Private ruling: Native title benefits and mining payments
Date of advice: 20 July 2018
Published: September 2018

Ruling: Q1: Are the Production Payments paid under the Agreement to the Trust, a native title benefit under section 59-50 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Is any part of the Production Payment paid to the Trust under the Agreement unable to qualify as a native title benefit under section 59-50(3) of the ITAA 1997? | A2: No part of the Production payments under the Agreement are unable to qualify as a native title benefit under section 59-50(3) of the ITAA 1997 because no part of these payments are for the purpose of meeting the provider’s administrative costs, or in respect of remuneration, or consideration for the provision of goods and services. | Q3: Are the amounts paid to the Trust under the Agreement a mining payment under section 59-15 of the ITAA 1997? | A3: No. | Q4: Do the amounts paid to the Trust under the Agreement form part of the trust estate or the income of the trust? | A4: The Production Payments form part of the trust estate of the Trust. | Q5: Where the amount paid to the Trust under the Agreement is invested, will any income generated be non-assessable non-exempt (NANE)? | A5: No. None of the income generated will be non-assessable non-exempt (NANE). | Q6: Where the trustee of the Trust distributes an amount of trust estate comprising the Production Payment to a beneficiary of the trust who is an *Indigenous person, an *Indigenous holding entity or a *distributing body, will the amount be non-assessable non-exempt income of the beneficiary? | A6: No. An amount comprising the Production Payment which is distributed to a beneficiary of the Trust who is an *Indigenous person, an *Indigenous holding entity or a *distributing body will not be non-assessable non-exempt income of the beneficiary under section 59-50 of the ITAA 1997 | Q7: Where the trustee of the Trust distributes an amount of trust income generated from the trustee investing the Production Payment to a beneficiary of the trust who is an *Indigenous person, an *Indigenous holding entity or a *distributing body, will the amount be non-assessable non-exempt income of the beneficiary? | A7: No. In light of the answer to Questions 4 and 6, no amount of trust income generated from the trustee investing the Production Payment distributed to a beneficiary of the trust who is an *Indigenous person, an *Indigenous holding entity or a *distributing body will be non-assessable non-exempt income of the beneficiary

Relevant facts and circumstances: The Relevant Court determined that under the Native Title Act 1993 (NTA 1993) that the People, a group of indigenous persons were the common law holders of native title within the native title determination area. The Court also appointed X Corporation to hold the determined native title in trust for the People as the registered native title body corporate (RNTBC) for the purpose of the NTA 1993. The Relevant Court found that the People as native title holders held various rights in relation to the native title determination area such as the right to access the land, camp, hunt, to engage in ritual and ceremony and to maintain and protect particular objects and sites. Agreement In Year X, X Corporation for itself and on behalf of the People entered into an Agreement with a mining company. Under the Agreement, the People consent to the mining company undertaking mining operations, in exchange for a range of financial benefits. Under the Agreement, X Corporation must (on behalf of the People) support the company’s mining business by providing necessary consents, approvals and cooperation. Under the terms of the Agreement, the mining company is required to pay compensation including various milestone payments and also annual payments (Production Payments). The Production Payments are calculated by reference to the amount of minerals produced and price. The mining company’s obligations under the Agreement, including making the compensation payments are in full and final satisfaction of any entitlement to native title compensation which X Corporation and /or the People may presently or in the future have. Production Payments have been paid by the mining company to X Corporation pursuant to the Agreement. Indigenous Land Use Agreement Sometime after the Agreement was made, an Indigenous Land Use Agreement (ILUA) was entered into between the mining company and X Corporation. The area which is the subject of the ILUA is a relatively small area within the native title determination area. Under the ILUA X Corporation’s consents to the granting of a limited number of leases and licences within the ILUA area. Trust Some years after the Agreement was made, the Trust was established. X Corporation, a company incorporated under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 is also a party to the Deed. The trustee of the Trust received from X Corporation payments comprising Production Payments. The terms of the Deed recognise that X Corporation is the RNTBC which hold the native title rights and interests according