Edited version of private advice

Authorisation Number: 1052352339314

Date of advice: 20 March 2025

Ruling

Subject: Native title - property

Question 1

Are the Payments made by Entity B under the Ancillary Agreement, consideration for any taxable supplies pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), made by:

•                     The Native Title Holders collectively or individually; or

•                     Entity A?

Answer 1

No.

This ruling applies for the following period:

DD MM YYYY to DD MM YYYY

The scheme commences on:

DD MM YYYY

Relevant facts and circumstances

The Native Title Holders made a native title claim which was determined on DD MM YYY (Determination). Under the Determination, the Federal Court recognised that the Native Title Holders hold native title rights and interests in parts of the claimed native title area (the Determination Area) pursuant to the Native Title Act 1993 (Cth) (NTA).

The Determination recognised the Native Title Holders hold non-exclusive rights in the native title area which include access to, camping on, and use of the land and waters, extraction of resources, and protection of important places. The native title rights and interests are subject to and exercisable in accordance with the traditional laws and customs of the native title holders.

The Determination also determined that Entity A shall act as agent for the Native Title Holders pursuant to section 57(2) and (3) of the NTA and perform the functions as provided for in the NTA.

Entity A was registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) on DD MM YYYY and is a prescribed body corporate for the purposes of the NTA.

Entity A is registered for goods and services tax (GST).

The objects of Entity A are contained in its Constitution and include, amongst others:

•                     performing the functions of a registered native title body corporate in accordance with the NTA;

•                     relieving the poverty, disadvantage and misfortune suffered by Native Title Holders;

•                     acting as agent of the Native Title Holders and managing their native title rights and interests; and

•                     holding property and money (including payments received as compensation related to the native title rights and interests) in trust for the Native Title Holders.

Entity A, as agent for Native Title Holders, executed the following agreements:

•                     the Deed for the grant of the tenement and granting consents and covenants to Entity B and Entity C pursuant to section 31 of the NTA; and

•                     the Ancillary Agreement.

An explanation of the relationship between the two agreements is set out below:

•                     The Deed is signed between Entity A, (Entity B, Entity C (together the Proponent)), and the Government.

•                     Under the Deed, the Government grants the tenement to the Proponent. The Deed records key rights and obligations of the parties including Entity A's consent to the granting of the tenement.

•                     The Deed takes effect from the day it is executed by all parties and continues to operate until such time as all parties agree to release each other and every other party from their respective right and obligations arising under the Deed.

•                     The Ancillary Agreement is an agreement ancillary to the Deed. It is signed by Entity A and Entity B (acting on its own behalf and in its capacity as Operator of the Joint Venture, of which Entity B and Entity C are participants).

•                     The Ancillary Agreement takes effect on the date the Deed has been entered into by Entity A, the Joint Venture Participants and the Government.

•                     The Ancillary Agreement records the way that Entity A and Entity B conduct their relationship and exercise their respective rights in recognition of the others in a mutually beneficial way. It includes some payments to Entity A in exchange for the consents given to the Proponent.

•                     The Deed and the Ancillary Agreement are intended to operate together, with the Deed prevailing in the event of any inconsistency between them.

•                     The Native Title Holders have not individually executed the Deed or the Ancillary Agreement. Instead Entity A entered into both agreements in its capacity as the registered native title body corporate. The Deed states that the Deed is binding on the Native Title Holders.

•                     The Ancillary Agreement sets out the financial Benefits (Payments) to be paid under the agreement.

•                     The Payments will be payable to Entity A and not directly to the Native Title Holders.

GST

GST is contained in the Ancillary Agreement.

The GST clause provides that all prices or other sums payable or consideration to be provided in accordance with the agreement are exclusive of GST.

If GST is imposed on any supply made under or in connection with the agreement, the recipient of the taxable supply must pay an additional amount equal to the GST payable on or for the taxable supply.

