related deeds or agreements. Also, the parties will not oppose, object to or challenge the validity of any such related articles.

The NTA Agreements also require the establishment of the Trust for charitable purposes in respect of the welfare of the Indigenous group. The Trust's deed includes, among other things:

· various articles to achieve the charitable purposes required under the NTA Agreements, including:

· the relief of poverty, sickness, distress, misfortune or destitution;

· the advancement of education;

· the promotion of health including the provision of health care services and facilities;

· the provision of transport and communication services; and

· the promotion and protection of Aboriginal culture, for 'community benefit' that satisfy the requirements for endorsement of the Trust under Subdivision 50-B of the ITAA 1997;

· specifies that community benefit means the benefit, welfare or assistance of the Aboriginal Community or any section of the Aboriginal Community comprising one or more of its members including but not limited to:-

· community development;

· managing the affairs of the Indigenous group taking into account the maintenance of their traditional culture;

· improving the social and health circumstances of the Indigenous group;

· developing and acquiring communities and community facilities within the Lands;

· advancing the education and training of the Indigenous group;

· providing employment opportunities to the Indigenous group;

· developing community projects;

· assisting the Indigenous group in asserting and maintaining their traditional rights and interests to land including the protection of culturally significant areas.

· specifies that the beneficiaries are the members of the Indigenous group

· restricts cash payments to beneficiaries unless in pursuit of the charitable purposes

· clauses outlining the trustee's powers, including:

· for the purpose of the charitable objects, the trustee may modify or vary the trusts and powers declared

· the trustee may supplement, alter or amend the administrative provisions of the deed to effect the charitable objects of the trust.

Under the NTA Agreements the Trust is to receive certain payments that would otherwise be included in the Trust's assessable income.

The Trust is not endorsed as a tax concession charity under Subdivision 30-B of the Income Tax Assessment Act 1997 (ITAA 1997).

The Trust is not a registered charity under the Australian Charities and Not-for-profits Commission Act 2012 (ACNCA).

Relevant legislative provisions

Australian Charities and Not-for-profits Commission Act 2012

Section 25-5

Income Tax Assessment Act 1936

Section 128U

Income Tax Assessment Act 1997

Section 59-50

Subsection 59-50(1)

Subsection 59-50(2)

Subsection 59-50(3)

Subsection 59-50(4)

Subsection 59-50(5)

Subsection 59-50(6)

Paragraph 59-50(6)(a)

Paragraph 59-50(6)(b)

Paragraph 59-50(6)(c)

Income Tax (Transitional Provisions) Act 1997

Section 59-50

Native Title Act 1993

Part 2

Part 15

Division 2

Division 3

Subdivision P

Section 223

Subsection 223(1)

Section 238.

Reasons for decision

General discussion of the law

Non-assessable non-exempt income

Division 59 of the ITAA 1997 details particular amounts of non-assessable non-exempt income. Section 59-50 of the ITAA 1997 deals specifically with native title benefits and was introduced to clarify the tax treatment of benefits arising from native title rights.

The Tax Laws Amendment (2012 Measures No. 6) Bill 2012 (TLAB 2012 No. 6) introduced the provisions '…to make it clear that native title benefits are not subject to income tax…' and '…to clarify that there are no capital gains tax (CGT) implications arising from certain CGT events involving native title rights'(Explanatory Memorandum to TLAB 2012 No. 6 (EM TLAB 2012 No. 6)). The amendments apply for income years commencing on or after 1 July 2008.

Section 59-50 of the ITAA 1997 provides:

59-50(1) To the extent that a *native title benefit would otherwise be included in your assessable income, it is not assessable income and is not *exempt income if you are an *Indigenous person or an *Indigenous holding entity.

59-50(2) To the extent that an amount, or other benefit, arising directly or indirectly from a *native title benefit would otherwise be included in your assessable income, it is not assessable income and is not *exempt income if you are an *Indigenous person or an *Indigenous holding entity.

Exclusions

Subsection 59-50(3) of the ITAA 1997 provides that neither subsection 59-50(1) of the ITAA 1997 nor subsection 59-50(2) of the ITAA 1997 applies to an amount, or benefit, to the extent that it:

(a) is for the purposes of meeting the provider's administrative costs; or

(b) is remuneration or consideration for the provision of goods or services.