to the determination on trust for the People as common law holders of native title rights and interests. That the People through X Corporation have entered into existing native title payment agreements in connection with their native title claims. Further that the Trust is a recipient of funds which includes compensation for an act or acts that would extinguish native title rights and interests or that would otherwise be wholly or partially inconsistent with the continued existence, enjoyment or exercise of native title rights and interests. The People have nominated the Trust as a recipient for certain native title payments. Under the terms of Trust’s trust deed, the trustee is to hold the trust fund and the income from the Trust Fund for the benefit of its beneficiaries. The beneficiaries of the Trust are those persons and entities who meet the definition of ‘indigenous persons’ and ‘indigenous holding entity’ under the ITAA 1997 X CORPORATION Under X Corporation’s rules, X Corporation is required to receive funds on behalf of the People including payments received as compensation or otherwise related to native title rights and interests and to hold such payments in trust for the People. Further, X Corporation is required to apply the money held in trust as directed by the People. Payment of Production Payments Under the terms of the Agreement, no part of the Production Payments arises from the provision of goods or services by X Corporation or the People to the mining company. Further the Agreement does not provide for payment of X Corporation’s administrative costs. Additionally, no part of the Production Payments received by the Trust is for the purpose of meeting X Corporation’s administrative costs. No part of the Production Payments is comprised of investment income.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 59-15 | Income Tax Assessment Act 1997 Section 59-50 | Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-10 | Income Tax Assessment Act 1997 Section 6-23 | Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Section 95(1) | Income Tax Assessment Act 1936 Section 128U | Native Title Act 1993 Paragraph 31(1)(b) | Native Title Act 1993 Section 56 | Native Title Act 1993 Section 61 | Native Title Act 1993 Section 223 | Native Title Act 1993 Section 225 | Native Title Act 1993 Section 227 | Native Title Act 1993 Section 253 | Native Title (Prescribed Bodies Corporate) Regulations 1999 Regulation 6

Reasons for decision: Summary: The Production Payments payable under the Agreement to the Trust are not ‘native title benefits’ under section 59-50 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: For a payment to satisfy the requirements of section 59-50 to be a native title benefit under section 59-50 of the ITAA 1997, the payment must: 1. otherwise be included in assessable income (subsection 59-50(1) ITAA 1997) 2. be made to an Indigenous person or Indigenous holding entity (subsections 59-50(1) and (2) ITAA 1997). 3. arise under an agreement made under an Commonwealth, State or Territory Act (paragraph 59-50(5)(a)(i) ITAA 1997) or an ancillary agreement (paragraph 59-50(5)(a)(ii) ITAA 1997) 4. 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 (paragraph 59-50(5)(a) ITAA 1997) Each of these requirements are discussed in turn below: 1. Payment would otherwise be included in your assessable income The assessable income of a taxpayer consists of the following amounts: ● amounts which constitute income according to ordinary concepts (ordinary income) (section 6-5 ITAA 1997) ● amounts which are not ordinary income but are included in the assessable income of a taxpayer by virtue of the specific provisions contained in the ITAA 1997 and the ITAA 1936 (statutory income) (section 6-10 ITAA 1997) If an amount received by a taxpayer is neither ordinary income nor statutory income then the amount is not included in the assessable income of the taxpayer (section 6-15 ITAA 1997). There is no definition of ‘ordinary income’ contained in either ITAA 1997 or the ITAA 1936 but a substantial body of case law has evolved over time which sets out various factors that must be taken into account to determine whether an amount is ordinary income. Where an amount is not ordinary income, it may give rise to statutory income. Section 10-5 ITAA 1997 contains a list of provisions in the ITAA 1997 and the ITAA 1936 which, amongst other things, deal with the specific types of amounts which are included in statutory income. Where an amount does not have the characteristics of ordinary income, and is not statutory income, the amount may be regarded as capital in nature. The difficulties encountered in determining whether an amount is income or capital are recognised in extensive case law including IRC v British Salmon Aero Engines Ltd [1938] 2 KB 482 per Lord Greene; Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946) 72 CLR 634 per Dixon J and Scott v Commissioner of Taxation (NSW) (1935) SR (NSW) 215 per Jordan CJ. In GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124 the Full Bench of the High Court set out a number of factors which