Edited version of your written advice

Authorisation Number: 1012755958804

Ruling

Subject: Co-existence Agreement

Question

Should the B Trust (or the X Trustee if the X Trustee has been established and nominated by the Native Title Party) charge GST under the Co-Existence Agreement (Agreement)?

Answer

The B Trust (or the X Trustee) should not charge GST in respect of:

• the $WW paid by Mining Co at Completion pursuant to the Agreement

• the $XX payable by Mining Co on the commencement of Commercial Production pursuant to the Agreement

• the X Royalty payable quarterly by Mining Co from the commencement of Commercial Production pursuant to the Agreement

• the Exploration Payments payable annually by Mining Co from the first anniversary of Completion pursuant to the Agreement

• the $YY X Trust Administration Support payments payable quarterly by Mining Co from the commencement of Commercial Production pursuant to the Agreement, and

• the $ZZ Cultural Heritage Support and Preservation payments payable quarterly by Mining Co from Completion pursuant to the Agreement.

Relevant facts and circumstances

Entities referred to in the Agreement

Mining Co is a party to the Agreement and is the registered holder of the mining tenements (Granted Tenements) and has applied for the mining tenements listed in the Agreement (Pending Tenements) which are required by Mining Co in order to extract minerals on a commercial basis (Project Operations). The Pending Tenements include a mining lease which the State intends to grant to Mining Co (Mining Lease). Mining Co will undertake the Project Operations in an area of land (Project Area) which falls within land and waters (Claim Area) which are the subject of an application for a native title determination made by the Native Title Party on behalf of the X People (Native Title Claim). In addition, Mining Co will continue to explore for minerals in the Project Area.

The Native Title Party (that is, named individuals) on behalf of the X People is a party to the Agreement and is authorised by the X People to be the named applicants in the Native Title Claim (which has not been determined) and to negotiate in relation to the Mining Lease pursuant to Part 2, Division 3 of the Native Title Act 1993 (Cth) (NT Act). The Agreement indicates that the Native Title Party a Registered Native Title Claimant as defined in the NT Act.

The X People are indigenous people and, for the purposes of the NT Act, the Native Title Claimant Group on whose behalf the Native Title Claim is made.

K Ltd as trustee for the B Trust is referred to in the Agreement and holds an ABN and is registered for GST and is registered as a charity.

The Agreement states that 'X Trust' refers to a trust to be established in accordance with the agreement for the benefit of the X People and to be nominated by the Native Title Party to receive the amounts payable by Mining Co to the X Trustee (the corporate trustee appointed as trustee of the X Trust) under the Agreement and until that trust is established, means the B Trust (in particular for the purposes of the $WW paid by Mining Co at Completion).

Operative provisions of the Agreement dealing with monetary benefits payable to the X Trustee

The Agreement requires the Native Title Party to nominate the X Trustee to Mining Co within 90 days after Completion. Consequently it may be that only the $WW paid by Mining Co on Completion was paid to the B Trust and Mining Co will pay the other monetary benefits to the X Trustee nominated by the Native Title Party. However, the ruling request indicated that, so far, the Native Title Party had not nominated the X Trustee and we have prepared this ruling on the basis that the other monetary benefits which Mining Co is obliged to pay to the X Trustee under the Agreement may be paid to the B Trust.

The Agreement states that at Completion Mining Co will pay $WW to the X Trustee to be held as property of the X People and that the Native Title Party will execute and deliver to Mining Co the Section 31 Deed annexed to the Agreement.

The Agreement states that Mining Co will pay $XX to the X Trustee to be held as property of the X People on the commencement of Commercial Production.

The Agreement states that Mining Co will pay the X Royalty to the X Trustee to be held as property of the X People from the commencement of Commercial Production.

The Agreement states that Mining Co will pay Exploration Payments to the X Trustee to be held as property of the X People each year on and from the anniversary of Completion.

The Agreement also states that, from the commencement of Commercial Production until the cessation of Project Operations, Mining Co will pay the X Trustee $YY per quarter by way of financial assistance to support the administration of the X Trust.

The Agreement further states that on the first day of each quarter after Completion Mining Co will pay $ZZ to the X Trustee to be held as property of the X People.

Other operative provisions of the Agreement

The Agreement states that the X People (including the Native Title Party) agree with and consent to the grant (which includes renew, extend and re-grant) of all Project Tenure (defined as the Granted Tenements, Pending Tenements and any Future Tenements (that is, any grant to or application made by Mining Co for a miscellaneous licence or lease under the Mining Act that is within the Project Area which are mining tenements)).

The Agreement states that the Native Title Party agrees to execute the Section 31 Deed annexed to the Agreement contemporaneously with execution of the Agreement.

