Private ruling: Native Title Benefits
Published: September 2015
Ruling period: The duration of the Claim Wide Participation Agreement.
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the ABC Trust an ' Indigenous holding entity' as that term is defined under subsection 59-50(6) of the Income Tax assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Does all of the initial Payment and all of the Future Quarterly Payments received or receivable by the ABC Trust comprise non-assessable non-exempt ' native title benefit' income of the ABC Trust under subsection 59-50(1) of the ITAA 1997? | A2: Yes. | Q3: Will all of a distribution from ABC Trust out of the initial Payment and/or Future Quarterly Payments to a beneficiary who is an ' indigenous person ' or an ' indigenous holding entity ' comprise non-assessable non-exempt 'native title benefit' income of that beneficiary under subsection 59-50(2) of the ITAA 1997? | A3: Yes.

Relevant facts and circumstances: You have provided copies of the following documents, which should be read in conjunction with, and form part of the scheme of this private ruling: • Extracts from the Register of Native Title Claims for the ABC Claims (which is referred to in your application as Appendix B). • The Binding Initial Agreement (BIA) (Appendix C). • Deed for Grant of Mining Tenement (Appendix D). • Claim Wide Participation Agreement (CWPA) (Appendix E). • Bank statements for the Preservation Account and the CWPA Preservation Account (Appendix F). • Deed of Assumption - (Appendix G). • Indigenous Land Use Agreement (Appendix H). • ABC Trust Deed (Appendix I) • ABC Trust Deed (Appendix J). • Sub-Fund Agreement (Appendix K). The claimant applications ( ABC Claims ) were filed in the Federal Court in accordance with the Native Title Act 1993 (NTA). The ABC Claims were lodged by named individuals as applicant acting for and on behalf of a group of indigenous persons collectively and individually comprising native title claim group ( ABC Claimant Group ) described in both the ABC Claims. In 2006, the ABC Claimant Group (by its representatives) entered into a Binding Initial Agreement ( BIA ) with XY. The BIA related to XY's planning, development and conduct from time to time of all iron ore mining and other associated activities ( Operations ) within the areas claimed in the ABC Claims. 1 The BIA relevantly provided that: (a) The commitments of XY are conditional upon: (i) certain cultural heritage surveys being completed and the parties consulting in relation to any necessary applications under the Aboriginal Heritage Act 1972 by certain specified dates 2 , (ii) there being no objection or challenge by the ABC Claimant Group to the grant of certain mining tenements and titles, or if such objection or challenge is made, such objection or challenge being withdrawn within 14 days after signing of the BIA 3 , and (iii) the ABC Claimant Group executing section 31 deeds for the grant of specified mining tenements and titles within 28 days after signing of the BIA. 4 (b) XY would pay: (i) financial benefits in quarterly instalments calculated on production from mines located within certain areas ( BIA Quarterly Payments ) in consideration of the ABC Claimant Group giving their support to the Operations (such support primarily being comprised of agreeing to the grant of, and not objecting or bringing any injunction or other proceedings in relation to the grant of, certain mining tenements and titles) 5 , (ii) $X upon fulfilment of the conditions set out in paragraphs 2.6(a)(ii) and 2.6(a(iii) and provided that there is no subsisting breach of the BIA by the ABC Claimant Group at that time ( CP Payment ) 6 , and (iii) $X when a claim wide coexistence agreement and indigenous land use agreement are signed ( CWPA Payment ). 7 (c) The payments outlined in paragraph 2.6(b)were to be paid as follows: (i) the BIA Quarterly Payments, unless otherwise agreed in writing between the parties to the BIA: (A) to an agreed professionally administered charitable trust for the benefit of the ABC Claimant Group that will not permit the use of any trust assets for the purposes of litigation for native title or future act processes under the NTA; or (B) under such other financial arrangements as are agreed during the negotiation process relating to the execution of an indigenous land use agreement and claim wide coexistence agreement 8 , and (ii) the CP Payment and CWPA Payment in a manner agreed by the parties to the BIA. 9 (d) Until suitable financial arrangements are agreed between the parties to the BIA, the BIA Quarterly Payments, CP Payment and CWPA Payment are to be paid into a separate interest bearing bank account ( BIA Preservation Account ). 