they considered indicative of whether an amount was received on income or capital account including the ‘periodicity, regularity, recurrence, character of the thing disposed of and the scope of the transaction, venture or business which gave rise to the receipt. Further, in Federal Commissioner of Taxation v Anstis (2010) 76 ATR 735, the Court stated that the ‘totality of the circumstances’ must be considered in determining the character of the amount in the recipients hands. | Detailed Reasoning - Application to your circumstances: The Production Payments which are ultimately directed to the Trust consist of a series of payments calculated with reference to the output of the mining company’s mining operations in the determination area. In exchange for these payments, X Corporation have agreed to provide a range of considerations as detailed in the Agreement in order that the mining company can conduct its mining activities. The Production Payments are to be made regularly and are to be paid for an extended and indefinite period of time. On balance, the Agreement entered into by X Corporation is considered to be a commercial transaction resulting in a revenue stream which is directed to X Corporation for allowing the company’s mining operations to proceed in the native title determination area. Therefore, it is considered that Production Payments are amounts in the nature of ordinary income and are assessable in the hands of a recipient. If the amounts paid under the Agreement are not native title benefits, they would otherwise be included in assessable income as ordinary income under section 6-5. 2. Payment must be made to an *Indigenous person or an *Indigenous holding entity Subsection 995-1(1) ITAA 1997 defines an ‘Indigenous person’ as an individual who is a member of the Aboriginal race of Australia or a descendent of an Indigenous inhabitant of the Torres Strait Islands. Subsection 59-50(6) ITAA 1997 defines ‘Indigenous holding entity’ as: (a) a distributing body (b) a trust if the beneficiaries of the trust can only be Indigenous persons or Indigenous holding entities; or (c) a registered charity Section 128U(1) ITAA 1936 defines a ‘distributing body’ as: (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 (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 Further assistance is provided in the Native Title Act 1993 (NTA 1993): ● Section 61(1) NTA 1993 defines a ‘native title claim group’ as those persons who, according to their traditional laws and customs, hold the common or group rights and interests comprising the particular native title claimed. ● Section 223(1) NTA 1993 defines ‘native title’ as the communal, group or individual rights and interests of Aboriginal people or Torres Strait Islanders. ● Section 225 NTA 1993 requires that a determination of native title must specify who holds it. | Detailed Reasoning - Application to your circumstances: Under the terms of the Trust deed, the Trust can only make distributions to natural persons or entities that meet the definition of Indigenous persons or Indigenous holding entities as defined in the ITAA 1997. Consequently, the Trust qualifies as an Indigenous holding entity. 3. The amount or *non-cash benefit must arise under an agreement made under an Act of the Commonwealth, a State or a Territory, or under an instrument made under such an Act OR an ancillary agreement to such an agreement While the terms ‘agreement’ and ‘ancillary agreement’ are not defined in either the ITAA 1936 or the ITAA 1997, Note 1 to subsection 59-50(5) ITAA 1997 states that Indigenous Land Use Agreements (ILUAs) within the meaning of the NTA 1993; agreements under paragraph 31(1)(b) of the NTA 1993 or recognition and settlement agreements under the Traditional Owners Settlement Act 2010 (Vic) will satisfy the requirement to be an agreement or an ancillary agreement. Further Note 2 to subsection 59-50(5) states that an ILUA does not require a determination of native title under the NTA 1993. Paragraph 1.27 of the Explanatory Memorandum (EM) to Taxation Laws Amendment Bill 2012 No. 6 (TLAB 2012/6) which introduced section 59-50 of the ITAA 1997 also confirms that an ILUA would be considered an agreement. Paragraph 1.29 of the EM to TLAB 2012/6 states that ‘..An ancillary agreement is a subsidiary agreement that is directly connected with a primary agreement and may provide details not contained in the primary agreement.’ Section 24BB of the NTA 1993 provides that an agreement must be about one or more of the following matters in relation to an area: (a) the doing, or the doing subject to conditions (which may be about procedural matters), of particular future acts, or future acts included in classes, (aa) particular future acts (other than intermediate period acts) or future acts (other than intermediate period acts) included in classes, that have already been done. Section 24BE of the NTA 1993 goes on to provide that: (1) The agreement may be given for any consideration, and subject to any conditions, agreed by the parties (other than consideration or conditions that contravene any law) (2) Without limiting subsection (1), the consideration may be the grant of a freehold estate in any land, or any other interests in relation to land whether statutory or otherwise. Therefore, where the parties have made an agreement under the NTA 1993, it is this agreement which should be construed as the ‘agreement’ under subsection 59-50(5)(a) ITAA 1997 and any other agreements between the parties should fall within the term ‘ancillary agreement’. | Detailed Reasoning - Application to your circumstances: The relevant benefits ultimately payable to the Trust arise out of the Agreement, and include Production Payments. The Agreement is a privately negotiated agreement between the mining company and X Corporation. It is not an Indigenous Land Use Agreement made under the NTA 1993 nor an agreement made under paragraph 31(1)(b) of NTA 1993 nor under any other Australian law of the kind contemplated by subsection 59-50(5) [for example the Traditional Owners Settlement Act 2010 (Vic) ]. Accordingly, it is considered that the Agreement is not an ‘agreement’ for the purposes of section 59-50(5). An ILUA was entered into between the mining company and X Corporation. The ILUA qualifies as an ‘agreement’ covered by paragraph 59-50(5)(a) ITAA 1997. For the Agreement to be considered an ‘ancillary agreement’ to the ILUA, the Agreement is required to be a ‘subsidiary agreement that is directly connected’ to the ILUA. It is noted that the making of the Agreement precedes the making of ILUA. Neither the Agreement or the ILUA contain any reference to each other or evidence any connection to each other. Moreover, it is noted that the description of the land area in the Agreement is not consistent with the land area in the ILUA. In this regard, the ILUA land area comprises only a small part of the land area subject to the native title determination. Further, under the terms of the Agreement, X Corporation provides consent to the grant, amongst other things of various leases, licences, and authorities required for the conduct of the company’s mining operations in the determination area. In contrast, the consents provided by X Corporation under the ILUA are restricted to a limited number of licences and leases within the ILUA area. Given the extent and nature of the differences between each agreement and the lack of any connection between the agreements, the Agreement cannot be described as a ‘subsidiary agreement that is directly connected’ to the ILUA. Therefore, the Agreement does not qualify as an ‘ancillary agreement’ to an agreement under section 59-50(a). Accordingly, as the third requirement is not met, the Production Payments do not qualify as a ‘native title benefit’ under section 59-50. 4. The amount or benefit must 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 As it is considered that the Production Payments are not ‘native title benefits’ as the third requirement is not met, there is no need to address this requirement. However, for the sake of completeness this requirement will also be examined. Whether a payment relates to an act (or acts) that would extinguish native title or would be wholly or partly inconsistent with the continued existence of native title, or the ability of an indigenous group to enjoy or exercise their native title rights, will be a question of fact in each case. Subsection 995-1(1) ITAA 1997 states that ‘native title’ has the same meaning as in the NTA 1993. Section 223(1) NTA 1993 defines the term ‘native title’ or ‘native title rights and interests’ as: 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. Subsections 223(2) and 223(3) of the NTA 1993 extend the definition in 223(1) NTA 1993 to include hunting, gathering or fishing rights and rights and interests under 223(1) NTA 1993 which are converted into, or replaced by, statutory rights and interests. The particular rights and interests that will fall within the definition of ‘native title’ or ‘native title rights and interests’ will differ from one Indigenous group to another. These ‘rights and interests’ of an Indigenous group would be expected to be particularised in the native title claim lodged by the group under the NTA 1993, whether or not it has been determined. It is also possible that the native title rights and interests of several Indigenous groups may co-exist for a particular geographic region (claim area). The ITAA 1997 does not define the ‘act’ that might extinguish or impair the exercise of native title. However section 226 of the NTA 1993 defines ‘act’ to include the grant, issue, variation, extension, renewal, revocation or suspension of a licence, permit, authority or instrument; the creation, variation, extension, renewal or extinguishment of any interest in relation to land or waters or any legal or equitable right (under contract or otherwise) and any act having an effect at common law or in equity. The relevant ‘act’ in section 59-50(5)(a) ITAA 1997 is not confined to an act or acts that have already occurred and could encompass a ‘past act’ (section 228 NTA 1993), an ‘intermediate period act’ (section 232A NTA 1993), a ‘future act’ (section 233 NTA 1993) or