Subsection 59-50(4) of the ITAA 1997 provides that subsection 59-50(2) of the ITAA 1997 does not apply to an amount, or benefit, to the extent that it arises directly or indirectly:

(a) from so much of:

(i) the *native title benefit; or

(ii) an amount, or benefit, arising directly or indirectly from the native title benefit;

as is not *non-assessable non-exempt income of an entity because of this section; or

(b) from an entity investing any or all of:

(i) the native title benefit; or

(ii) an amount, or benefit, arising directly or indirectly from the native title benefit.

Indigenous holding entity

An 'indigenous person' is defined by section 995-1 of ITAA 1997 as a member of the Aboriginal race of Australia or a descendent of an Indigenous inhabitant of the Torres Strait Islands.

An 'indigenous holding entity' is defined in subsection 59-50(6) of the ITAA 1997 and is:

(a) a *distributing body; or

(b) a trust, if the beneficiaries of the trust can only be *Indigenous persons or Indigenous holding entities; or

(c) a *registered charity.

Paragraph 1.32 EM TLAB 2012 No. 6 discussed:

Defining an Indigenous holding entity as including a trust for Indigenous persons and distributing bodies is intended to apply to a broad range of circumstances, such as where a native title benefit is held by an ordinary corporation but where that entity is acting as trustee in respect of the native title benefit.

Distributing body

'Distributing body' is defined in section 128U of the Income Tax Assessment Act 1936 (ITAA 1936) and means:

(a) an Aboriginal Land Council established by or under the Aboriginal Land Rights (Northern Territory) Act 1976;

(b) a corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006; or

(c) (Repealed by No 125 of 2006)

(d) any other incorporated body that:

(i) is established by or under provisions of a law of the Commonwealth or of a State or Territory that relate to Indigenous persons; and

(ii) is empowered or required (whether under that law or otherwise) to pay moneys received by the body to Indigenous persons or to apply such moneys for the benefit of Indigenous persons, either directly or indirectly;

Trust whose beneficiaries can only be indigenous persons or indigenous holding entities

It is necessary to examine the beneficiaries of the trust to determine whether those beneficiaries include only entities that are indigenous persons or indigenous holding entities. A trust with potential beneficiaries who are not indigenous persons or other indigenous holding entities would not qualify as an indigenous holding entity under paragraph 59-50(6)(b) of the ITAA 1997.

In relation to the administration of a trust, in their judgement for FC of T v. Bargwanna & Anor (As Trustees Of The Kalos Metron Charitable Trust) 2012 ATC 20-312; [2012] HCA 11 French CJ, Gummow, Hayne, and Crennan JJ discussed that:

7. First, it may be observed that in many respects the administration of a charitable trust does not differ from that of a private trust. A critical distinction is that a trust for charitable purposes lacks the individual beneficiaries who commonly hold the beneficial interest in the trust assets.

8. When delivering the reasons of the Privy Council in Latimer v Commissioner of Inland Revenue Lord Millett stated the following "general principles" respecting charitable trusts:

"It is of the essence of a charitable trust that it is a trust for the promotion or advancement of social purposes rather than a trust for individual beneficiaries. Of course, individuals may benefit from the application of trust moneys, but they are not, as individuals, the beneficiaries of the trust and may not enforce its terms. If the purposes of the trust are charitable, they may be enforced by the Attorney-General; if they are not charitable then, with certain anomalous exceptions, they are not enforceable and the trust is not valid. Whether the purposes of the trust are charitable does not depend on the subjective intentions or motives of the settlor, but on the legal effect of the language he has used. The question is not, [w]hat was the settlor's purpose in establishing the trust? [B]ut, [w]hat are the purposes for which trust money may be applied?"

In Yazbek v. Federal Commissioner of Taxation [2013] FCA 39; 2013 ATC 20-371; (2013) 209 FCR 416 (Yazbek), for the purpose of determining the period of review applicable to the taxpayer in which the Commissioner may amend an assessment, the taxpayer argued that they were merely a potential object of the discretionary trust and not a beneficiary. However, the Court held that the common usage of the term 'beneficiary' includes any person for whose benefit the trust is to be administered and who is entitled to enforce the trustee's obligation to administer the trust according to its terms. It therefore includes the potential object of a discretionary trust.

In Decision Impact Statement Yazbek v Commissioner of Taxation (DIS for Yazbek), the Commissioner's view is that consistent with the decision in Kafataris v. Commissioner of Taxation (2008) 172 FCR 242; 2008 ATC 20-048; 73 ATR 531, Yazbek confirms that the term 'beneficiary' means any person (or entity) for whose benefit a trust is to be administered and who is entitled to enforce the trustee's obligation to administer the trust according to its terms.