If an additional amount is payable on a taxable supply, the supplier must issue the recipient a tax invoice for the supply.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 184-1

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

All legislative references are to A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

To qualify as a taxable supply, all requirements in section 9-5 must be satisfied:

•                     the entity makes a supply for consideration;

•                     the supply is made in the course or furtherance of an enterprise the entity carries on;

•                     the supply is connected with the indirect tax zone (Australia), and

•                     the entity is registered or required to be registered for GST.

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

In follows that for Entity A or the Native Title Holders to be liable for GST on any supplies they make either individually or together under the Deed and Ancillary Agreement, all conditions in section 9-5 must be met.

Of particular relevance is whether a supply is made by either party in relation to the Payments and whether the supply is in the course of an enterprise conducted by the parties.

Supply

A supply is defined in section 9-10 as 'any form of supply whatsoever'. Specifically, paragraph 9-10(2)(g) provides that a supply includes an entry into, or release from, an obligation to do anything or refrain from an act.

In this case, the Deed and Ancillary Agreement involve the entry into various obligations by the Parties to the Agreement and therefore there are supplies made under the Agreement. On behalf of the Native Title Holders, Entity A have made several undertakings in connection with the payments being made to it by the Proponents that include undertakings to do certain things and refrain from others. This includes Entity A consenting to the grant of the tenement to the Proponent.

As the Deed and Ancillary Agreement encompass various obligations undertaken by the Parties, we consider that the Entity A's consent to the granting of the tenement, the undertaking of the project and covenants to not challenge the project or to not challenge the validity of the application for, or grant of, the tenement meet the definition of 'supply'.

However, for the reasons set out below, they are not 'taxable supplies'.

Who is the supplier?

Paragraph 9-5(a) requires that 'you' make a supply. Section 195-1 states that if a provision of the GST Act uses the expression 'you', it applies to entities generally, unless its application is expressly limited.

Section 195-1 also states that 'entity' has the meaning given by section 184-1 and includes:

•                     an individual;

•                     a body corporate;

•                     a partnership;

•                     any other unincorporated association or body of persons.

For GST purposes, a supply must be made by an entity. Consequently, it is relevant to examine who is making any supply in relation to the Payments from the Joint Venture Participants, i.e. Entity A or the Native Title Holders.

Entity A

As the prescribed body corporate of the Native Title Holders, Entity A acts for, and on behalf of, the Native Title Holders in respect of all native title related matters subject to the requirements in The Native Title (Prescribed Bodies Corporate) Regulations 1999 (Cth) (PBC Regulations).

In considering Entity A's role as acting on behalf of the Native Title Holders, it is necessary to consider Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax: agency relationships and the application of the law (GSTR 2000/37), which describes what is meant by principal/agent relationships (agency relationships).

Per paragraph 10 of GSTR 2000/37, an entity may be authorised by another party to do something on that party's behalf. The authorised entity is called an agent. The party who authorised the agent to act on their behalf is called the principal.

Paragraph 11 of GSTR 2000/37 states that:

11.          For commercial law purposes, an agent is a person who is authorised, either expressly or impliedly, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.

The Explanatory Memorandum which accompanied the A New Tax System (Goods and Services Tax) Bill 1999 (GST Bill) states at paragraph 6.277 that the general principles surrounding agency law will apply to the supplies made through agents. That is, in a principal/agent relationship, it is the principal that makes a supply, not the agent.

The Deed acknowledges that Entity A is the agent body corporate of the Native Title Holders under section 57(2) of the NTA. Entity A must perform the functions given to it as the 'registered native title body corporate' under the NTA and under the PBC Regulations in respect of the native title rights and interests.

The Deed acknowledges that the Native Title Holders authorised Entity A to enter into the Deed on its behalf and binds the Native Title Holders to the terms and obligations of the Deed.

The Ancillary Agreement states that Entity A is the 'registered native title body corporate' and acts as the agent for the Native Title Holders.

The functions of a 'registered native title body corporate' are prescribed in regulation 7 of the PBC Regulations and include, amongst other things:

•                     acting as agent of the Native Title Holders in respect of matters relating to native title;

•                     manage rights and interests of the Native Title Holders; and

•                     hold in trust money connected with the native title rights and interest (including payments received as compensation or otherwise related to those rights and interests).