arguably any act at common law which may have the effect of extinguishing native title, which prevails over native title or causes native title to yield (see Brown v Western Australia (2012) 294 ALR 223 at 456 upheld in Western Australia v Brown [2014] HCA 8; 306 ALR 168). The ITAA 1997 does not define ‘would’ however the term appears to contemplate acts that are yet to occur, but which will have an impact on native title when they do. This might include situations where the agreement between the native title group and the mining company contemplates consent being given to a future grant of a mining right for an area yet to be identified but which will impose restrictions on the ability of the members of the native title group to access or enjoy the land when the mining right is granted. The ITAA 1997 does not provide a list of circumstances where native title is considered to have been ‘extinguished’ or when some act may be considered to be ‘wholly or partly inconsistent with its continued existence, enjoyment or exercise’. However the NTA 1993 states the following at section 227: An act affects native title if it extinguishes the native title rights and interests or if it is otherwise wholly or partly inconsistent with their continued existence, enjoyment or exercise. It has been argued that it is sufficient that an act affects native title rights and interests, regardless of who holds those rights and interests. In particular the ITAA 1997 does not require that the native title rights and interests be held by the same persons receiving, or directing, the amounts under the agreement. The circumstances under which a benefit ‘relates to’ an act that extinguishes or affects native title is not set out in the ITAA 1936, ITAA 1997 or the NTA 1993. However, the phrase has been considered in a number of cases which support a wide interpretation. In Tooheys Ltd v Commissioner of Stamp Duties (NSW) (1961 105 CLR 604, Taylor J acknowledged that the phrase ‘relating to’ was extremely wide but considered some precision was to be found within the context in which the phrase was expressed. In Oceanic Life Ltd v Chief Commissioner of Stamp Duties (NSW) [1999] NSWCA 416 Fitzgerald JA considered the width of the phrase ‘relating to’ is undoubted. The most recent consideration of the phrase appears in Commonwealth Bank of Australia v Garuda Aviation Pty Ltd (2013) 45 WAR 92. While it is not necessary to establish a direct link between the payment (or the quantum of the payment) under the relevant agreement or ancillary agreement and the act or acts asserted to have extinguished native title or been wholly or partly inconsistent with its continued existence, there must be a connection between the payment and the act for the amount paid to be eligible for consideration as native title benefit. | Detailed Reasoning - Application to your circumstances: The Relevant Court determined that the People were the native title holders within the native title determination area. Further, the Court appointed X Corporation to hold the determined native title in trust for the native title holders. The payments to X Corporation, and ultimately to Trust, are not compensation determined in accordance with Division 5 of Part 2 of the NTA 1993. Therefore to be eligible for consideration as native title benefit payments, the Production Payments must 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. The Relevant Court found that the native title rights and interests of the People in relation to the native title determination area included such rights as the right to access the land, camp, hunt, to engage in ritual and ceremony and to maintain and protect particular objects and sites. The Agreement entered into allows the mining company to conduct its mining operations in the native title determination area. Under the terms of the Agreement, X Corporation, on behalf of the People, will provide the necessary consents in order that the mining company can conduct its mining operations. In consideration, the mining company is to provide monetary compensation including the Production Payments to X Corporation. X Corporation agrees that the making of the compensation payments are in full and final satisfaction of any entitlement to native title compensation which X Corporation and/or the People may have presently or in the future. It is considered that the acts i.e. conduct of the company’s mining operations are acts that would affect the continued existence, enjoyment or exercise of the People’s native title rights and interests which are particularised in the determination. The acts specified in the Agreement include both present and future acts. Therefore, it follows that the Production Payments are amounts which relate to an act or acts that would otherwise be wholly or partly inconsistent with the continued existence, enjoyment or exercise of native title rights by the People. Consequently, it is considered that the fourth requirement is met. | Detailed Reasoning - Conclusion: As the payment of the Production Payments does not meet the third requirement i.e the amount does not arise