Class Ruling CR 2021/59

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion of whether, for the purposes of paragraph 9-5(a) of the A New Tax System (Goods and Services Tax) Act 1999 [1] , payment of compensable losses made by an entity that holds an exploration licence or an assessment lease over the land (holder) is consideration for a supply made by an owner of land (landholder) under an access arrangement made pursuant to section 141 of the Mining Act 1992 (NSW) (NSW Mining Act). 2. Full details of this scheme are set out in paragraphs 9 to 35 of this Ruling. Who this Ruling applies to 3. This Ruling applies to you if you are: Access arrangements covered by this Ruling 4. This Ruling covers access arrangements that: 5. To the extent the Mining Regulation 2016 prescribes an access code and designates provisions of the access code as mandatory in accordance with sections 141A and 141B of the NSW Mining Act, and the mandatory provisions of the access code are not contrary to the matters specified in section 141 of the NSW Mining Act nor impose any obligations on the parties which are inconsistent with the matters described in section 141 of the NSW Mining Act, this Ruling will continue to apply to access agreements with mandatory provisions included. When this Ruling applies 6. This Ruling applies to entities that enter into the scheme during 8 September 2021 to 8 September 2025. 7. The regulatory requirement arising under the NSW Mining Act to pay compensation for compensable losses is directly linked to the prospecting title held by a holder. The compensation for compensable losses is for repatriation of any damages caused/potentially caused by the works undertaken by the holder as allowed under either an exploration licence or assessment lease (prospecting titles). 8. For the purposes of paragraph 9-5(a), the payment for compensable losses made by a holder to a landholder does not have a nexus with any supplies made by a landholder under an access arrangement. Accordingly, for the purposes of paragraph 9-5(a), the payment for compensable losses made by a holder to a landholder is not consideration for a supply made by a landholder under an access arrangement made pursuant to section 141 of the NSW Mining Act. 9. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. 10. Exploration licences and assessment leases are granted under Parts 3 and 4 of the NSW Mining Act to holders. Pursuant to section 138(1) of the NSW Mining Act, exploration licences and assessment leases are referred to as 'prospecting titles'. 11. Under the NSW Mining Act, a holder who holds a prospecting title has a right to carry out prospecting activities on land (subject to the licence or lease) that belongs to landholders. 12. Part 8 of the NSW Mining Act regulates how a holder exercises their prospecting title rights (including access to the land). 13. Section 140 of the NSW Mining Act provides that a holder must not carry out prospecting operations unless they are in accordance with an access arrangement entered into with each landholder of the area or, where no agreement can be reached with a landholder, determined by an arbitrator in accordance with Division 2 of Part 8 of the NSW Mining Act. Accordingly, an access arrangement must be entered into prior to the holder accessing and carrying out prospecting operations on the landholder's land. 14. Section 140 of the NSW Mining Act states: 15. Pursuant to section 142 of the NSW Mining Act, a holder may, by written notice served on each landholder concerned, give notice of the holder's intention to obtain an access arrangement in respect of the land. 16. The holder and a landholder concerned may agree in writing (either before or after the prospecting title is granted) on an access arrangement. 17. Subsection 141(1) of the NSW Mining Act states: 18. Prospecting titles can cover land on which, or within the prescribed distance of which, there is a dwelling-house, a garden or other significant improvement. 19. However, holders of prospecting titles cannot exercise any of their prospecting rights in relation to land on which, or within the prescribed distance of which, there is a dwelling-house, a garden or other significant improvement. 20. Section 31 of the NSW Mining Act (in regard to exploration licences) states: 21. Similarly, section 49 of the NSW Mining Act (in regard to assessment leases) states: 22. Accordingly, a holder can only access land on which a dwelling-house, garden or significant improvement is situated (or within a prescribed distance of these items) where a landholder has granted permission to access this land to a holder under an access arrangement. 23. For the avoidance of doubt, these conditions on which access occurs do not change the prospecting title already granted to the holder. 24. If a landholder disagrees to a holder entering their land (other than land on which a dwelling-house, garden or significant improvement is situated (or within a prescribed distance of these items)), an arbitrator or the Land Environment Court may rule that a holder is nonetheless entitled entry into the respective land on which they hold an exploration licence or assessment lease to carry out prospecting activities. 25. Under sections 263 and 264 of the NSW Mining Act, a landholder has a statutory entitlement to compensation for any 'compensable loss' suffered as a result of the holder exercising the prospecting rights conferred by the prospecting title or access agreement. 26. Section 263 of the NSW Mining Act states: 27. Similarly, in relation to compensation arising under an assessment lease, section 264 of the NSW Mining Act states: 28. Section 262 of the NSW Mining Act defines 'compensable loss' as: 29. An access arrangement will typically include a clause that provides that the compensation provided to the landholder under the access arrangement represents a full and final settlement of the landholder's compensation rights in relation to the matters covered by the access arrangement. 30. The full and final amount payable to landholders under an access arrangement is only for a 'compensable loss' as defined in section 262 of the NSW Mining Act and does not include payments for anything other than a compensable loss (for example, no payments for minerals, incentive payments to secure an access arrangement or to obtain consent to operate within the prescribed distance of a house, garden or significant improvement or other supplies that will not constitute a payment for damage will be agreed to under an access arrangement). 