The clause in the Agreement which deals with GST is discussed in the Reasons for Decision.

Section 31 Deed

Attached to the Agreement is the Section 31 Deed between the State and the Minister responsible for the State mining legislation (together the 'Government Party'), the Native Title Party, and Mining Co (the 'Grantee Party') which the Native title Party was obliged to execute and deliver to Mining Co at Completion pursuant to the Agreement.

The recitals to the Section 31 Deed state that Mining Co has applied for the grant of the tenement(s) (that is, the Mining Lease), that that grant of the tenement(s) affects native title, that the Government Party has given notice of intention to grant the tenement(s), and that the Native Title Party has made a native title claim in respect of the subject land and is the Registered Native Title Claimant in respect of that native title claim. The recitals to the Section 31 Deed also state:

In accordance with Part 2 Division 3 Subdivision P of the Native Title Act negotiations in good faith in respect of the grant of the tenement(s) have been conducted between the Government Party, the Grantee Party and the Native Title Party.

The Native Title Party agrees to the grant of the tenement(s) and this deed is entered into for the purpose of ensuring the validity of the tenement(s) under the Native Title Act.

The operative provisions of the Section 31 Deed state that the Native Title Party warrants that it has obtained all necessary authorisations and that the Section 31 Deed is enforceable against the Native Title Party and all the persons included in the Native Title Claim Group.

Those provisions also state that the Native Title Party agrees to the grant of the tenement(s) and to the Grantee Party (that is, Mining Co) exercising its rights and discharging its obligations under the tenement(s) and acknowledges that the Section 31 Deed is an agreement for the purposes of sections 28(1)(f) and 31(1)(b) of the NT Act.

Other provisions of the Section 31 Deed set out conditions to be complied with by the parties and state that all persons included in the Native Title Claim Group (that is, the X People) are taken to be parties in respect of the provisions setting out those conditions.

Ruling request

It was stated in the ruling request that, pending the X People creating the X Trust, the B Trust will receive all monetary benefits payable to the X People under the Agreement. The ruling request asked the ATO to address the following questions:

Should the B Trust charge GST under the Agreement, and

Should the X People charge GST under the Agreement?

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5.

Reasons for decision

Summary

The B Trust should not charge GST in respect of the $WW paid by Mining Co at Completion as the $WW does not have a nexus with a supply made by the B Trust, the B Trust is not liable to pay GST, and Mining Co therefore is not required by the GST clause in the Agreement to pay an additional amount to the B Trust. The $WW paid by Mining Co at Completion does have a nexus with the delivery of the executed Section 31 Deed to Mining Co by the Native Title Party, but the Native Title Party should not charge GST in respect of that supply because that supply is not a taxable supply as the Native Title Party is not carrying on an enterprise. Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of the NT Act without any positive action by the X People. Consequently the X People did not 'make' a supply and should not charge GST.

The X Trustee/B Trust should not charge GST in respect of the $XX payable by Mining Co on the commencement of Commercial Production as the Agreement indicates that that payment also has a nexus with the delivery of the executed Section 31 Deed to Mining Co by the Native Title Party. Consequently that payment does not have a nexus with a supply made by the X Trustee, the X Trustee/B Trust is not liable to pay GST, and Mining Co therefore is not required by the GST clause in the Agreement to pay an additional amount to the X Trustee/B Trust. As noted above, the Native Title Party should not charge GST in respect of the delivery of the executed Section 31 Deed because that supply is not a taxable supply as the Native Title Party is not carrying on an enterprise. Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of the NT Act without any positive action by the X People. Consequently the X People did not 'make' a supply and should not charge GST.

The X Trustee/B Trust should not charge GST in respect of the X Royalty payable by Mining Co pursuant to the Agreement as the X Royalty also has a nexus with the delivery of the executed Section 31 Deed to Mining Co by the Native Title Party. Consequently the X Royalty is not consideration for a supply made by the X Trustee, the X Trustee/B Trust is not liable to pay GST, and Mining Co therefore is not required by the GST clause in the Agreement to pay an additional amount to the X Trustee/B Trust. The Native Title Party should not charge GST in respect of the delivery of the executed Section 31 Deed because that supply is not a taxable supply as the Native Title Party is not carrying on an enterprise. Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of the NT Act without any positive action by the X People. Consequently the X People did not 'make' a supply and should not charge GST.

The X Trustee/B Trust should not charge GST in respect of the Exploration Payments payable by Mining Co pursuant to the Agreement as the Exploration Payments have a nexus with the consent to the grant of all Project Tenure by the X People, including the Native Title Party and are not consideration for a supply made by the X Trustee. Consequently the Exploration Payments are not consideration for a supply made by the X Trustee, the X Trustee/B Trust is not liable to pay GST, and Mining Co therefore is not required by the GST clause in the Agreement to pay an additional amount to the X Trustee/B Trust. The X People should not charge GST because the supply by the X People, including the Native Title Party, of the consent to the grant of all Project Tenure is a 'supply' which falls within paragraph 9-10(2)(g) of the GST Act but is not a taxable supply as neither the X People nor the Native Title Party are carrying on an enterprise.