under an eligible agreement or an ancillary agreement to such an agreement, the Production Payments paid under the Agreement are unable to qualify as native title benefits under section 59-50 of the ITAA 1997. | Detailed Reasoning - Question 2: Subsection 59-50(3) applies to exclude an amount or benefit provided out of a native title benefit from being regarded as NANE income under section 59-50 to the extent that it is: (a) for the purposes of meeting the provider’s administrative costs, or (b) as remuneration or consideration for the provisions of goods or services. In question 1, it was determined that no part of the Production Payments were native title benefit payments under section 59-50 of the ITAA 1997. Moreover, in the present circumstances, no part of the Production Payments are payments for the purpose of meeting the provider’s administrative costs, or remuneration, or consideration for the provision of goods and services. Consequently, no part of the Production payments under the Agreement are unable to qualify as a native title benefit under section 59-50(3) of the ITAA 1997. | Summary: The amounts paid to Trust under the Agreement are not a mining payment under section 59-15 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Under section 59-15 of the ITAA 1997 a payment will be a non-assessable non-exempt mining payment if it satisfies the following conditions: ● it is a mining payment (section 128U of the ITAA 1936) ● it relates to Indigenous land (subsection 995-1(1)of the ITAA 1997); and ● it is made to a distributing body (section 128U of the ITAA 1936); or ● it is made to one or more Indigenous persons (subsection 995(1) ITAA 1997) or applied for their benefit. A ‘mining payment’ is relevantly defined in subsection 128U(1) of the ITAA 1936 as ‘a payment made to a distributing body or made to, or applied for the benefit of, an Indigenous person or persons, being….: (c) any other payment made on or after 1 July 1979 under provisions of a law of the Commonwealth or of a State or Territory that relate to *Indigenous persons or under an agreement made in accordance with such provisions, being a payment made: (i) in consideration of the issuing, granting or renewal of a miner’s right or mining interest in respect of *Indigenous land (ii) in consideration of the granting of permission to a person to enter or remain on Indigenous land or to do any act on Indigenous land in relation to prospecting or exploring for, or mining of, minerals; or (iii) by way of payment of mineral royalties payable in respect of the mining of minerals on Indigenous land or by way of payment of an amount determined by reference to an amount of mineral royalties received by the Commonwealth, a State or the Northern Territory in respect of the mining of minerals on Indigenous land,’ However ‘mining payment’ it does not include a payment made by a distributing body (paragraph 128(1)(d)) ITAA 1936 or a native title benefit (paragraph 128U(1)(e) ITAA 1936). Subsection 6(1) of the ITAA 1936 defines ‘Indigenous land’ as having the same meaning as in the Income Tax Assessment Act 1997 . Subsection 995-1(1) ITAA 1997 defines ‘Indigenous land’ to mean ‘any estate or interest in land that, under an *Australian law relating to *Indigenous persons, is held for the use or benefit of Indigenous persons’. The term ‘Indigenous land’ replaced the former term ‘Aboriginal land’ which was repealed by No 84 of 2013, s 3 and Sch 1 item 14, effective 28 June 2013. Neither the ITAA 1936 nor the ITAA 1997 define ‘estate’ or ‘interest’ in land. Section 253 NTA 1993 defines an ‘ interest , in relation to land or waters’ as meaning: (a) a legal or equitable estate or interest in the land or waters; or (b) any other right (including a right under an option and a right of redemption), charge, power or privilege over, or in connection with: (i) the land or waters; or (ii) an estate or interest in the land or waters; or (c) a restriction on the use of the land or waters, whether or not annexed to other land or waters. Section 253 NTA 1993 defines ‘land’ as including the airspace over, or subsoil under, land, but does not include waters. ‘Waters’ is defined as including: (a) sea, a river, a lake, a tidal inlet, a bay, an estuary, a harbour or subterranean waters; or (b) the bed or subsoil under, or airspace over, any waters (including waters mentioned in paragraph (a)); or (c) the shore, or subsoil under or airspace over the shore, between high water and low water. Therefore, if a payment is made to an Indigenous person or persons (or applied for their benefit) or to a distributing body, to the extent the payment is not a native title benefit under section 59-50 of the ITAA 1997 it may still be a mining payment under section 59-15 of the ITAA 1997. However a payment will not be non-assessable non-exempt to the extent the amount is paid to a distributing body for the purposes of meeting its administrative costs (subsection 59-15(4)) ITAA 1997 or where the amount is remuneration or considerations for goods and services provided (subsection 59-15(5) ITAA 1997). | Detailed Reasoning - Application