Registered charity

Chapter nine of the Explanatory Memorandum to Tax Laws Amendment (2013 Measures No. 2) Bill 2013 (EM TLAB 2013 No. 2) discusses miscellaneous amendments, including clarifying the tax treatment of native title benefits distributed through charities. In particular, registered charities are included in the definition of indigenous holding entities.

Paragraph 9.13 of the EM TLAB 2013 No. 2 discusses that:

A charitable trust would not generally be taxable on the receipt of a native title payment anyway because all its income would be exempt from income tax. However, if it was not an Indigenous holding entity, the chain of payments would be broken, and subsequent payments it makes out of the native title payment could become taxable in the hands of those who receive it, even if they were Indigenous persons or Indigenous holding entities. For example, certain scholarships are not exempt income and so would be assessable to an Indigenous person even if paid by a charitable trust out of a native title payment.

Section 995-1 of the ITAA 1997 defines that 'registered charity' means an entity that is registered under the Australian Charities and Not-for-profits Commission Act 2012 (ACNCA) as the type of entity mentioned in column 1 of item 1 of the table in subsection 25-5(5) of that Act. However, registered charities only came into existence on 3 December 2012 with the commencement of the ACNCA.

Section 59-50 of the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997) may apply to treat an entity as an indigenous holding entity where, during an income year starting on or after 1 July 2008 and up to the commencement of Chapter 2 of the ACNCA (3 December 2012), at that time the entity was endorsed as a tax exempt charitable entity under Subdivision 50-B of the ITAA 1997.

Application of the law

A native title benefit may constitute non-assessable non-exempt income to the extent that it would otherwise be included in the assessable income of either an indigenous person or an indigenous holding entity. In this instance, it is necessary to consider whether the Trust is an indigenous holding entity under subsection 59-50(6) of the ITAA 1997.

Distributing body

The Trust is established under the laws of Government for the purposes set out in the NTA Agreements and is to operate in accordance with the Trust Deed. The Trust is:

· not an Aboriginal Land Council established by or under the ALRNTA; or,

· not a corporation registered under the CATSI; or,

· not an incorporated body that:

· is established by or under provisions of a law of the Commonwealth or of a State or Territory that relate to Indigenous persons; and,

· is empowered or required (whether under that law or otherwise) to pay moneys received by the body to Indigenous persons or to apply such moneys for the benefit of Indigenous persons, either directly or indirectly.

Therefore, the Trust is not a distributing body within the meaning of section 128U of the ITAA 1936. Paragraph 59-50(6)(a) of the ITAA 1997 does not apply to the Trust.

Trust whose beneficiaries can only be indigenous persons or indigenous holding entities

Under paragraph 59-50(6)(b) of the ITAA 1997, the Trust must exclude any person who is not an indigenous person and any entity which is not an indigenous holding entity from being, or subsequently becoming, a beneficiary of the trust.

The Trust's deed includes that the Trust fund shall be applied exclusively for the promotion of the charitable objects in accordance with the terms of the deed.

The Trust's purpose is enabled through the trustee's utilisation of available income as set out under the Trust's deed, which includes investments, education and training, business development, community development, cultural purposes, beneficiary benefits and other income.

The Trustee may make a distribution of cash to beneficiaries (being beneficiaries as defined in the Trust deed), which is limited to a maximum specified percentage of the available income and the Trustee must first consult with the Indigenous group regarding such a proposal. However, the Trust deed specifies that such a distribution may only be made in cases of emergency or to alleviate unusual hardship or distress and the recipient receives it in their capacity as a member of the Indigenous group not in their individual capacity.

The Trust deed specifies that the charitable object of the Trust is restricted to community benefit that satisfy the requirements for endorsement of the Trust under Subdivision 50-B of the ITAA 1997. Also, the Trust deed defines that community benefit means the benefit, welfare or assistance of the Aboriginal community or any section of the Aboriginal community comprising one or more of its members.

Further, the Trust Deed defines that Aboriginal community means the Indigenous group who are holders or claimants of native title in the area of land and water covered by the claim and all other members of the Indigenous group whether or not living in the lands.

However, whilst the Trust deed defines beneficiaries, the Trust has been established as a trust exclusively for the promotion of charitable objects. As the objects of a charitable trust are purposes, with regard to the ordinary meaning of beneficiary described in the DIS for Yazbek, a charitable trust cannot have beneficiaries.