The X Trustee/B Trust should not charge GST in respect of X Trust Administration Support payments payable by Mining Co pursuant to the Agreement as those payments commence on an from the commencement of Commercial Production (defined as when minerals mined from any part of the Mining Lease are transported for sale) and therefore have a nexus with the delivery of the executed Section 31 Deed to Mining Co by the Native Title Party because the act of granting the Mining Lease is invalid without the delivery of the executed Section 31 Deed. Consequently the X Trust Administration Support payments are not consideration for a supply made by the X Trustee, the X Trustee/B Trust is not liable to pay GST, and Mining Co therefore is not required by the GST clause in the Agreement to pay an additional amount to the X Trustee/B Trust. Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of the NT Act without any positive action by the X People. Consequently the X People did not 'make' a supply and should not charge GST.

The X Trustee/B Trust should not charge GST in respect of Cultural Heritage Support and Preservation payments payable by Mining Co pursuant to the Agreement as those payments have a nexus with the commencement and continuation of Project Operations (which is defined as all operations that may be lawfully conducted pursuant to Project Tenure and Project Tenure is defined as the Granted Tenements, Pending Tenements (including the Mining Lease) and Future Tenements) and therefore have a nexus with the delivery of the executed Section 31 Deed by the Native Title Party. Consequently the Cultural Heritage Support and Preservation payments are not consideration for a supply made by the X Trustee, the X Trustee/B Trust is not liable to pay GST, and Mining Co therefore is not required by the GST clause in the Agreement to pay an additional amount to the X Trustee/B Trust. Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of the NT Act without any positive action by the X People.

Consequently the X People did not 'make' a supply and should not charge GST.

Detailed reasoning

Charging GST under the Agreement

The ruling request asked the ATO to confirm whether the B Trust should 'charge GST' under the Agreement. We understand this to mean whether the B Trust is entitled to recover from the recipient of any supply made by the B Trust an additional amount equal to any GST which the B Trust is liable to pay on that supply, as provided for in the GST clause in the Agreement:

If a party makes a supply (the supplier) to another party (the recipient) under or in connection with this Agreement, then (unless the consideration is expressly stated to be inclusive of GST) the consideration for that supply is exclusive of GST and, in addition to paying the consideration, the recipient must:

(i) pay to the supplier an amount equal to any GST for which the supplier is liable on that supply, without deduction or set-off of any other amount.

This clause requires a recipient party to pay to the supplier party an additional amount equal to any GST for which the supplier party is liable on the relevant supply. Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which uses the expression 'you' to apply to entities generally, states:

You must pay the GST payable on any taxable supply that you make.

The combined effect of this clause and section 9-40 of the GST Act is that the X Trustee/B Trust is entitled to charge GST under the Agreement if any monetary benefit paid to the X Trustee/B Trust by Mining Co has a nexus with a taxable supply made by the X Trustee or B Trust. Below we examine each of the provisions of the Agreement pursuant to which the X Trustee or B Trust may receive a monetary benefit and determine whether there is a nexus between that consideration and a taxable supply made by the X Trustee or B Trust.

$WW paid by Mining Co at Completion:

The Agreement indicates that this payment has a nexus with the Native Title Party delivering an executed Section 31 Deed to Mining Co as the Agreement both obliges Mining Co to make the $WW payment to the B Trust and obliges the Native Title Party to deliver the executed Section 31 Deed to Mining Co and states that Mining Co is not required to make the $WW payment to the B Trust unless all members of the Native Title Party have executed the Section 31 Deed.

We therefore consider that the $WW payment paid by Mining Co to the B Trust does not have a nexus with a supply made by the B Trust. Consequently the B Trust is not liable under section 9-40 of the GST Act to pay GST and Mining Co is not required by the GST in the Agreement to pay the B Trust an amount additional to the $WW payment.

As noted above, the Agreement indicates that the $WW payment made by Mining Co to the B Trust on Completion is consideration for a supply made by the Native Title Party, that is, delivery of the executed Section 31 Deed to Mining Co.

'Section 31 Deed' is defined in the Agreement as a deed in the form annexed to the Agreement which is effective as an agreement for the purposes of section 31 of the NT Act for the grant of the Mining Lease.