31. Compensation provided by a holder under an access arrangement includes: 32. The access agreement is entered into prior to the prospecting activities taking place and the amount agreed to be paid for compensable loss is an estimate. In some circumstances, the amount of compensation paid to a landholder under an access arrangement may be more or less than the actual loss suffered. 33. Where a holder breaches an access arrangement, section 141(4) of the NSW Mining Act enables the landholder to deny access until the breach is rectified or a resolution is arbitrated. 34. A compensation amount agreed under an access agreement between a holder and a landholder is no more than what is reasonably necessary for the holder to exercise its rights under its prospecting title. 35. The landholders are either registered or required to be registered for GST and enter into access arrangements with holders in the course of an enterprise carried out by them. Commissioner of Taxation 8 September 2021 Goods and services tax liability 36. GST is payable on taxable supplies an entity makes. Taxable supply - section 9-5 37. Section 9-5 states that you make a taxable supply if: 38. Section 9-5 further provides that the supply is not a taxable supply to the extent that it is GST-free or input taxed. 39. The first requirement of section 9-5 is that a supply is made for consideration. This requires the consideration of establishing whether there exists a nexus between a supply made by the supplier and consideration paid by the recipient to the supplier. In other words, it needs to be established whether the consideration was for that particular supply made by the supplier or something else. 40. The importance of establishing the nexus between a supply and consideration was discussed in AP Group Limited v Commissioner of Taxation [2013] FCAFC 105. 41. Paragraph 21 of Goods and Services Tax Ruling GSTR 2001/4 Goods and Services Tax: GST consequences of court orders and out-of-court settlements states: Supply 42. The term 'supply' is broadly defined in subsection 9-10(1) as 'any form of supply whatsoever' and includes the following: 43. The Commissioner's views on supplies are outlined in several goods and services tax rulings. 44. Paragraph 71 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies states: 45. Further, paragraph 25 of GSTR 2001/4 states: 46. While generally there is an inherent requirement for a supplier to take some action to cause a supply to be made, the High Court said in Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49 that it is not necessary '... that the making of a supply must always involve the taking of some action on the part of the supplier'. An entity may be said to be making a supply by refraining from doing something or tolerating some act or situation if the entity was subject to an obligation to do so and then performed accordingly. 47. Accordingly, in certain circumstances, not taking any action may also still constitute a supply. However, there will be no supply where something occurs by operation of law. Paragraph 76 from GSTR 2006/9 distinguishes between situations where an act may amount to a supply from situations where something that occurs by operation of law that does not amount to a supply: 48. The prospecting title which grants prospecting rights over the landowner's land is issued to the holder by the State of NSW in accordance with the NSW Mining Act. The landowner does not do anything or agree to tolerate anything in respect of this licence. Therefore, in respect of the prospecting title, the landowner does not make a supply. 49. However, the prospecting title does not, in itself, grant access to the holder to the landowner's land. Prior to being able to access the landowner's land to exercise the rights under the prospecting title, there must be an access agreement. 50. Where the landowner and the holder enter the access agreement (as opposed to an agreement set by an arbitrator or court), the landowner grants certain rights of access over their land. Landholders take positive action in the form of providing access and deciding the conditions upon which the holders can access the land, including locations, times, how the holder will access the land and any consent to prospecting activities within prescribed distances of dwelling-houses, gardens and significant improvements. 51. The Commissioner considers that the granting of permission to access land and the conditions agreed under an access arrangement constitute supplies that come under either paragraphs 9-10(2)(d) or (e), or subparagraph (g)(iii). This is because, while having an access arrangement may be a statutory obligation, the terms and conditions agreed under these access arrangements are not governed by a statute. The statute does not stipulate the nature of the terms and conditions to be agreed under access arrangements. Consideration 52. Consideration is defined in section 9-15 as follows: 53. The compensation paid for the compensable loss is a payment that has some relationship with the prospecting arrangement. However, to meet the requirements of paragraph 9-5(a), that payment must be 'for' the supply by the landowner. That is, it must have a sufficient nexus with a supply made by the landowner. 54. The mere fact that a supply has been made under an access arrangement by a landholder and a payment has been made by a holder is not enough for paragraph 9-5(a) to have been satisfied. There must be a sufficient nexus between the payment and making of the supply. Nexus between supply and consideration 55. All payments of compensation (both monetary and non-monetary) by a holder to a landholder under access arrangements that are subject to this Ruling are classified as being paid for a 'compensable loss'. A 'compensable loss' is defined in section 262 of the NSW Mining Act as: 56. Regarding payments for damage claims, paragraph 71 of GSTR 2001/4 states: 57. Further, paragraph 73 of GSTR 2001/4 states: 58. Accordingly, given the view that a landholder may make supplies of access to a holder under an access arrangement, it is necessary to determine whether the substance of the requirement to pay compensable losses are for: 59. The requirement to pay compensation for compensable losses by a holder for damages caused or potentially caused to all types of land described under paragraph 4(c) of this Ruling is a statutory obligation arising under the NSW Mining Act and has a nexus to the holders exercising of their prospecting rights sourced from the prospecting title. 