10 (e) The payments outlined in paragraph 2.6(b)constitute the ABC Claimant Group's full and final entitlement to all compensation for the effect on their native title rights and interests and on all other rights they may have, of the grant of certain mining tenements and titles and the conduct of the Operations. 11 (f) In return for the payments outlined in paragraph 2.6(b), XY, the Joint Venture Partners, any grantee of certain mining tenements and titles and the particular State in Australia is released from any claim for compensation, damages, restitution, benefits or loss of any kind whatsoever and howsoever arising in respect of the grant of certain mining tenements and titles and the conduct of the Operations. 12 In 2006 and for the purpose of section 31(1)(b) and section 28(1)(f) of the NTA, the particular State in Australia, the ABC Claimant Group (by its representatives acting for and on behalf of themselves and all persons included in the native title claim group described in ABC Claim WAD) and XY entered into a Deed for Grant of Mining Tenement ( Section 31 Deed ). The mine (which forms part of the Operations located within the areas claimed in the ABC Claims) commenced commercial production. From this time, XY made required payments under the BIA to the BIA Preservation Account being a separate interest bearing bank account opened and controlled by XY. About 6 months later, the ABC Claimant Group (by its representatives acting for and on behalf of themselves and all members of the ABC Claimant Group who have the capacity to contract as at this time) entered into a Claim Wide Participation Agreement ( CWPA ) with XY. The CWPA was intended to replace the BIA and establish a comprehensive framework for the future relationship between the ABC Claimant Group and XY. 13 The CWPA relevantly provides that: (a) The BIA is terminated on a certain date in accordance with its terms. 14 (b) XY must pay: (i) An amount plus any interest accrued on the amounts deposited into the BIA Preservation Account or otherwise within 10 business days after a certain date ( Signature Payment ) (ii) the net proceeds of any amount held in the BIA Preservation Account within 10 business days after a certain date ( BIA Preservation Payment ), and (iii) financial benefits in quarterly instalments calculated on production from mines which started after the BIA and were located within certain areas ( CWPA Quarterly Payments ). 15 (c) The payments outlined in paragraph 2.12(b)are to be paid as follows to a benefits management structure approved by XY and comprised of one or more charitable trusts that complies with the requirements in item X of Schedule XX of the CWPA ( Charitable Trust ) and one or more discretionary trusts that complies with the requirements in item X of Schedule XX of the CWPA ( Direct Benefits Trust ) ( Benefits Management Structure ) 16 : (i) the Signature Payment to the Direct Benefits Trust 17 , and (ii) a percentage of each BIA Preservation Payment and CWPA Quarterly Payment to a Charitable Trust and a percentage of each BIA Preservation Payment and CWPA Quarterly Payment to a Direct Benefits Trust (amended by subsequent agreement to a percentage and a percentage as detailed below). 18 (d) Until the Benefits Management Structure is approved by XY, the Signature Payment, the BIA Preservation Payment and all CWPA Quarterly Payments must be paid into a separate interest bearing bank account established by XY ( CWPA Preservation Account ). 19 (e) The payments made by XY under the terms of the CWPA are in full and final satisfaction of any rights or entitlements of the ABC Claimant Group and the local aboriginal corporation that acts as the agent of the ABC Claimant Group that arise from or in connection with and at any time: (i) certain agreed acts (ii) the grant or modification of certain titles (iii) the grant or modification of an enjoyment, exercise of rights or discharge of obligations under certain titles, whether done before or after a certain date, (iv) the grant of interests or approvals within or relating to certain areas to, and the exercise of rights or discharge of obligations under them whether done before or after a certain date by certain entities, and (v) any effect of any of the above things on native title ( Compensation Entitlements ). 