Subsection 26(1) of the NT Act states that Part 2, Division 3, Subdivision P of the NT Act applies to certain 'acts' by the Commonwealth, a State, or a Territory ('Government Party'), including the creation of a right to mine, whether by grant of a mining lease or otherwise. Subsection 28(1) of the NT Act states that an act to which Subdivision P applies is invalid to the extent that it affects native title unless, before it is done, the requirements of one of the paragraphs of subsection 28(1) are satisfied. One of the requirements in subsection 28(1) is that an agreement of the kind mentioned in paragraph 31(1)(b) of the NT Act is made (paragraph 28(1)(f) of the NT Act). Section 29 of the NT Act states that before an act is done the Government Party must notify any Registered Native Title Party Claimant in relation to land or waters that will be affected by an act and paragraph 31(1)(a) of the NT Act obliges the Government Party to give all Native Title Parties an opportunity to make submissions regarding the act. Section 30A states that the Government Party, any Native Title Party, and any Grantee Party (for example, Mining Co) are negotiation parties. Paragraph 31(1)(b) of the NT Act states:

The negotiation parties must negotiate in good faith with a view to obtaining the agreement of each of the Native Title Parties to:

(a) The doing of the act; or

(b) The doing of the act subject to conditions to be complied with by any of the parties.

These provisions of the NT Act indicate that, as the relevant 'act' (that is, the grant by the State to Mining Co of the Mining Lease) affects native title, it is rendered invalid by section 28 of the NT Act unless the Native Title Party enters into the Section 31 Deed in which the Native Title Party agrees to that act. The Section 31 Deed annexed to the Agreement states that the Native Title Party agrees to both the grant of the tenement(s) (defined as the Mining Lease) and to the Grantee Party (Mining Co) exercising its rights and discharging its obligations under the tenement(s) and acknowledges that the Section 31 Deed is an agreement for the purposes of sections 28(1)(f) and 31(1)(b) of the NT Act.

Based on the NT Act provisions referred to above we consider that by delivering the executed Section 31 Deed to Mining Co the Native Title Party makes a supply which falls within paragraph 9-10(2)(g) of the GST Act. 'Supply' is defined in subsection 9-10(1) of the GST Act as any form of supply whatsoever and subsection 9-10(2) states that, without limiting subsection 9-10(1), supply includes any of a number of items including:

(g) An entry into, or release from, an obligation:

(i) To do anything; or

(ii) To refrain from an act; or

(iii) To tolerate an act or situation

Although paragraphs 85 to 89 of Goods and Services Tax Ruling GSTR 2006/9 state that compulsory acquisition by a government authority of land and interests relating to that land (including native title rights under a particular statute) does not involve the Native Title Claimants making a supply (because the rights are extinguished by operation of statute), paragraphs 90 and 91 of GSTR 2006/9 contrast that situation with a sale of the land to the government authority (where the land owner does make a supply). The Agreement states that the parties agree that the Non-Extinguishment Principle in section 283 of the NT Act will apply to the grant of all Pending Tenements (which includes the Mining Lease), that is, that if any act affects any native title, the native title is nevertheless not extinguished. In our view this indicates that in the present case native title rights are not being extinguished and that the Native Title Party made a supply for GST purposes by delivering the executed Section 31 Deed to Mining Co.

Our view that the Native Title Party made a supply raises the issue of whether the Native Title Party should charge GST pursuant to the GST clause in the Agreement in respect of the $WW paid by Mining Co. In our view the Native Title Party should not charge GST because the Native Title Party did not make a 'taxable supply' as defined in section 9-5 of the GST Act:

You make a taxable supply if:

(a) you make the supply for consideration; and

(b) the supply is made in the course or furtherance of an enterprise that you carry on; and

(c) the supply is connected with Australia; and

(d) you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Paragraph 9-5(b) of the GST Act is not satisfied because delivery of the executed Section 31 Deed by the Native Title Party is not made in the in the course or furtherance of an enterprise carried on by the Native Title Party. The definition of 'enterprise' in section 9-20 of the GST Act states:

An enterprise is an activity, or series of activities, done:

(a) in the form of a business; or

(b) in the form of an adventure or concern in the nature of trade; or

(c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

…

(e) by a charity; or

(f) (Repealed by No 169 of 2012)

(g) by the Commonwealth, a State or a Territory, or by a body corporate, or corporation sole, established for a public purpose by or under a law of the Commonwealth, a State or a Territory; or

The definitions of 'Native Title Party' and 'Native Title Claim' in the Agreement indicate that the individuals comprising the Native Title Party were authorised by the X People to be the named applicants in a native title determination application. A recital to the Agreement states:

The Native Title Party has the right to negotiate under Part 2, Division 3, Subdivision P of the NTA in relation to the Mining Lease

and the recitals to the Section 31 Deed state:

In accordance with Part 2 Division 3 Subdivision P of the Native Title Act, negotiations in good faith in respect of the grant of the tenement(s) have been conducted between the Government Party, the Grantee Party and the Native Title Party.