60. It is acknowledged that the amount of the compensation paid for compensable losses and the means by which this amount should be calculated may be outlined in an access arrangement. However, under sections 263 and 264 of the NSW Mining Act, the requirement to pay compensation payments by a holder to a landholder is a direct consequence of the prospecting title issued by the NSW Government rather than a requirement under the access arrangement. 61. Considering the overall nature of the scheme under which compensation for compensable losses is required to be paid, the Commissioner considers that the substance of the payment is for the damages caused, or likely to be caused, to the land by a holder rather than because of any supplies made by a landholder under an access arrangement. Therefore, the payment of the compensable losses is akin to a payment of a damages claim contemplated under paragraph 73 of GSTR 2001/4. 62. Accordingly, it is the Commissioner's view that the requisite nexus that must be present between a supply and consideration under paragraph 9-5(a) does not exist between the compensable losses received by a landholder and any supply made by them to a holder under an access arrangement. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft

Class of entities or scheme: 4. This Ruling covers access arrangements that: 5. To the extent the Mining Regulation 2016 prescribes an access code and designates provisions of the access code as mandatory in accordance with sections 141A and 141B of the NSW Mining Act, and the mandatory provisions of the access code are not contrary to the matters specified in section 141 of the NSW Mining Act nor impose any obligations on the parties which are inconsistent with the matters described in section 141 of the NSW Mining Act, this Ruling will continue to apply to access agreements with mandatory provisions included. | When this Ruling applies: 6. This Ruling applies to entities that enter into the scheme during 8 September 2021 to 8 September 2025. 7. The regulatory requirement arising under the NSW Mining Act to pay compensation for compensable losses is directly linked to the prospecting title held by a holder. The compensation for compensable losses is for repatriation of any damages caused/potentially caused by the works undertaken by the holder as allowed under either an exploration licence or assessment lease (prospecting titles). 8. For the purposes of paragraph 9-5(a), the payment for compensable losses made by a holder to a landholder does not have a nexus with any supplies made by a landholder under an access arrangement. Accordingly, for the purposes of paragraph 9-5(a), the payment for compensable losses made by a holder to a landholder is not consideration for a supply made by a landholder under an access arrangement made pursuant to section 141 of the NSW Mining Act. 9. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. 10. Exploration licences and assessment leases are granted under Parts 3 and 4 of the NSW Mining Act to holders. Pursuant to section 138(1) of the NSW Mining Act, exploration licences and assessment leases are referred to as 'prospecting titles'. 11. Under the NSW Mining Act, a holder who holds a prospecting title has a right to carry out prospecting activities on land (subject to the licence or lease) that belongs to landholders. 12. Part 8 of the NSW Mining Act regulates how a holder exercises their prospecting title rights (including access to the land). 13. Section 140 of the NSW Mining Act provides that a holder must not carry out prospecting operations unless they are in accordance with an access arrangement entered into with each landholder of the area or, where no agreement can be reached with a landholder, determined by an arbitrator in accordance with Division 2 of Part 8 of the NSW Mining Act. Accordingly, an access arrangement must be entered into prior to the holder accessing and carrying out prospecting operations on the landholder's land. 14. Section 140 of the NSW Mining Act states: 15. Pursuant to section 142 of the NSW Mining Act, a holder may, by written notice served on each landholder concerned, give notice of the holder's intention to obtain an access arrangement in respect of the land. 16. The holder and a landholder concerned may agree in writing (either before or after the prospecting title is granted) on an access arrangement. 17. Subsection 141(1) of the NSW Mining Act states: 18. Prospecting titles can cover land on which, or within the prescribed distance of which, there is a dwelling-house, a garden or other significant improvement. 19. However, holders of prospecting titles cannot exercise any of their prospecting rights in relation to land on which, or within the prescribed distance of which, there is a dwelling-house, a garden or other significant improvement. 20. Section 31 of the NSW Mining Act (in regard to exploration licences) states: 21. Similarly, section 49 of the NSW Mining Act (in regard to assessment leases) states: 22. Accordingly, a holder can only access land on which a dwelling-house, garden or significant improvement is situated (or within a prescribed distance of these items) where a landholder has granted permission to access this land to a holder under an access arrangement. 23. For the avoidance of doubt, these conditions on which access occurs do not change the prospecting title already granted to the holder. 24. If a landholder disagrees to a holder entering their land (other than land on which a dwelling-house, garden or significant improvement is situated (or within a prescribed distance of these items)), an arbitrator or the Land Environment Court may rule that a holder is nonetheless entitled entry into the respective land on which they hold an exploration licence or assessment lease to carry out prospecting activities. 