In addition, as the trustee has the power to appoint other beneficiaries by exercising the trustee's powers to vary the trust deed, the class of beneficiaries is not sufficiently restricted to only indigenous persons or indigenous holding entities to satisfy 59-50(6)(b) of the ITAA 1997.

Registered charity

As the Trust is not endorsed as a tax concession charity under Subdivision 30-B of the ITAA 1997, and is not a registered charity under the ACNCA, the Trust is not a registered charity for the purposes of paragraph 59-50(6)(c) of the ITAA 1997.

Conclusion

The Trust is not a distributing body; or, a trust where the beneficiaries of the trust can only be indigenous persons or indigenous holding entities; or a registered charity. Paragraphs 59-50(6)(a), (b) or (c) of the ITAA 1997 do not apply to the Trust.

Therefore, the Trust is not an indigenous holding entity under subsection 59-50(6) of the ITAA 1997.

To the extent that a native title benefit would otherwise be included in the assessable income of the Trust, that amount or benefit does not constitute non-assessable non-exempt income under section 59-50 of the ITAA 1997.

Question 2

General discussion of the law

Native title benefit

Native title benefit is defined in subsection 995-1(1) to have the meaning given by subsection 59-50(5) of the ITAA 1997, which provides a native title benefit is an amount, or 'non-cash benefit', that:

(a) arises under:

(i) an agreement made under an Act of the Commonwealth, a State or a Territory, or under an instrument made under such an Act; or

(ii) an ancillary agreement to such an agreement;

to the extent that the amount or benefit relates to an act that would extinguish *native title or that would otherwise be wholly or partly inconsistent with the continued existence, enjoyment or exercise of native title; or

(b) is compensation determined in accordance with Division 5 of Part 2 of the Native Title Act 1993.

Subsection 995-1(1) of the ITAA 1997 defines that 'non-cash benefit' is property or services in any form except money. If a non-cash benefit is dealt with on behalf of an entity, or is provided or dealt with as an entity directs, the benefit is taken to be provided to the entity.

Agreement made under an Act of the Commonwealth, State or Territory

Agreements that can be covered by paragraph 59-50(5)(a) of the ITAA 1997 include:

· indigenous land use agreements (ILUA) (within the meaning of the NTA)

· an agreement of the kind mentioned in paragraph 31(1)(b) of the NTA

· recognition and settlement agreements (within the meaning of the Traditional Owner Settlement Act 2010 (Vic.) (TOSA)).

In relation to ILUA, paragraph 1.27 of EM TLAB 2012 No. 6 provides the following examples:

Example 1.8 : Indigenous Land Use Agreement and native title benefits

An Indigenous group enters into an ILUA with a mining company. Under the agreement, the group sets up a trust as an Indigenous holding entity to receive cash payments in the form of profit-sharing payments and milestone lump-sum payments. The agreement also provides for non-cash benefits in the form of training for the beneficiaries of the trust. As the agreement is an ILUA entered into under the NTA and the trust satisfies the definition of an Indigenous holding entity, the benefits received by the trust and its Indigenous beneficiaries are native title benefits and thus NANE income.

However, paragraph 59-50(5)(a) of the ITAA 1997 does not require a determination of native title under the NTA. This is discussed in paragraph 1.28 of the EM TLAB 2012 No. 6, which explains:

It is possible for an amount or benefit arising under an agreement to qualify as a native title benefit even if it is later found that native title does not exist or no formal determination of native title is ever made. It is sufficient that the agreement is made under Australian legislation and the amount or benefit otherwise meets the criteria of the provision, if the acts to which the agreement pertains would extinguish or impair native title if it was found to exist. This is consistent with the treatment of agreements under the NTA, where the agreement continues in force even if it is later found that native title does not exist.

Example 1.9 : Indigenous Land Use Agreement where subsequently no native title exists and native title benefits

Members of an Indigenous group enter into an ILUA with a mining company. While the members of the group assert native title rights and interests over the land in question, they do not have a native title determination at the time the ILUA is entered into. Under the agreement the mining company will pay two lump sum amounts to the group, one at the time of signing the ILUA and another five years later. Prior to the second payment being received by the Indigenous group a determination is made that native title does not exist. However, the NTA provides for the ILUA to continue in operation regardless of whether native title is ultimately found to exist. As the agreement is an ILUA entered into under the NTA and the payment is being made directly to Indigenous persons all the benefits received by members of the Indigenous group under the agreement are native title benefits and thus NANE income.