20 (f) The payments made by XY under the terms of the CWPA release certain entities (including XY and the Joint Venture Partners) and the particular State of Australia from all claims brought by or on behalf of the ABC Claimant Group (or a member of the ABC Claimant Group ) in relation to the Compensation Entitlements. 21 From a certain date, XY made required payments under the CWPA to the CWPA Preservation Account (previously the BIA Preservation Account) being a separate interest bearing bank account maintained and controlled by XY. The ABC Aboriginal Corporation ( ABC-AC ), being the nominated Local Aboriginal Corporation ( LAC ) for the ABC Claimant Group, entered into a Deed of Assumption - Claim Wide Participation Agreement for the benefit of XY ( Deed of Assumption ). The terms of the Deed of Assumption outlined the acceptance and assumption by ABC-AC of the rights and obligations of the LAC under the CWPA and the local aboriginal corporation under the then yet to be entered indigenous land use agreement. The ABC Claimant Group (by its representatives acting for and on behalf of themselves and all of the ABC Claimant Group) entered into an Indigenous Land Use Agreement with XY ( ILUA ). The ILUA relevantly provides that: (a) The payments made by XY under the terms of the CWPA are in full and final satisfaction of any rights or entitlements of the ABC Claimant Group and ABC-AC that arise from or in connection with and at any time the Compensation Entitlements. 22 (b) The payments made by XY under the terms of the CWPA release certain entities (including XY and the Joint Venture Partners) and the particular State of Australia from all claims brought by or on behalf of the ABC Claimant Group (or a member of the ABC Claimant Group) in relation to the Compensation Entitlements. 23 (c) Except for the CWPA or where otherwise contemplated in the ILUA, the ILUA contains the entire agreement between the parties about its subject matter and any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by the ILUA and has no further effect. 24 (d) The ILUA prevails to the extent of any consistency between it and any other document or agreement between the parties to the ILUA. 25 The ILUA was registered on the Register of Indigenous Land Use Agreements maintained by the National Native Title Tribunal. The ILUA Area under the ILUA was the same area as the agreement area under the CWPA. During a period of time, $X was paid from the CWPA Preservation Account to ABC-AC in accordance with clause XX of the CWPA to assist ABC- AC with implementing the CWPA. The Federal Court made orders in both of the ABC Claims pursuant to section 66B of the Native Title Act 1993 (Cth) replacing the then named persons comprising the applicant with named individuals, all of whom are members of the ABC Claimant Group. The ABC Claimant Group authorised execution versions of the documents comprising the Benefits Management Structure, being: (a) the Trust Deed for the ABC Charitable Trust (b) the Trust Deed for the ABC Trust, and (c) the XY Sub Fund Agreement for the ABC Charitable Trust and ABC Trust. At that meeting, the ABC Claimant Group authorised an application to XY to approve, pursuant to clause XX of the CWPA, a change in the apportionment so that a percentage of each BIA Preservation Payment and CWPA Quarterly Payment is paid to the Charitable Trust and another percentage of each BIA Preservation Payment and CWPA Quarterly Payment is paid to the other Trust. On a certain date: (a) the ABC Trust was established as the Direct Benefits Trust with the Applicant as trustee by execution of the Trust Deed for the ABC Trust Deed ; and (b) ABC Charitable Trust was established as the Charitable Trust with the Applicant as trustee by execution of the Trust Deed for the ABC Charitable Trust Deed As part of the Benefits Management Structure approval process, the ABC Trust Deed, the ABC Charitable Trust Deed and the XY Sub-Fund Agreement (signed by all parties other than XY), together with an authorisation report on the Benefits Management Structure, were submitted to XY on a certain date. With effect from a certain date, the ABC Charitable Trust was registered as a charity under the Australian Charities and Not-for-profits Commission Act 2012 (Cth). On a certain date, XY formally approved the ABC Claimant Group's