25. Under sections 263 and 264 of the NSW Mining Act, a landholder has a statutory entitlement to compensation for any 'compensable loss' suffered as a result of the holder exercising the prospecting rights conferred by the prospecting title or access agreement. 26. Section 263 of the NSW Mining Act states: 27. Similarly, in relation to compensation arising under an assessment lease, section 264 of the NSW Mining Act states: 28. Section 262 of the NSW Mining Act defines 'compensable loss' as: 29. An access arrangement will typically include a clause that provides that the compensation provided to the landholder under the access arrangement represents a full and final settlement of the landholder's compensation rights in relation to the matters covered by the access arrangement. 30. The full and final amount payable to landholders under an access arrangement is only for a 'compensable loss' as defined in section 262 of the NSW Mining Act and does not include payments for anything other than a compensable loss (for example, no payments for minerals, incentive payments to secure an access arrangement or to obtain consent to operate within the prescribed distance of a house, garden or significant improvement or other supplies that will not constitute a payment for damage will be agreed to under an access arrangement). 31. Compensation provided by a holder under an access arrangement includes: 32. The access agreement is entered into prior to the prospecting activities taking place and the amount agreed to be paid for compensable loss is an estimate. In some circumstances, the amount of compensation paid to a landholder under an access arrangement may be more or less than the actual loss suffered. 33. Where a holder breaches an access arrangement, section 141(4) of the NSW Mining Act enables the landholder to deny access until the breach is rectified or a resolution is arbitrated. 34. A compensation amount agreed under an access agreement between a holder and a landholder is no more than what is reasonably necessary for the holder to exercise its rights under its prospecting title. 35. The landholders are either registered or required to be registered for GST and enter into access arrangements with holders in the course of an enterprise carried out by them. Commissioner of Taxation 8 September 2021 | Goods and services tax liability: 36. GST is payable on taxable supplies an entity makes. | Taxable supply - section 9-5: 37. Section 9-5 states that you make a taxable supply if: 38. Section 9-5 further provides that the supply is not a taxable supply to the extent that it is GST-free or input taxed. 39. The first requirement of section 9-5 is that a supply is made for consideration. This requires the consideration of establishing whether there exists a nexus between a supply made by the supplier and consideration paid by the recipient to the supplier. In other words, it needs to be established whether the consideration was for that particular supply made by the supplier or something else. 40. The importance of establishing the nexus between a supply and consideration was discussed in AP Group Limited v Commissioner of Taxation [2013] FCAFC 105. 41. Paragraph 21 of Goods and Services Tax Ruling GSTR 2001/4 Goods and Services Tax: GST consequences of court orders and out-of-court settlements states: | Supply: 42. The term 'supply' is broadly defined in subsection 9-10(1) as 'any form of supply whatsoever' and includes the following: 43. The Commissioner's views on supplies are outlined in several goods and services tax rulings. 44. Paragraph 71 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies states: 45. Further, paragraph 25 of GSTR 2001/4 states: 46. While generally there is an inherent requirement for a supplier to take some action to cause a supply to be made, the High Court said in Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49 that it is not necessary '... that the making of a supply must always involve the taking of some action on the part of the supplier'. An entity may be said to be making a supply by refraining from doing something or tolerating some act or situation if the entity was subject to an obligation to do so and then performed accordingly. 47. Accordingly, in certain circumstances, not taking any action may also still constitute a supply. However, there will be no supply where something occurs by operation of law. Paragraph 76 from GSTR 2006/9 distinguishes between situations where an act may amount to a supply from situations where something that occurs by operation of law that does not amount to a supply: 48. The prospecting title which grants prospecting rights over the landowner's land is issued to the holder by the State of NSW in accordance with the NSW Mining Act. The landowner does not do anything or agree to tolerate anything in respect of this licence. Therefore, in respect of the prospecting title, the landowner does not make a supply. 49. However, the prospecting title does not, in itself, grant access to the holder to the landowner's land. Prior to being able to access the landowner's land to exercise the rights under the prospecting title, there must be an access agreement. 50. Where the landowner and the holder enter the access agreement (as opposed to an agreement set by an arbitrator or court), the landowner grants certain rights of access over their land. Landholders take positive action in the form of providing access and deciding the conditions upon which the holders can access the land, including locations, times, how the holder will access the land and any consent to prospecting activities within prescribed distances of dwelling-houses, gardens and significant improvements. 51. The Commissioner considers that the granting of permission to access land and the conditions agreed under an access arrangement constitute supplies that come under either paragraphs 9-10(2)(d) or (e), or subparagraph (g)(iii). This is because, while having an access arrangement may be a statutory obligation, the terms and conditions agreed under these access arrangements are not governed by a statute. The statute does not stipulate the nature of the terms and conditions to be agreed under access arrangements. | Consideration: 52. Consideration is defined in section 9-15 as follows: 53. The compensation paid for the compensable loss is a payment that has some relationship with the prospecting arrangement. However, to meet the requirements of paragraph 9-5(a), that payment must be 'for' the supply by the landowner. That is, it must have a sufficient nexus with a supply made by the landowner. 