THE economic development of indigenous people is being "hampered" by complex and inappropriate tax laws, a report released yesterday has found.
Lisa Strelein, Director of Research at the Australian Institute of Aboriginal and Torres Strait Islander Studies Native Title Research Unit, said Australia must radically reduce the amount of tax paid by successful native title claimants.
It comes after the federal Government revealed it would overhaul native title laws to allow compensation payments to be used for future generations.
"The question is whether native title payments to traditional owners are compensation or income," Dr Strelein said.
"There is an urgent need to clarify the tax treatment of native title to ensure that the economic benefits that do flow to the traditional owners can be maximised."
The report finds the economic potential of native title is undermined by the interpretation of native title by the legislature and the courts.
"Yet indigenous people are entering into agreements with industry who want access to their lands," Dr Strelein said.
"Native title is a unique legal concept that seeks to bridge the rights held by indigenous peoples under their own law and accommodation and protection of those rights within Australian law.
"The current tax treatment of benefits from native title agreements has not come to terms with the uniqueness of native title."
The report concluded that tax policy could play a role in creating incentives for investment as well as maximising the benefit of native title payments, particularly in relation to price-sensitive agreements.
Payments for loss or impairment of native title and the exercise of native title rights could be defined as compensatory and exempted from the income tax and GST regimes.
The report said all exemption regimes should be accompanied by an expanded social security means-testing exemption.