A clear priority of the Closing the Gap agenda is to ensure that Indigenous Australians have the opportunity to achieve greater economic independence and security for themselves, their families and their communities.
Land-related payments and other income are vital tools for increasing Indigenous economic development. Under the right circumstances, they can also be used to achieve important social benefits including improved community functioning, education, health and wellbeing.
However, land-related payments and other income on their own do not necessarily ensure ongoing economic participation, or build the social capital and capabilities of Indigenous individuals and communities. There must be effective management and governance structures in place in order to achieve these outcomes.
Good governance is vital both so that native title or traditional owner groups receiving land-related payments and other income are actively involved in directing the use of those payments, and to ensure those payments are used appropriately, as agreed by the group and in an accountable way.
The finite nature of many land-related payments must also be recognised and the payments managed appropriately. Structures for managing these payments should encourage investment in economic development activities that are sustainable after payments cease, for example in the case of mineral production.
Ongoing concerns have been raised about the adequacy of existing governance and tax arrangements for holding, managing and distributing land-related payments.
A number of reforms have been proposed to ensure that governance and tax policy settings support these important objectives. A proposal for an ICDC has been developed by the National Native Title Council, the Minerals Council of Australia, native title tax experts and Indigenous leaders (Attachment B). The model focuses on the management of land-related payments and other income and rewarding of effort for the future and the application of robust governance standards.
As proposed, an ICDC would be a not-for-profit corporation or trust with the purpose of promoting and participating in Indigenous community and socio-economic development. It would be exempt from income tax and would have DGR status. The purposes of an ICDC would be wider than charitable purposes.2 ICDCs would be able to accumulate funds and provide support for Indigenous businesses and associated initiatives established for community benefit, and also for Indigenous families to participate in the mainstream economy.
The primary function of an ICDC as proposed would be to receive, generate, manage and apply funds rather than conduct activities directly. However, an ICDC could conduct activities directly if this was consistent with the purposes of the ICDC.
An ICDC would be an optional entity that could be used by Indigenous communities on its own or together with other entities. It could also be applied at a regional level if discrete communities saw fit to utilise such an entity at that level.
To avoid confusion, this report adopts the terminology of an ICDC entity, which may take the legal form of a corporation or a trust. If the Working Group's recommendation is adopted, the Government should consider the appropriate Name for such an entity.
Also, a 'statutory trust' arrangement has been proposed by Native Title Services Victoria and the National Native Title Council to ensure that future act-generated monies are disbursed in accordance with the instructions, or for the benefit, of the entire 'claim group' as opposed to the individual applicants.3
The Working Group
On 18 March 2013 the Australian Government announced that it would establish a working group to examine the tax treatment of land-related payments, and how they can better benefit Indigenous communities now and into the future.4
The Working Group's task was to examine existing arrangements for holding, managing and distributing land-related payments, and to identify options to strengthen governance and promote sustainability, with a particular focus on the tax treatment of current arrangements and of proposed options for holding, managing and distributing those payments. The ICDC option was to be considered by the Working Group together with other options.
The Working Group was required to report on options to the Government by 1 July 2013.
The terms of reference for the Working Group enabled it to consider taxation and governance issues in relation to all land-related payments and other income received by Indigenous communities. In particular, the Working Group was not confined to a consideration of the tax treatment of native title benefits.
The main focus of the Working Group's discussions was the ICDC option. While other options were considered in response to identified governance concerns, these options were not considered in detail and the Working Group acknowledges that further development is required to progress these reform options.
2Charities Act 2013.
3 Native Title Services Victoria's submission to the House Standing Committee on Aboriginal and Torres Strait Islander Affairs and the Senate Legal and Constitutional Affairs Committee inquiries into the Native Title Amendment Bill 2012, p 18.
4 Joint media release of Attorney-General, Minister for Families, Community Services and Indigenous Affairs and Assistant Treasurer, Native title tax treatment to be examined, 18 March 2013.