54. The mere fact that a supply has been made under an access arrangement by a landholder and a payment has been made by a holder is not enough for paragraph 9-5(a) to have been satisfied. There must be a sufficient nexus between the payment and making of the supply. | Nexus between supply and consideration: 55. All payments of compensation (both monetary and non-monetary) by a holder to a landholder under access arrangements that are subject to this Ruling are classified as being paid for a 'compensable loss'. A 'compensable loss' is defined in section 262 of the NSW Mining Act as: 56. Regarding payments for damage claims, paragraph 71 of GSTR 2001/4 states: 57. Further, paragraph 73 of GSTR 2001/4 states: 58. Accordingly, given the view that a landholder may make supplies of access to a holder under an access arrangement, it is necessary to determine whether the substance of the requirement to pay compensable losses are for: 59. The requirement to pay compensation for compensable losses by a holder for damages caused or potentially caused to all types of land described under paragraph 4(c) of this Ruling is a statutory obligation arising under the NSW Mining Act and has a nexus to the holders exercising of their prospecting rights sourced from the prospecting title. 60. It is acknowledged that the amount of the compensation paid for compensable losses and the means by which this amount should be calculated may be outlined in an access arrangement. However, under sections 263 and 264 of the NSW Mining Act, the requirement to pay compensation payments by a holder to a landholder is a direct consequence of the prospecting title issued by the NSW Government rather than a requirement under the access arrangement. 61. Considering the overall nature of the scheme under which compensation for compensable losses is required to be paid, the Commissioner considers that the substance of the payment is for the damages caused, or likely to be caused, to the land by a holder rather than because of any supplies made by a landholder under an access arrangement. Therefore, the payment of the compensable losses is akin to a payment of a damages claim contemplated under paragraph 73 of GSTR 2001/4. 62. Accordingly, it is the Commissioner's view that the requisite nexus that must be present between a supply and consideration under paragraph 9-5(a) does not exist between the compensable losses received by a landholder and any supply made by them to a holder under an access arrangement. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft

Ruling: 1. This Ruling sets out the Commissioner's opinion of whether, for the purposes of paragraph 9-5(a) of the A New Tax System (Goods and Services Tax) Act 1999 [1] , payment of compensable losses made by an entity that holds an exploration licence or an assessment lease over the land (holder) is consideration for a supply made by an owner of land (landholder) under an access arrangement made pursuant to section 141 of the Mining Act 1992 (NSW) (NSW Mining Act). 2. Full details of this scheme are set out in paragraphs 9 to 35 of this Ruling. | Who this Ruling applies to: 3. This Ruling applies to you if you are: | Access arrangements covered by this Ruling: 4. This Ruling covers access arrangements that: 5. To the extent the Mining Regulation 2016 prescribes an access code and designates provisions of the access code as mandatory in accordance with sections 141A and 141B of the NSW Mining Act, and the mandatory provisions of the access code are not contrary to the matters specified in section 141 of the NSW Mining Act nor impose any obligations on the parties which are inconsistent with the matters described in section 141 of the NSW Mining Act, this Ruling will continue to apply to access agreements with mandatory provisions included. | When this Ruling applies: 6. This Ruling applies to entities that enter into the scheme during 8 September 2021 to 8 September 2025. 7. The regulatory requirement arising under the NSW Mining Act to pay compensation for compensable losses is directly linked to the prospecting title held by a holder. The compensation for compensable losses is for repatriation of any damages caused/potentially caused by the works undertaken by the holder as allowed under either an exploration licence or assessment lease (prospecting titles). 8. For the purposes of paragraph 9-5(a), the payment for compensable losses made by a holder to a landholder does not have a nexus with any supplies made by a landholder under an access arrangement. Accordingly, for the purposes of paragraph 9-5(a), the payment for compensable losses made by a holder to a landholder is not consideration for a supply made by a landholder under an access arrangement made pursuant to section 141 of the NSW Mining Act. 9. The following description of the scheme is based on information provided by the applicant. If the scheme is not carried out as described, this Ruling cannot be relied upon. 10. Exploration licences and assessment leases are granted under Parts 3 and 4 of the NSW Mining Act to holders. Pursuant to section 138(1) of the NSW Mining Act, exploration licences and assessment leases are referred to as 'prospecting titles'. 11. Under the NSW Mining Act, a holder who holds a prospecting title has a right to carry out prospecting activities on land (subject to the licence or lease) that belongs to landholders. 12. Part 8 of the NSW Mining Act regulates how a holder exercises their prospecting title rights (including access to the land). 13. Section 140 of the NSW Mining Act provides that a holder must not carry out prospecting operations unless they are in accordance with an access arrangement entered into with each landholder of the area or, where no agreement can be reached with a landholder, determined by an arbitrator in accordance with Division 2 of Part 8 of the NSW Mining Act. Accordingly, an access arrangement must be entered into prior to the holder accessing and carrying out prospecting operations on the landholder's land. 14. Section 140 of the NSW Mining Act states: 15. Pursuant to section 142 of the NSW Mining Act, a holder may, by written notice served on each landholder concerned, give notice of the holder's intention to obtain an access arrangement in respect of the land. 16. The holder and a landholder concerned may agree in writing (either before or after the prospecting title is granted) on an access arrangement. 