NANE Income

From July 1, 2003, certain mining related payments to indigenous groups in Australia are classified as non assessable non exempt income.

This classification means these payments are neither taxable nor tax exempt.

The law also specifies what counts as a mining payment and a distributing body. Mining payments include royalties and other payments related to mining on indigenous land. Distributing bodies are organisations like Aboriginal Land Councils that are responsible for distributing these funds.

However, there are some exceptions. The non assessable non exempt status does not apply to amounts a distributing body uses for its administrative costs, like employee salaries. Also, payments for goods or services provided to a distributing body are not included in this category.

Refunds from State or Territory business franchise fees, when subject to the Commonwealth’s franchise fees windfall tax, are classified as non assessable non exempt income from July 1, 2003.

This means these refunds do not have any tax consequences for the recipient.

Under Australian tax laws, a fundamental rule applies to amounts received by taxpayers that must be repaid later and are non deductible: they are neither considered taxable income nor tax exempt. These repayable amounts fall into the category of non assessable non exempt income, ensuring they have no immediate tax implications upon receipt or repayment.

This rule includes various scenarios, whether the obligation to repay existed at the time of the initial payment or arose later. It even applies to government payments to industry (GPIs), including bounties, subsidies, grants, or rebates, as long as they are non deductible upon repayment.

However, there are exceptions to this rule. If taxpayers can claim a deduction for the repayment, especially in a business context, the rule does not apply. Similarly, when repayments are linked to compensation or damages for occupational matters, such as workers’ compensation or sickness allowances offset by a lump sum payment, the rule is also exempt.

The Australian tax law addresses the treatment of certain income received by entities, specifically focusing on ordinary income that would typically qualify as mutual receipts.

Under the mutuality principle, income derived from members of clubs, unincorporated associations, or entities created for a common purpose is not considered assessable income. This principle generally applies to membership subscriptions and similar transactions with members, excluding income from dealings with non members, which may be taxable.

However, there is an exception to the mutuality principle. It states that when an entity’s governing documents prevent it from distributing income, whether in money or property, to its members, the income that would otherwise be mutual receipts becomes neither assessable nor exempt income. This specific classification places such income into the category of NANE income, effectively exempting it from taxation.

It’s crucial to note that the above ruling applies solely to ordinary income, with statutory income remaining unaffected.

When a company offers its shareholders the opportunity to buy additional shares or a unit trust offers unit holders the chance to acquire more trust units, it doesn’t trigger an immediate tax liability for these shareholders or unit holders. The market value of the rights when they’re issued is considered non assessable non exempt income.

However, there are certain conditions for this exemption to apply. First, the original shares or units and the rights must not be considered revenue assets or trading stock at the time of issuance. Second, it applies to shareholders or unit holders who would typically be subject to capital gains tax (CGT) for the original interests and the rights.

Native title benefits, which include both monetary and non monetary gains, are derived from agreements made under Commonwealth, state, or territory laws. These benefits typically arise due to actions that either extinguish native title rights or interfere with their continued existence, enjoyment, or exercise.

As per Australian tax laws, when indigenous individuals or Indigenous holding entities receive native title benefits, these benefits are considered NANE income. This means that they are exempt from income tax.