Measures to address barriers in the taxation system and other financial arrangements

Although the Working Group is firmly of the view that legislatively prescribing what use should be made of payments is not the immediate answer, it does support a number of other legislative changes. Levin has proposed amendments to taxation legislation to set up alternatives to charitable trusts by establishing a new category of tax-exempt or deductible gift recipient for the growth and development of specific Indigenous communities. Levin further proposes tax deductibility for specific capacity building and infrastructure expenditure and tax incentives for venture capitalists, with statutory minimum requirements for Indigenous shareholding.¹⁴

Joint ventures may be encouraged by limiting the capacity of the Office of Evaluation and Audit to publish the results of their examination of entities associated with Government-funded programs.

The Working Group proposes that there be a series of amendments to the existing taxation and financial arrangements in Australia to achieve better outcomes from the tax/social policy interface including in facilitating the development of Indigenous enterprises. These proposals focus on the federal income tax law (Income Tax Assessment Act 1997 and Income Tax Assessment Act 1936) but similar amendments may also be desirable for State and Territory tax laws. Such amendments could include:

allowing long term tax exempt accumulation of mining benefit agreement funds, with appropriate governance and auditing arrangements, to provide for the creation of an intergenerational capital base with which Aboriginal people can contribute to their own regional and economic development;
amendment of Divisions 30 and 50 of the Income Tax Assessment Act 1997 to establish a specific category of tax exempt deductible gift recipient entities for use by Indigenous communities for the growth and development of their specified community;
full and immediate tax deductibility for expenditure incurred on specific capacity building and community infrastructure in indigenous communities, recognising that in many cases this is provided in situations where there is both an absence of government investment and significant market failure. These expenditures should be able to be deducted on a flow through basis against other sources of business income or profits of investors; and
simplification of the eligibility of deductible gift recipient (DGR) status for income tax purposes to enable Indigenous organisations to establish economic independence and to expand their activities. This would include enabling organisations whose roles cover more than one DGR category (eg organisations which have a mixed cultural, environmental and capacity building focus) to be eligible for achieving DGR status; recognising that several Indigenous organizations may appear to have similar roles but will be independent entities and should therefore not be restricted from achieving DGR status on the basis that a similar organisation exists.
granting flow through income tax treatment, coupled with exemption of income and capital gains for venture capital partners in Indigenous enterprise development where business have prescribed minimum levels of Indigenous ownership and targets for increasing equity arrangements over time;
granting up front tax income tax concessions similar to the research and development tax deduction/credit for capital investment in Indigenous businesses or enterprise development in Indigenous communities;
providing specific arrangements for government funded Indigenous enterprise development, including venture capital grants targeted at small family enterprises, application processes that are simplified and do not simply rule out Indigenous enterprises in undefined markets or products as higher risk and unsuitable for investment, and the provision of a specific Indigenous Enterprise Development Grants Program (akin to the existing Export Market Development Grants Program) that supports the promotion, marketing and growth of Indigenous enterprises following their establishment;
reforming the focus and function of IBA such that their capacity building and investment strategies better facilitate the incubation and emergence of Indigenous businesses including: a reduction in the commercial viability hurdles required for the provision of support or assistance by IBA, enhanced provision of capacity building and other support measures, removal of the requirements to provide security in the form of assets of sufficient real value that can be sold to recover the full value of the loan in the case of default, removal of the loan application fee requirements, reductions in the credit report requirements and removal of the requirement to provide a financial return which is consistent with the relevant industry sector; and
reforming the Indigenous Land Corporation to better facilitate Indigenous enterprise development, including a simplification of the application process, greater capacity building assistance for business incubation and development, and revision of the Program Guidelines that currently prescribe narrow parameters within which a business must demonstrate that it is sustainable over the long term and delivers quantifiable and sustainable benefits, specifically in employment and training, through land ownership.

14 Adam Levin, Improvements to the Tax and Legal Environment for Aboriginal Community Organisations and Trusts, Discussion paper, ATNS workshop, 28 August 2007

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