17. Subsection 141(1) of the NSW Mining Act states: 18. Prospecting titles can cover land on which, or within the prescribed distance of which, there is a dwelling-house, a garden or other significant improvement. 19. However, holders of prospecting titles cannot exercise any of their prospecting rights in relation to land on which, or within the prescribed distance of which, there is a dwelling-house, a garden or other significant improvement. 20. Section 31 of the NSW Mining Act (in regard to exploration licences) states: 21. Similarly, section 49 of the NSW Mining Act (in regard to assessment leases) states: 22. Accordingly, a holder can only access land on which a dwelling-house, garden or significant improvement is situated (or within a prescribed distance of these items) where a landholder has granted permission to access this land to a holder under an access arrangement. 23. For the avoidance of doubt, these conditions on which access occurs do not change the prospecting title already granted to the holder. 24. If a landholder disagrees to a holder entering their land (other than land on which a dwelling-house, garden or significant improvement is situated (or within a prescribed distance of these items)), an arbitrator or the Land Environment Court may rule that a holder is nonetheless entitled entry into the respective land on which they hold an exploration licence or assessment lease to carry out prospecting activities. 25. Under sections 263 and 264 of the NSW Mining Act, a landholder has a statutory entitlement to compensation for any 'compensable loss' suffered as a result of the holder exercising the prospecting rights conferred by the prospecting title or access agreement. 26. Section 263 of the NSW Mining Act states: 27. Similarly, in relation to compensation arising under an assessment lease, section 264 of the NSW Mining Act states: 28. Section 262 of the NSW Mining Act defines 'compensable loss' as: 29. An access arrangement will typically include a clause that provides that the compensation provided to the landholder under the access arrangement represents a full and final settlement of the landholder's compensation rights in relation to the matters covered by the access arrangement. 30. The full and final amount payable to landholders under an access arrangement is only for a 'compensable loss' as defined in section 262 of the NSW Mining Act and does not include payments for anything other than a compensable loss (for example, no payments for minerals, incentive payments to secure an access arrangement or to obtain consent to operate within the prescribed distance of a house, garden or significant improvement or other supplies that will not constitute a payment for damage will be agreed to under an access arrangement). 31. Compensation provided by a holder under an access arrangement includes: 32. The access agreement is entered into prior to the prospecting activities taking place and the amount agreed to be paid for compensable loss is an estimate. In some circumstances, the amount of compensation paid to a landholder under an access arrangement may be more or less than the actual loss suffered. 33. Where a holder breaches an access arrangement, section 141(4) of the NSW Mining Act enables the landholder to deny access until the breach is rectified or a resolution is arbitrated. 34. A compensation amount agreed under an access agreement between a holder and a landholder is no more than what is reasonably necessary for the holder to exercise its rights under its prospecting title. 35. The landholders are either registered or required to be registered for GST and enter into access arrangements with holders in the course of an enterprise carried out by them. Commissioner of Taxation 8 September 2021 | Goods and services tax liability: 36. GST is payable on taxable supplies an entity makes. | Taxable supply - section 9-5: 37. Section 9-5 states that you make a taxable supply if: 38. Section 9-5 further provides that the supply is not a taxable supply to the extent that it is GST-free or input taxed. 39. The first requirement of section 9-5 is that a supply is made for consideration. This requires the consideration of establishing whether there exists a nexus between a supply made by the supplier and consideration paid by the recipient to the supplier. In other words, it needs to be established whether the consideration was for that particular supply made by the supplier or something else. 40. The importance of establishing the nexus between a supply and consideration was discussed in AP Group Limited v Commissioner of Taxation [2013] FCAFC 105. 41. Paragraph 21 of Goods and Services Tax Ruling GSTR 2001/4 Goods and Services Tax: GST consequences of court orders and out-of-court settlements states: | Supply: 42. The term 'supply' is broadly defined in subsection 9-10(1) as 'any form of supply whatsoever' and includes the following: 43. The Commissioner's views on supplies are outlined in several goods and services tax rulings. 44. Paragraph 71 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies states: 45. Further, paragraph 25 of GSTR 2001/4 states: 46. While generally there is an inherent requirement for a supplier to take some action to cause a supply to be made, the High Court said in Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49 that it is not necessary '... that the making of a supply must always involve the taking of some action on the part of the supplier'. An entity may be said to be making a supply by refraining from doing something or tolerating some act or situation if the entity was subject to an obligation to do so and then performed accordingly. 