Example 1.10 : 'Right to negotiate' agreement and native title benefits

An Indigenous group has a registered application for native title in place, but a determination has not yet been made. The Indigenous group enters into negotiations with a mining company under the 'right to negotiate' provisions of the NTA. The parties subsequently enter into a contractual agreement under the NTA. Under the terms of the agreement the members of the Indigenous group will set up a trust to receive cash payments. The payments under the agreement are to be paid to the trust at four different times during the life of the agreement. As the payments are made under an agreement made under Commonwealth legislation, and the payments satisfy the other criteria, they are native title benefits and thus NANE income of the persons in the Indigenous group.

Also, paragraph 1.29 of the EM TLAB 2012 No. 6 discusses that a native title benefit includes amounts or benefits that arise under ancillary agreements to an agreement made under Commonwealth or State or Territory legislation. An ancillary agreement is a subsidiary agreement that is directly connected to a primary agreement and may provide details not contained in the primary agreement. EM TLAB 2012 No. 6 provides the following example:

Example 1.11 : Ancillary agreements and native title benefits

Members of an Indigenous group enter into an agreement under section 31 of the NTA. This agreement provides that an ancillary agreement will be made later setting out the details of the payment of the native title benefit being provided. The ancillary agreement specifies that the members of the group will receive payments every six months for the next 10 years. As the ancillary agreement is part of the agreement which is made under Commonwealth legislation, and assuming the benefit provided satisfies the other criteria, the native title benefit provided to the Indigenous group under the ancillary agreement will be NANE income.

Division 3 of Part 2 of the NTA deals with future acts that affect native title. Subdivision P of Division 3 of Part 2 of the NTA sets out the procedures, where the parties to an agreement made in respect of a future act possess the right to negotiate.

Generally, under section 238 of the NTA valid future acts are subject to the non-extinguishment principle, meaning that native title is not extinguished by the agreement in respect of the undertaking of the future act.

Section 31 of Division 3 of Part 2 of the NTA sets out the normal negotiation procedure and provides:

(1) Unless the notice includes a statement that the Government party considers the act attracts the expedited procedure:

(a) the Government party must give all native title parties an opportunity to make submissions to it, in writing or orally, regarding the act; and

(b) the negotiation parties must negotiate in good faith with a view to obtaining the agreement of each of the native title parties to:

(i) the doing of the act; or

(ii) the doing of the act subject to conditions to be complied with by any of the parties.

Note: The native title parties are set out in paragraphs 29(2)(a) and (b) and section 30. If they include a registered native title claimant, the agreement will bind all of the persons in the native title claim group concerned: see subsection 41(2).

Relates to an act affecting native title

Native title is defined in subsection 995-1(1) of the ITAA 1997 to have the same meaning as in the NTA, which section 223 of the NTA provides:

(1) The expression native title or native title rights and interests means the communal, group or individual rights and interests of Aboriginal peoples or Torres Strait Islanders in relation to land or waters, where:

(a) the rights and interests are possessed under the traditional laws acknowledged, and the traditional customs observed, by the Aboriginal peoples or Torres Strait Islanders; and

(b) the Aboriginal peoples or Torres Strait Islanders, by those laws and customs, have a connection with the land or waters; and

(c) the rights and interests are recognised by the common law of Australia

…

Subsection 223(2) of the NTA expands the definition to include hunting, gathering or fishing rights and interests. Whereas subsection 223(3) of the NTA includes other interests that are converted into, or replaced by, statutory rights and interests.

The term act is not defined in the ITAA 1997 but is broadly defined in section 226 of the NTA to include:

Section affects meaning of act in references relating to native title

(1) This section affects the meaning of act in references to an act affecting native title and in other references in relation to native title.

Certain acts included

(2) An act includes any of the following acts:

(a) the making, amendment or repeal of any legislation;

(b) the grant, issue, variation, extension, renewal, revocation or suspension of a licence, permit, authority or instrument;

(c) the creation, variation, extension, renewal or extinguishment of any interest in relation to land or waters;

(d) the creation, variation, extension, renewal or extinguishment of any legal or equitable right, whether under legislation, a contract, a trust or otherwise;

(e) the exercise of any executive power of the Crown in any of its capacities, whether or not under legislation;

(f) an act having any effect at common law or in equity.

Acts by any person

(3) An act may be done by the Crown in any of its capacities or by any other person.