application to have the payment percentages under the Benefits Management Structure amended so that a certain percentage of each BIA Preservation Payment and CWPA Quarterly Payment is made to the Charitable Trust and another percentage of each BIA Preservation Payment and CWPA Quarterly Payment is made to the Direct Benefits Trust. On a certain date, XY, the Applicant (as trustee of the ABC Trust and as trustee of the ABC Charitable Trust), the ABC Claimant Group (by its representatives) and ABC-AC entered into the XY Sub-Fund Agreement for the ABC Charitable Trust and ABC Direct Benefits Trust ( Sub-Fund Agreement ). On a certain date, XY paid from the CWPA Preservation Account: (a) to the ABC Trust an amount representing the Signature Payment and a percentage of the BIA Preservation Payments, CWPA Quarterly Payments and accrued interest up to the date of payment plus an amount for GST ( Initial XY Payment ), and (b) to the ABC Charitable Trust an amount representing a percentage of the BIA Preservation Payments, CWPA Quarterly Payments and accrued interest up to the date of payment plus an amount for GST. CWPA Quarterly Payments after this date have or will be paid by XY to: (a) the ABC Trust (a certain %) (Future CWPA Quarterly Payments), and (b) the ABC Charitable Trust (a certain %). As at the date of this private binding ruling application: (a) the ABC Claims are still being progressed in the Federal Court, and (b) there has been no approved determination of native title made by the Federal Court as to whether native title exists, and if so who are the native title holders, in relation to the claim areas covered by the ABC Claims.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 59-50 | Income Tax Assessment Act 1997 subsection 59-50(1) | Income Tax Assessment Act 1997 subsection 59-50(2) | Income Tax Assessment Act 1997 subsection 59-50(3) | Income Tax Assessment Act 1997 subsection 59-50(4) | Income Tax Assessment Act 1997 subsection 59-50(5) | Income Tax Assessment Act 1997 subsection 59-50(6) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Is the ABC Trust an ' Indigenous holding entity' as that term is defined under subsection 59-50(6) of the Income Tax Assessment Act 1997 (ITAA 1997)? Definition of Indigenous Holding Entity Subsection 59-50(6) of the ITAA 1997 defines the term " Indigenous holding entity " as follows: (a) a distributing body; or (b) a trust, if the beneficiaries of the trust can only be Indigenous persons or distributing bodies; or (c) a registered charity. ' Indigenous person' is defined in section 995-1 of the ITAA 1997 as an individual who is: (a) a member of the Aboriginal race of Australia; or (b) a descendant of an Indigenous inhabitant of the Torres Strait Islands. The ABC Trust is an Indigenous holding entity as paragraph 59-50(6)(b) of the ITAA 1997 applies. We agree with your submission that, The ABC Trust is an Indigenous holding entity as defined under subsection 59-50(6) of the ITAA 1997. As outlined in the terms of the ABC Trust Deed: • The ABC Trust is a trust whose beneficiaries can only be 'Indigenous persons' or other ' Indigenous holding entities ' as those terms are defined ITAA 1997. • Only persons listed from time to time on the Register of ABC People (as that term is defined in the ABC Trust Deed) who are also listed on the Register of ABC beneficiaries as amended from time to time can be 'ABC Beneficiaries' and only ' Indigenous persons ' (as that term is defined in subsection 59-50(6)) can be listed on the Register of ABC People; and • All persons/entities falling within the definition of 'Other Beneficiaries' are only eligible to be beneficiaries of the ABC Trust if they are an ' Indigenous person ' or an ' Indigenous holding entity ' as those terms are defined in subsection 59-50(6). Does all of the initial XY Payment and all of the Future CWPA Quarterly Payments received or receivable by the ABC Trust comprise non-assessable non-exempt ' native title benefit' income of the ABC Trust under subsection 59-50(1) of the ITAA 1997? Meaning of Native Title Benefit The Explanatory Material to the Native Title Exposure Draft explains at [1.16] that the definition of Native Title Benefit (in section 59-50(5) of the ITAA 1997) covers agreements under Australian legislation that provide payments for an action affecting native title. An action affecting native title is one that extinguishes native title rights and interests or is otherwise