47. Accordingly, in certain circumstances, not taking any action may also still constitute a supply. However, there will be no supply where something occurs by operation of law. Paragraph 76 from GSTR 2006/9 distinguishes between situations where an act may amount to a supply from situations where something that occurs by operation of law that does not amount to a supply: 48. The prospecting title which grants prospecting rights over the landowner's land is issued to the holder by the State of NSW in accordance with the NSW Mining Act. The landowner does not do anything or agree to tolerate anything in respect of this licence. Therefore, in respect of the prospecting title, the landowner does not make a supply. 49. However, the prospecting title does not, in itself, grant access to the holder to the landowner's land. Prior to being able to access the landowner's land to exercise the rights under the prospecting title, there must be an access agreement. 50. Where the landowner and the holder enter the access agreement (as opposed to an agreement set by an arbitrator or court), the landowner grants certain rights of access over their land. Landholders take positive action in the form of providing access and deciding the conditions upon which the holders can access the land, including locations, times, how the holder will access the land and any consent to prospecting activities within prescribed distances of dwelling-houses, gardens and significant improvements. 51. The Commissioner considers that the granting of permission to access land and the conditions agreed under an access arrangement constitute supplies that come under either paragraphs 9-10(2)(d) or (e), or subparagraph (g)(iii). This is because, while having an access arrangement may be a statutory obligation, the terms and conditions agreed under these access arrangements are not governed by a statute. The statute does not stipulate the nature of the terms and conditions to be agreed under access arrangements. | Consideration: 52. Consideration is defined in section 9-15 as follows: 53. The compensation paid for the compensable loss is a payment that has some relationship with the prospecting arrangement. However, to meet the requirements of paragraph 9-5(a), that payment must be 'for' the supply by the landowner. That is, it must have a sufficient nexus with a supply made by the landowner. 54. The mere fact that a supply has been made under an access arrangement by a landholder and a payment has been made by a holder is not enough for paragraph 9-5(a) to have been satisfied. There must be a sufficient nexus between the payment and making of the supply. | Nexus between supply and consideration: 55. All payments of compensation (both monetary and non-monetary) by a holder to a landholder under access arrangements that are subject to this Ruling are classified as being paid for a 'compensable loss'. A 'compensable loss' is defined in section 262 of the NSW Mining Act as: 56. Regarding payments for damage claims, paragraph 71 of GSTR 2001/4 states: 57. Further, paragraph 73 of GSTR 2001/4 states: 58. Accordingly, given the view that a landholder may make supplies of access to a holder under an access arrangement, it is necessary to determine whether the substance of the requirement to pay compensable losses are for: 59. The requirement to pay compensation for compensable losses by a holder for damages caused or potentially caused to all types of land described under paragraph 4(c) of this Ruling is a statutory obligation arising under the NSW Mining Act and has a nexus to the holders exercising of their prospecting rights sourced from the prospecting title. 60. It is acknowledged that the amount of the compensation paid for compensable losses and the means by which this amount should be calculated may be outlined in an access arrangement. However, under sections 263 and 264 of the NSW Mining Act, the requirement to pay compensation payments by a holder to a landholder is a direct consequence of the prospecting title issued by the NSW Government rather than a requirement under the access arrangement. 61. Considering the overall nature of the scheme under which compensation for compensable losses is required to be paid, the Commissioner considers that the substance of the payment is for the damages caused, or likely to be caused, to the land by a holder rather than because of any supplies made by a landholder under an access arrangement. Therefore, the payment of the compensable losses is akin to a payment of a damages claim contemplated under paragraph 73 of GSTR 2001/4. 62. Accordingly, it is the Commissioner's view that the requisite nexus that must be present between a supply and consideration under paragraph 9-5(a) does not exist between the compensable losses received by a landholder and any supply made by them to a holder under an access arrangement. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft


Appendix: Goods and services tax liability: 36. GST is payable on taxable supplies an entity makes. | Taxable supply - section 9-5: 37. Section 9-5 states that you make a taxable supply if: 38. Section 9-5 further provides that the supply is not a taxable supply to the extent that it is GST-free or input taxed. 39. The first requirement of section 9-5 is that a supply is made for consideration. This requires the consideration of establishing whether there exists a nexus between a supply made by the supplier and consideration paid by the recipient to the supplier. In other words, it needs to be established whether the consideration was for that particular supply made by the supplier or something else. 40. The importance of establishing the nexus between a supply and consideration was discussed in AP Group Limited v Commissioner of Taxation [2013] FCAFC 105. 41. Paragraph 21 of Goods and Services Tax Ruling GSTR 2001/4 Goods and Services Tax: GST consequences of court orders and out-of-court settlements states: | Supply: 42. The term 'supply' is broadly defined in subsection 9-10(1) as 'any form of supply whatsoever' and includes the following: 43. The Commissioner's views on supplies are outlined in several goods and services tax rulings. 44. Paragraph 71 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies states: 45. Further, paragraph 25 of GSTR 2001/4 states: 46. While generally there is an inherent requirement for a supplier to take some action to cause a supply to be made, the High Court said in Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49 that it is not necessary '... that the making of a supply must always involve the taking of some action on the part of the supplier'. An entity may be said to be making a supply by refraining from doing something or tolerating some act or situation if the entity was subject to an obligation to do so and then performed accordingly. 