The Native Title Party agrees to the grant of the tenement(s) and this deed is entered into for the purpose of ensuring the validity of the tenement(s) under the Native Title Act.

Essentially the Native Title Party is a creation of the NT Act and the activities, or series of activities, done by the Native Title Party are governed by the NT Act, including exercise of the right to negotiate in relation to an act (for example, the grant of the Mining Lease by the State to Mining Co) which affects the native title claim pursuant to Part 2 of the NT Act and pursuit of the native title application through the Federal Court pursuant to Part 3 of the NT Act.

We do not consider that the activities done by the Native Title Party are in the form of a 'business' (defined in section 195-1 to include any profession, trade, employment, vocation or calling, but not to include occupation as an employee) as those activities do not have the indicators of a business referred to in paragraph 178 of Miscellaneous Taxation Ruling MT 2006/1, for example, a significant commercial activity and an intention to make a profit. Nor are the activities done by the Native Title Party in the form of 'an adventure in the nature of trade' as described in paragraph 234 of MT 2006/1, that is, an isolated or one-off transaction that does not amount to a business but which has the characteristics of a business deal. Nor do the Native Title Party's activities fall within paragraph 9-20(1)(c) of the GST Act , that is, regular or continuous in the form of a lease, licence, or other grant of an interest in property as it is the Government Party (that is, the State), not the Native Title Party, which will grant the Mining Lease to Mining Co.

As the Native Title Party is not carrying on an enterprise paragraph 9-5(b) of the GST Act is not satisfied and the delivery of the executed Section 31 Deed by the Native Title Party to Mining Co is not a taxable supply made by the Native Title Party. Consequently the $WW paid by Mining Co to the B Trust pursuant to the Agreement is not consideration for a taxable supply made by the Native Title Party, the Native Title Party is not liable to pay GST, and Mining Co is not obliged to pay an additional amount to the Native Title Party pursuant to the GST clause in the Agreement.

Our view that the $WW paid by Mining Co on Completion has a nexus with the delivery of the executed Section 31 Deed by the Native Title Party also raises the issue of whether the X People should charge GST pursuant to the GST clause in the Agreement on the basis that the Native Title Party delivered the Section 31 Deed on behalf of the X People. As noted above, the first page of the Agreement states that the Native Title Party is a party to the Agreement 'on behalf of the X People' and a recital to the Agreement states:

The Native Title Party is authorised to deal with all matters arising from the Native Title Claim for and on behalf of the X People.

The Section 31 Deed states that the Native Title Party acknowledged that the Section 31 Deed is an agreement for the purposes of section 28(1)(f) and section 31(1)(b) of the NT Act. Section 3 of the NT Act is followed by a note which states:

Note: The native title parties are set out in paragraphs 29(2)(a) and (b) and section 30. If they include a registered native title claimant, the agreement will bind all of the persons in the native title claim group concerned: see subsection 41(2).

Subsections 41(1) and (2) of the NT Act state:

(1) Subject to this section:

(a) a determination by the arbitral body; or

(b) an agreement of the kind mentioned in paragraph 31(1)(b);

that the act may be done subject to conditions being complied with by the parties has effect, if the act is done, as if the conditions were terms of a contract among the negotiation parties. The effect is in addition to any other effect that the agreement or determination may have apart from this subsection.

Other negotiation parties

(2) If a native title party is a registered native title claimant, any other person included in the native title claim group concerned is taken to be a negotiation party for the purposes only of subsection (1).

'Native Title Claim Group' is defined in section 253 of the NT Act in relation to a claim in an application for an approved determination of native title made to a recognised State/Territory body as either the person or persons making the claim, or on whose behalf the claim is made. In the present case the X People are a Native Title Claim Group.

The effect of subsection 41(2) of the NT Act in the present case is that because the Native Title Party is a Registered Native Title Claimant (which is confirmed in a recital the Section 31 Deed), any other person included in the Native Title Claim Group concerned, that is, the X People, is taken to be a negotiation party for the purposes of subsection 41(1).

The effect of subsection 41(1) in the present case is that the conditions in the Section 31 Deed have effect as if they were terms of a contract between the negotiation parties (which section 30A of the NT Act states to be the Government Party (that is, State), Native Title Party and the Grantee Party (that is, Mining Co) and which subsection 41(2) deems to include the Native Title Claim Group, that is, X People). This is reflected in the Section 31 Deed which states:

Clauses AA, BB and CC of this deed constitute conditions to be complied with by the parties for the purposes of subsections 41(1) and 41(2) of the Native Title Act, and all persons included in the native title claim group are taken to be parties in respect of those clauses.