wholly or partly inconsistent with their continued existence, enjoyment and exercise. Subsection 59-50(5) of the ITAA 1997 defines the term 'native title benefit': 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 . In your submission, you state that all of the initial XY Payment and/or all the Future CWPA Quarterly Payments received or receivable by the ABC Trust comprise non-assessable non-exempt ' native title benefit ' income of the ABC Trust under subsection 59-50(1) of the ITAA 1997. This submission is based on the following: • the ABC Trust is an ' Indigenous holding entity ' (as outlined in our response to Question 1) • all of the Initial XY Payment and/or all of the Future CWPA Quarterly Payments comprise a native title benefit as that term is defined in subsection 59-50(5) of the ITAA 1997 as they each: (i) arise under: (a) an agreement made under the Native Title Act 1993 (NTA) which is an Act of the Commonwealth, a state or a territory; or (b) an ancillary agreement to such an agreement; and (ii) wholly relate 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 and • no part of the Initial XY Payment and/or all of the Future CWPA Quarterly Payments is an amount described in subsection 59-50(3) of the ITAA 1997. Based on these facts, we conclude that all of the Initial XY Payment and/or all of the Future CWPA Quarterly Payments received or receivable by the ABC Trust comprise non-assessable non-exempt ' native title benefit' income of the ABC Trust. Will all of a distribution from ABC Trust out of the initial XY Payment and/or Future CWPA Quarterly Payments to a beneficiary who is an 'indigenous person' or an 'indigenous holding entity' comprise non-assessable non-exempt 'native title benefit' income of that beneficiary under subsection 59-50(2) of the ITAA 1997? Non-Assessable Non-Exempt Native Title Benefits is covered under Section 59-50 of the ITAA 1997. Subsection 59-50(1) of the ITAA 1997 states that: 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 . Subsection 59-50(2) of the ITAA 1997 states that: 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 . As concluded earlier: • the ABC Trust is an ' Indigenous holding entity' (refer to Question1) • all of the initial XY Payments and/or all of the Future CWPA Quarterly Payments comprise a native title benefit (refer to Question 2) Furthermore, subsection 59-50(3) of the ITAA 1997 states that: Neither subsection (1) nor (2) 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 states that; Subsection (2) 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. You have stated that: • no part of the Initial XY Payment and/or all of the Future CWPA Quarterly Payments is an amount described in subsection 59-50(3) or subsection 59-50(4) of the ITAA 1997. Therefore based on the following: • the ABC Trust is an ' Indigenous holding entity' (as outlined in our response to Question 1) • all of the initial XY Payments and/or all of the Future CWPA Quarterly Payments comprise a native title benefit (as outlined in Question 2); and • no part of the Initial XY Payment and/or the Future CWPA Quarterly Payments is an amount described in subsection 59-50(3) or subsection 59-50(4) of the ITAA 1997. We agree with your submission that all distributions from the ABC Trust out of the Initial XY Payment and/or Future CWPA Quarterly Payments to a beneficiary who is an ' Indigenous person' or an ' Indigenous holding entity' comprise non-assessable non-exempt 'native title benefit' income of that beneficiary under subsection 59-50(2) of the ITAA 1997. 1 See the recitals of the BIA. 2 See clause XX and Schedule XX of the BIA. 3 See clause XX of the BIA. 4 See clause XX of the BIA. 5 See clause XX and clause XX of the BIA. 6 See clause XX of the BIA. 7 See clause XX of the BIA. 8 See clause XX and clause XX of the BIA. 9 See clause XX of the BIA. 10 See clause XX and XX of the BIA. 11 See clause XXL of the BIA. 12 See clause XX of the BIA. 13 See the recitals of the CWPA. 14 See clause XX of the CWPA. 15 See clause XX of the CWPA. 16 See clause XX of the CWPA. 17 See clause XX of the CWPA. 18 See clause XX of the CWPA. 19 See clause XX of the CWPA. 20 See clause XX and the definition of 'Compensation Entitlements' in clause XX of the CWPA. 21 See clause XX of the CWPA. 22 See clause XX and the definition of 'Compensation Entitlements' in clause XX of the ILUA. 23 See clause XX of the ILUA. 24 See clause XX of the ILUA. 25 See clause XX of the ILUA.