A combined reading of the Deed, Ancillary Agreement and Regulation 7 of the PBC Regulations demonstrates that Entity A is acting as an agent for the Native Title Holders in connection with their native title rights and interests. In principal/agent relationships, it is the principal that makes the supply, not the agent.

As an agent for the Native Title Holders, Entity A receives Payments for activities carried out on behalf of the Native Title Holders. As such, the supplies relating to these Payments are made by the Native Title Holders. Consequently, Entity A does not make supplies to Entity B under the Deed or the Ancillary Agreement. Since Entity A does not satisfy all requirements for making a 'taxable supply' under section 9-5, it is not liable for GST on the Payments received.

Native Title Holders

Native Title Holders are subject to GST if they make supplies whether individually or collectively as an unincorporated entity, body of persons, or partnership. These supplies must be made 'in the course or furtherance of an enterprise' they operate.

We will therefore consider the question of 'enterprise' in relation to the Native Title Holders, both as a group and individually.

Enterprise

An 'enterprise' is an activity, or series of activities, done in certain ways as provided for under subsection 9-20(1). It provides that:

(1)           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, ...

The Commissioner considers these matters in Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1).

Paragraph 177 of MT 2006/1 provides that to determine whether an activity, or series of activities, amounts to a business, the activity needs to be considered against the indicators of a business established by case law. Some indicators of carrying on a business include:

•                     a significant commercial activity;

•                     a purpose and intention of the taxpayer to engage in commercial activity;

•                     an intention to make a profit from the activity;

•                     the activity is or will be profitable;

•                     is recurrent or regular in nature;

•                     the activity is carried out in a manner similar to that of other businesses in the same or similar trade;

•                     activity is systematic, organised and carried on in a businesslike manner;

•                     commercial sales of product; and

•                     the entity has relevant knowledge or skill.

Whilst the Ancillary Agreement concerns Payments, the purpose of Entity A and the Native Title Holders in entering into the Ancillary Agreement relates to recognition of their native title rights and interests and not ongoing, regular activities of a commercial nature such as making sales and engaging in trade.

The Ancillary Agreement states that the payment under the agreement is a full and final compensation for the grant of the tenement, undertaking of the project and for any consequential impairment of any native title rights and interests.

On balance, the Native Title Holders, collectively or individually, are not undertaking activities in the form of a business in entering into, and performing the obligations under, the Ancillary Agreement and other similar agreements.

The concept of an 'adventure or concern in the nature of trade' is considered in paragraphs 233 to 261 of MT 2006/1. The public ruling considers the characteristics of trade including the subject matter of realisation, length of period of ownership, frequency or number of similar transactions, supplementary work on or in connection with the property realised and the circumstances responsible for the realisation. The Native Title Holders' native title rights and interests were not acquired for the purpose of commercial trade, but rather arise from traditional laws and customs.

On balance, the characteristics of trade are not satisfied and the activities of the Native Title Holders, collectively or individually, in entering into and performing the obligations under the agreements do not involve activities in the nature of trade and are therefore not an 'adventure or concern in the nature of trade'.

Under the terms of the Deed and Ancillary Agreement, the Native Title Holders, collectively or individually, do not enter into any lease or licence or provide any other grant of an interest in the Determination Area. The Native Title Holders do not agree to provide access rights to the Proponent under the Ancillary Agreement, nor in the Deed. Rather, in the Deed (which is the separate tripartite agreement with the Government), Entity A consents to the grant of the tenement to the Proponent for the purpose of complying with the NTA. The Proponent's legal right to access the project area and undertake the project is derived from the tenement.

Therefore, the Native Title Holders, collectively or individually, are not making supplies in the course or furtherance of an enterprise by entering into and performing any of the obligations under the Ancillary Agreement. As the Native Title Holders, both as a group and individually, do not satisfy all the requirements of taxable supply under section 9-5, they are not liable for GST.