to your circumstances: The definition of the term ‘mining payment’ in subsection 128U(1) requires amongst other things that the payment is made under an agreement which was made in pursuance of Commonwealth, State or Territory laws that relate to Indigenous persons. The Agreement does not meet this requirement as it was not made under an Australian law that relates to Indigenous persons. Therefore, as this requirement is not met, the Production Payments do not qualify as ‘mining payments’ under subsection 128U(1). Accordingly, the Production Payments will not be treated as a mining payment for the purposes of section 59-15. Consequently, the Production Payments are not NANE income under section 59-15 in the hands of an eligible recipient. | Summary: We have considered the terms of section 95(1) of the ITAA 1936. In light of the circumstances, we have concluded that the amounts of Production Payments received by the Trust under the terms of Agreement are made on behalf of and/or at the direction of the People. Consequently, these amounts do not form part of the net income of the Trust; instead these amounts form part of the Trust’s trust estate. | Detailed Reasoning - Detailed reasoning: Sections 59-15 and 59-50 of the ITAA 1997 set out the conditions that must be satisfied for a payment to be a non-assessable non-exempt mining payment or a non-assessable non-exempt native title benefit. They do not discuss the nature of such a payment in the hands of a trustee. Section 95(1) of the ITAA 1936 provides that the net income of a trust estate is the total assessable income of the trust estate calculated as if the trustee were a resident taxpayer, less allowable deductions. The income of a trust is what is generated by the trust property. It follows that a payment, directed to the trustee of a trust pursuant to an agreement between an entity and an Indigenous person or a native title group, will not meet the definition of trust income. The amount directed to the trust will form part of the trust estate. | Detailed Reasoning - Application to your circumstances: There are a number of factors present in the current arrangement which would support the conclusion that the Production Payments are directed to the trustee of the Trust on behalf of and / or at the direction of the People. These factors include: ● It was the native title rights and interests of the People over the native title determination area that gave rise to the Agreement. ● X Corporation has entered into the Agreement on behalf of itself and the People. X Corporation is the registered native title body corporate (RNTBC) who holds the determined native title in trust for the People pursuant to section 56 of the NTA 1993. Under Regulation 6 of the Native Title (Prescribed Bodies Corporate) Regulations 1999 , a RNTBC is required amongst others, to hold money including payments received as compensation or otherwise related to native title rights and interest in trust, to apply the money held in trust as directed by the common law holders and to perform any function relating to native title rights and interest as directed by the common law holders (which in this case is the People). The requirement for X Corporation to hold monies related to native title rights and interest in trust and to apply those monies as directed by the People is also imposed on X Corporation under its rules. ● it is X Corporation on behalf of the People who are party to the contract and have contractually agreed to undertake the rights, obligations and actions contained in the Agreement in exchange for, amongst other things, the Production Payments; ● the payments provided to X Corporation for and on behalf of the People under the terms of the Agreement represents full and final compensation for any entitlements to native title compensation which X Corporation and / or the People may now or in the future have; ● X Corporation on behalf of the People have a contractual right to take action to enforce the Agreement; ● X Corporation is a party to the Trust. The Trust is a recipient of funds which includes compensation for an act or acts that would otherwise be wholly or partially inconsistent with the continued existence, enjoyment or exercise of native title or extinguish native title. In this regard, the People have nominated the Trust as a recipient for certain native title payments. Moreover, it is the native title rights and interests of the People that have given rise to the Agreement as mentioned above, and, it is the People through X Corporation as their representative body who have contracted with the mining company, not the trustee of the Trust. Therefore, in light of the above it is considered that the Production Payments are made to Trust on behalf of and/or at the direction of the People through their representative body namely X Corporation. The payments therefore form part of the trust estate of the Trust. Consequently, the Production Payments will not form part of the ‘net income’ of the Trust. | Detailed Reasoning - Question 5: Under subsection 59-40(4)(b) an amount or benefit that has arisen either