Section 237A of Part 15 of division 2 of the NTA provides that:

The word extinguish, in relation to native title, means permanently extinguish the native title. To avoid any doubt, this means that after the extinguishment the native title rights and interests cannot revive, even if the act that caused the extinguishment ceases to have effect.

EM TLAB 2012 No. 6 does not discuss any specific circumstances where an amount or benefit relates to an act that would extinguish native title or that would otherwise be wholly or partly inconsistent with the continued existence, enjoyment or exercise of native title.

However, EM TLAB 2012 No. 6 discusses at paragraph 1.28 that it is sufficient that the agreement is made under Australian legislation and the amount or benefit otherwise meets the criteria of the provision, if the acts to which the agreement pertains would extinguish or impair native title if it was found to exist. This indicates that acts specified within agreements made under Australian legislation, such as the NTA, are those acts to which subsection 59-50(5) of the ITAA 1997 refers.

As to the timing of such an act, it is considered that the use of the term 'would' includes an act that is yet to occur and that will affect native title in the manner described under subsection 59-50(5) of the ITAA 1997, whether it is determined at some later time that native title is found to exist or not.

In examination of paragraph 59-50(5)(a) of the ITAA 1997, an amount or non-cash benefit may be a native title benefit to the extent the amount or benefit 'relates to' an act. In Tooheys Ltd v. Commissioner of Stamp Duties (NSW) (1961) 105 CLR 602; (1961) 35 ALJR 109; [1962] ALR 195 (Tooheys), Taylor J explained:

There can be no doubt that the expression "relating to" is extremely wide but it is also vague and indefinite. Clearly enough it predicates the existence of some kind of relationship but it leaves unspecified the plane upon which the relationship is to be sought and identified. That being so all that a court can do is to endeavour to seek some precision in the context in which the expression is used.

To establish the context paragraph 59-50(5)(a) of the ITAA 1997 it is necessary to have regard to EM TLAB 2012 No. 6, which paragraph 1.28 refers to 'the act to which an agreement pertains'. This tends to indicate that the amount or benefit may be a native title benefit to the extent that such an amount or benefit relates to the acts described in an agreement, where the carrying out of those acts would result in the extinguishment or impairment of native title.

Application of the law

Under the Government Agreement, the Government made an agreement with the Joint Venturers in relation to various matters relevant to the mining areas as defined in that agreement, which includes the granting of mineral or mining leases over those mining areas.

In accordance with the Government Agreement, the Government issued a future act notice under section 29(2) of the NTA in relation to the granting of mining tenements over land and waters for which the Applicants registered the claim. The notice indicated that the granting of a mining lease would result in the disturbance to the land by mining treatment and transportation of material.

The NTA provides that a future act agreement carries the right to negotiate under Subdivision P of the NTA, which is to be negotiated in accordance with the procedure under section 31 of the NTA. With reference to examples 1.10 and 1.11 of the EM TLAB 2012 No. 6, an agreement carrying the right to negotiate under the NTA and negotiated according to section 31 of the NTA would be considered an agreement under an Act of the Commonwealth.

In respect of the Government Agreement and pursuant to subdivision P of the NTA, the Mining Co entered into ancillary agreements with the Indigenous group and the Applicants.

The parties to those ancillary agreements also executed the deed of grant of mining tenement and the deed of compulsory acquisition of native title rights, which in doing so agree that those deeds are agreements for the purposes of paragraph 28(1)(f) and paragraph 31(1)(h) of the NTA.

On review of the circumstances, it is considered that the acts described in the various agreements and deeds are relevant to the conduct of activities by Mining Co on the mining site as part of the NTA Agreements, which are the acts for which the Trust receive payments. Also, it is evident that the present and future activities of Mining Co would be inconsistent with the Indigenous group's rights to access the property, hold indigenous ceremonies and hunt, gather and fish within the land and waters of the native title claim area.

Therefore, as the Indigenous group have entered into NTA Agreements under an Act of the Commonwealth that is connected with an Act of a State or Territory, which the amount or benefit received under that agreement relates to an act that would otherwise be inconsistent with the continued existence, enjoyment or exercise of native title; the payments made to the Trust under the NTA Agreements are native title benefits under subsection 59-50(5) of the ITAA 1997.

However, as the Trust is not an indigenous holding entity, the native title benefits do not constitute non-assessable non-exempt income of the Trust under section 59-50 of the ITAA 1997.

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