Goods and Services Tax Ruling GSTR 2006/9 deals with supplies and includes Proposition 5, that is, that an entity must take some action to 'make' a supply for the purposes of section 9-5 of the GST Act. Paragraph 74 of GSTR 2006/9 states that an entity can still 'make' a supply even if the supply is made under compulsion of statute if the entity takes some action to cause the supply to occur, but paragraph 78 of GSTR 2006/9 states that an entity does not make a supply brought about by operation of law in the absence of that entity taking positive action.

In the present case the Native Title Party delivered to Mining Co the executed Section 31 Deed pursuant to which the Native Title Party agreed to the grant of the Mining Lease to Mining Co. The agreement by the X People to the conditions in clauses AA, BB and CC of the Section 31 Deed did not involve the X People taking any action but was brought about by the operation of law (subsections 41(1) and (2) of the NT Act). Consequently the X People did not 'make' a supply, the $WW paid by Mining Co on Completion is not consideration for a taxable supply for which the X People would be liable to pay GST, and Mining Co is not obliged to pay an additional amount to the X People pursuant to the GST clause in the Agreement.

$XX payable by Mining Co on commencement of Commercial Production:

The Agreement states that, subject to the terms of the Agreement, Mining Co will pay $XX to the X Trustee on the commencement of Commercial Production. The Agreement also states that 'X Trustee' means the corporate trustee appointed as trustee of the X Trust and the definition of 'X Trust' states that, pending establishment of the X Trust and nomination of the X Trustee to Mining Co, 'X Trust' means the B Trust 'Commercial Production' is defined as when minerals mined from any part of the Mining Lease are transported for sale from the Project Area.

The Agreement states:

For the avoidance of doubt:

(i) [Mining Co] will only be required to make the milestone payments referred to in subclauses [ ] and [ ] once all of the persons comprising the Native Title Party (that is, all members of the named applicant with respect to the Native Title Claim) have executed this Agreement and the Section 31 Deed required for the Grant of the Mining Lease;

We therefore consider that the $XX payable by Mining Co to the X Trustee/B Trust on commencement of Commercial Production does not have a nexus with a supply made by the X Trustee/B Trust. Consequently the X Trustee/B Trust is not liable under section 9-40 of the GST Act to pay GST and Mining Co is not required by the GST clause in the Agreement pay the X Trustee/B Trust an amount additional to the $XX.

Although the $XX payable by Mining Co to X Trustee/B Trust on the commencement of Commercial Production is consideration for a supply made by the Native Title Party (that is, delivery of an executed Section 31 Deed), that supply is not a taxable supply because paragraph 9-5(b) of the GST Act is not satisfied as the Native Title Party is not carrying on an enterprise. Consequently the $XX is not consideration for a taxable supply made by the Native Title Party, the Native Title Party is not liable to pay GST, and Mining Co is not obliged to pay an additional amount to the Native Title Party pursuant to the GST clause in the Agreement. Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of subsections 41(1) and (2) of the NT Act without the X People taking any action. Consequently the X People did not 'make' a supply, the $XX payable by Mining Co on commencement of Commercial Production is not consideration for a taxable supply for which the X People would be liable to pay GST and Mining Co is not obliged to pay an additional amount to the X People pursuant to the GST clause in the Agreement.

X Royalty payable quarterly by Mining Co from commencement of commercial Production:

The Agreement states that Mining Co shall pay a X Royalty to the X Trustee from the Commencement of Commercial Production in respect of each tonne of minerals sold by Mining Co.

We consider that the X Royalty also has a nexus with the delivery of the executed Section 31 Deed by the Native Title Party. The Agreement states that the X Royalty shall be payable from the commencement of Commercial Production and that the X Royalty shall accrue in respect of each tonne of minerals sold by Mining Co. 'Commercial Production' is defined as when minerals mined from any part of the Mining Lease are transported for sale from the Project Area. 'Mining Lease' is defined as any mining lease granted pursuant to Mining Co's lease application. Such transport for sale cannot commence without the grant of the Mining Lease, and subsection 28(1) of the NT Act makes the act of granting of the Mining Lease invalid without the delivery of the executed Section 31 Deed by the Native Title Party.

The X Royalty does not have a nexus with a supply made by the X Trustee/B Trust. Consequently the X Trustee/B Trust is not liable under section 9-40 of the GST Act to pay GST and Mining Co is not required by the GST clause in the Agreement to pay the X Trustee/B Trust an amount additional to the X Royalty.