directly or indirectly from investing a native title benefit amount is excluded from being treated as NANE under section 59-50 to the extent that the amount or benefit has arisen from investing a native title benefit amount. Consequently, as it was concluded at Question 1 that the Production Payments paid under the Agreement to the Trust do not qualify as a native title benefit, the question of whether the investment income generated from these payments is also treated as NANE income under section 59-50 does not arise. Although the Commissioner is not required to rule on the assessability of the investment income, it can be concluded that any investment income earned from the investment of the Production Payments will form part of the total assessable income of the Trust for the purposes of determining the trusts ‘net income’ under section 95 of the ITAA 1936. Section 95 provides that the net income of the trust will be the total assessable income of the trust, less allowable deductions. Relevantly, Draft Taxation Ruling TR 2012/D1 explains: Para 71. For trust law purposes, income of a trust is essentially that which is a product of the trust property – for example, rent from the letting of trust property or interest on loans of trust property. On that basis, it is likely to correspond in most cases with what would be ordinary income under section 6-5. Para 86. The many references in Division 6 to the ‘income of the trust estate’ show that the trust estate and its income are distinct concepts, the income being the product of the estate. Accordingly, where an amount is invested by a trust, the income generated from that investment will form part of the trust’s assessable income. | Summary: As consequence of the Production Payments not qualifying as a native title benefit, a distribution of an amount of the trust estate comprised of the Production Payments to a beneficiary of the trust who is an Indigenous person, an Indigenous holding entity or a distributing body, will also not qualify as non-assessable non-exempt income in the hands of the beneficiary under section 59-50 ITAA 1997. | Detailed Reasoning - Detailed reasoning: Subsection 59-50(2) of the ITAA 1997 provides that an amount or other benefit is non-assessable non-exempt income to the extent that the amount, or other benefit, arises directly or indirectly from a native title benefit and the person receiving that amount or other benefit is an Indigenous person or Indigenous holding entity. Therefore where: ● the trust satisfies the definition of Indigenous holding entity; ● the trustee distributes an amount of the trust estate being an amount which arose directly or indirectly from a native title benefit; and ● the trustee distributes this amount to an eligible beneficiary wo satisfies the definition of Indigenous person or Indigenous holding entity; the amount will be non-assessable non-exempt income in the hands of the beneficiary. | Detailed Reasoning - Relevant definitions: Indigenous person is defined in subsection 995-1(1) of the ITAA 1997 as an individual who is: a member of the Aboriginal race of Australia; or ● a descendant of an Indigenous inhabitant of the Torres Strait Islands. Subsection 59-50(6) of the ITAA 1997 defines ‘Indigenous holding entity’ as: 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. Distributing body is defined in section 128U of the ITAA 1936: ● an Aboriginal Land Council established by or under the Aboriginal Land Rights (Northern Territory) Act 1976 ; ● a corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 ; or ● any other incorporated body that: a. is established by or under the provisions of a law of the Commonwealth or of a State or territory that relate to Indigenous persons, and b. is empowered or required (whether under that law or otherwise) to pay moneys received by the body to Indigenous Persons or to apply such money for the benefit of Indigenous persons, either directly or indirectly. | Detailed Reasoning - Application to your circumstances: It was determined earlier in this ruling that the Production Payments did not qualify as a native title benefit within the terms of section 59-50. Consequently, where the trustee of the Trust distributes an amount of the trust estate comprised of the Production Payment to a beneficiary, the amount distributed will not be treated as an amount arising directly or indirectly from a native title benefit. Consequently, the amount distributed will not qualify as non-assessable non-exempt income in their hands under section 59-50(2). | Detailed Reasoning - Question 7: It was determined earlier that the Production Payments (not being amounts of investment income as set out in the ‘Relevant Facts and circumstances’ of this ruling) form part of the Trust’s trust estate. Consequently, in view of the answer to Questions 4 and 6, no amount of trust income generated from the trustee investing the Production Payment (which is not non-assessable non-exempt) distributed to a beneficiary of the trust who is an *Indigenous person, an *Indigenous holding entity or a *distributing body will be NANE income in their hands.