Although the X Royalty is consideration for a supply made by the Native Title Party (that is, delivery of the executed Section 31 Deed to Mining Co), that supply is not a taxable supply because paragraph 9-5(b) of the GST Act is not satisfied as the Native Title Party is not carrying on an enterprise. Consequently the X Royalty is not consideration for a taxable supply made by the Native Title Party, the Native Title Party is not liable to pay GST, and Mining Co is not obliged to pay an additional amount to the Native Title Party pursuant to the GST clause in the Agreement.

Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of subsections 41(1) and (2) of the NT Act without the X People taking any action. Consequently the X People did not 'make' a supply, the X Royalty is not consideration for a taxable supply for which the X People would be liable to pay GST, and Mining Co is not obliged to pay an additional amount to the X People pursuant to the GST clause in the Agreement.

Exploration Payments payable annually by Mining Co from the first anniversary of Completion:

The Agreement states that Mining Co shall pay the Exploration Payments to the X Trustee/B Trust each year on and from the first anniversary of Completion. 'Exploration Payment' is defined as an annual payment of 5% of the Minimum Annual Expenditure Commitment for each Granted exploration tenement that is in the Claim Area (that is, the land and waters the subject of the Native Title Claim) but outside the Project Area. 'Granted Tenements' is defined as the mining tenements granted to and held by Mining Co listed in a Schedule to the Agreement.

The Agreement states that the X People (including the Native Title Party) agree with and consent to the Agreed Acts listed in the Agreement which include the grant of all Project Tenure, the Project Operations, and Mining Co continuing to carry out exploration that has been cleared or cleared with conditions in the Claim Area, on the Project tenure, or on land otherwise covered by exploration licences granted under the State mining legislation.

Based on the provisions of the Agreement discussed above we consider that the Exploration Payments paid by Mining Co have a nexus with the agreement with and consent to the grant of all Project Tenure by the X People, including the Native Title Party. Consequently the Exploration Payments do not have a nexus with a supply made by the X Trustee, the X Trustee/B Trust is not liable to pay GST, and Mining Co is not obliged to pay an additional amount to the X Trustee/B Trust pursuant to the GST clause in the Agreement.

The supply by the X People, including the Native Title Party, of the agreement with and consent to the grant of all Project Tenure (including the Granted Tenements) is a 'supply' which falls within paragraph 9-10(2)(g) of the GST Act but is not a taxable supply as neither the X People nor the Native Title Party is carrying on an enterprise. We have already set out the reasons why we consider that the Native Title Party is not carrying on an enterprise. We consider that the same reasons apply to the X People, that is, the activities done by the X People are not in the form of a business or an adventure in the nature of trade.

Consequently the Exploration Payments are not consideration for a taxable supply made by the X People and/or the Native Title Party, neither the X People nor the Native Title Party is liable to pay GST, and Mining Co is not obliged to pay an additional amount to the X People and/or Native Title Party pursuant to the GST clause in the Agreement.

X Trust Administration Support payments payable quarterly by Mining Co from commencement of Commercial Production:

The Agreement states that, on and from the commencement of Commercial Production and until the cessation of Project Operations, Mining Co will pay the X Trustee $YY per quarter by way of financial assistance to support the administration of the X Trust (X Trust Administration Support).

The Agreement defines 'Commercial Production' as when defined minerals mined from any part of the Mining Lease are transported for sale from the Project Area and defines 'Mining Lease' as any lease granted pursuant to Mining Co's application.

These provisions indicate that payments of X Trust Administration Support are intended to fund the administration of the X Trust, particularly during the period after to the commencement of Commercial Production when Mining Co also begins paying the X Royalty to the X Trustee/B Trust. During that period the X Trustee may receive significant monetary benefits from Mining Co as property of the X People and will be bound to meet the ongoing requirements in the Agreement (for example, comply with all federal taxation requirements to maintain charitable trust status and subject to annual audit).

As the Trust Administration Support payments commence on and from the commencement of Commercial Production, we consider that, like the X Royalty, the X Trust Administration Support payments have a nexus with the delivery of the executed Section 31 Deed by the Native Title Party because Commercial Production cannot commence without the grant of the Mining Lease, and the grant of the Mining Lease is invalid without the delivery of the executed Section 31 Deed by the Native Title Party.

A X Trust Administration Support payment does not have a nexus with a supply made by the X Trustee/B Trust. Consequently the X Trustee/B Trust is not liable under section 9-40 of the GST Act to pay GST and Mining Co is not required by the GST clause in the Agreement to pay the X Trustee/B Trust an amount additional to the X Trust Administration Support payment.

Although a X Trust Administration Support payment does have a nexus with a supply made by the Native Title Party (that is, delivery of the executed Section 31 Deed to Mining Co), that supply is not a taxable supply because paragraph 9-5(b) of the GST Act is not satisfied as the Native Title Party is not carrying on an enterprise. Consequently a X Trust Administration Support payment is not consideration for a taxable supply made by the Native Title Party, the Native Title Party is not liable to pay GST, and Mining Co is not obliged to pay an additional amount pursuant to the clause in the Agreement.

Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of subsections 41(1) and (2) of the NT Act without the X People taking any action. Consequently the X People did not make a supply and a X Trust Administration Support payment is not consideration for a taxable supply for which the X People would be liable to pay GST and Mining Co is not obliged to pay an additional amount pursuant to the GST in the Agreement.

Cultural Heritage Support and Preservation payments payable quarterly by Mining Co after Completion:

The Agreement states that, in recognition of the value of promoting and maintaining the practice of traditional X heritage, law and culture, Mining Co will make quarterly Cultural Heritage Support and Preservation payments to the X Trustee to be held as property of the X People. The Cultural Heritage Support and Preservation payments paid by Mining Co to the X Trustee/B Trust are a small quarterly payment payable from Completion whereas the X Trust Administration Support payments paid by Mining Co to the X Trustee/B Trust are a much larger quarterly payment payable on and from commencement of Commercial Production.

The Agreement states that Mining Co shall be wholly relieved of any obligation to make payments or reimbursements under the Agreement where either Mining Co decides before the commencement of Commercial Production that Project Operations should not proceed or decides after the commencement of Commercial Production that Project Operations should cease either temporarily or permanently.

As the X Trust Administration Support Payments are payable on and from commencement of Commercial Production we found a nexus between those payments and delivery of the executed Section 31 Deed (because Commercial Production cannot commence without the grant of the Mining Lease and the grant of the Mining Lease is not valid without the Section 31 Deed). The Cultural Heritage Support and Preservation payments, on the other hand, are stated in the Agreement to be in recognition of the value of promoting and maintaining the practice of traditional X heritage, law and culture. We consider that a Cultural Heritage Support and Preservation payment is a 'financial assistance payment' as defined in paragraph 5 of Goods and Services Tax Ruling GSTR 2012/2, that is, a payment made to provide support or aid to the payee.

Paragraph 15 of GSTR 2012/2 states that for a financial assistance payment to be consideration for a supply there must be a sufficient nexus between the financial assistance payment made by the payer and a supply made by the payee (the X Trustee/B Trust). Paragraph 16 of GSTR 2012/2 states that reference to all of the circumstances surrounding a payment determines whether a sufficient nexus exists, including any terms and conditions attached to the payment.

As noted above, the Agreement states that Mining Co is relieved of any obligation to make payments under the Agreement where Mining Co decides before the commencement of Commercial Production that Project Operations shall not proceed or decides after commencement of Commercial Production to temporarily or permanently cease Project Operations. These provisions suggest that Mining Co is obliged to make a Cultural Heritage Support and Preservation payment only so long as Mining Co remains committed to commencing or continuing Project Operations.

'Project Operations' are defined in the Agreement all operations directed towards the extraction of minerals on a commercial basis in the Project Area pursuant to Project Tenure and 'Project Tenure' is defined to include the Granted Tenements, Pending Tenements (including the Mining Lease), and Future Tenements. As noted above, the act of granting the Mining Lease to Mining company is rendered invalid by section 28 of the NT Act unless the Native Title Party delivers the executed Section 31 Deed. We therefore consider that a Cultural Heritage Support and Preservation payment made by Mining Co has a sufficient nexus with a supply made by the Native Title Party.

A Cultural Heritage Support and Preservation payment does not have a nexus with a supply made by the X Trustee. Consequently the X Trustee/B Trust is not liable under section 9-40 of the GST Act to pay GST and Mining Co is not required by the GST clause in the Agreement to pay the X Trustee/B Trust an amount additional to the Cultural Heritage Support and Preservation payment.

Although a Cultural Heritage Support and Preservation payment does have a nexus with a supply made by the Native Title Party (that is, delivery of the executed Section 31 Deed to Mining Co), that supply is not a taxable supply because paragraph 9-5(b) of the GST Act is not satisfied as the Native Title Party is not carrying on an enterprise. Consequently a Cultural Heritage Support and Preservation payment is not consideration for a taxable supply made by the Native Title Party, the Native Title Party is not liable to pay GST, and Mining Co is not obliged to pay an additional amount pursuant to the GST clause in the Agreement.

Although the X People are bound by the conditions in the Section 31 Deed, that occurred by operation of subsections 41(1) and (2) of the NT Act without the X People taking any positive action. Consequently the X People did not make a supply and a Cultural Heritage Support and Preservation Payment is not consideration for a taxable supply for which the X People would be liable to pay GST, and Mining Co is not obliged to pay an additional amount pursuant to the GST clause in the Agreement.

The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.