47. Accordingly, in certain circumstances, not taking any action may also still constitute a supply. However, there will be no supply where something occurs by operation of law. Paragraph 76 from GSTR 2006/9 distinguishes between situations where an act may amount to a supply from situations where something that occurs by operation of law that does not amount to a supply: 48. The prospecting title which grants prospecting rights over the landowner's land is issued to the holder by the State of NSW in accordance with the NSW Mining Act. The landowner does not do anything or agree to tolerate anything in respect of this licence. Therefore, in respect of the prospecting title, the landowner does not make a supply. 49. However, the prospecting title does not, in itself, grant access to the holder to the landowner's land. Prior to being able to access the landowner's land to exercise the rights under the prospecting title, there must be an access agreement. 50. Where the landowner and the holder enter the access agreement (as opposed to an agreement set by an arbitrator or court), the landowner grants certain rights of access over their land. Landholders take positive action in the form of providing access and deciding the conditions upon which the holders can access the land, including locations, times, how the holder will access the land and any consent to prospecting activities within prescribed distances of dwelling-houses, gardens and significant improvements. 51. The Commissioner considers that the granting of permission to access land and the conditions agreed under an access arrangement constitute supplies that come under either paragraphs 9-10(2)(d) or (e), or subparagraph (g)(iii). This is because, while having an access arrangement may be a statutory obligation, the terms and conditions agreed under these access arrangements are not governed by a statute. The statute does not stipulate the nature of the terms and conditions to be agreed under access arrangements. | Consideration: 52. Consideration is defined in section 9-15 as follows: 53. The compensation paid for the compensable loss is a payment that has some relationship with the prospecting arrangement. However, to meet the requirements of paragraph 9-5(a), that payment must be 'for' the supply by the landowner. That is, it must have a sufficient nexus with a supply made by the landowner. 54. The mere fact that a supply has been made under an access arrangement by a landholder and a payment has been made by a holder is not enough for paragraph 9-5(a) to have been satisfied. There must be a sufficient nexus between the payment and making of the supply. | Nexus between supply and consideration: 55. All payments of compensation (both monetary and non-monetary) by a holder to a landholder under access arrangements that are subject to this Ruling are classified as being paid for a 'compensable loss'. A 'compensable loss' is defined in section 262 of the NSW Mining Act as: 56. Regarding payments for damage claims, paragraph 71 of GSTR 2001/4 states: 57. Further, paragraph 73 of GSTR 2001/4 states: 58. Accordingly, given the view that a landholder may make supplies of access to a holder under an access arrangement, it is necessary to determine whether the substance of the requirement to pay compensable losses are for: 59. The requirement to pay compensation for compensable losses by a holder for damages caused or potentially caused to all types of land described under paragraph 4(c) of this Ruling is a statutory obligation arising under the NSW Mining Act and has a nexus to the holders exercising of their prospecting rights sourced from the prospecting title. 60. It is acknowledged that the amount of the compensation paid for compensable losses and the means by which this amount should be calculated may be outlined in an access arrangement. However, under sections 263 and 264 of the NSW Mining Act, the requirement to pay compensation payments by a holder to a landholder is a direct consequence of the prospecting title issued by the NSW Government rather than a requirement under the access arrangement. 61. Considering the overall nature of the scheme under which compensation for compensable losses is required to be paid, the Commissioner considers that the substance of the payment is for the damages caused, or likely to be caused, to the land by a holder rather than because of any supplies made by a landholder under an access arrangement. Therefore, the payment of the compensable losses is akin to a payment of a damages claim contemplated under paragraph 73 of GSTR 2001/4. 62. Accordingly, it is the Commissioner's view that the requisite nexus that must be present between a supply and consideration under paragraph 9-5(a) does not exist between the compensable losses received by a landholder and any supply made by them to a holder under an access arrangement. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Not previously issued as a draft


What this Ruling is about | If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling. | except with the written consent of the owner of the dwelling-house, garden or improvement (and, in the case of the dwelling-house, the written consent of its occupant). | (3) A written consent given under this section is irrevocable. | (4) This section does not apply with respect to a dwelling-house, garden or significant improvement owned by the holder of the exploration licence or, if the holder is a corporation, by a related corporation. | (4) This section does not apply with respect to a dwelling-house, garden or significant improvement owned by the holder of the assessment lease or, if the holder is a corporation, by a related corporation. | (5) If a dispute arises as to whether or not subsection (1) applies in a particular case, any party to the dispute may apply to the Land and Environment Court for a determination of the matter. | but does not include loss that is compensable under the Coal Mine Subsidence Compensation Act 2017 . | An entity will make a supply whenever that entity (the supplier) provides something of value to another entity (the recipient). This is consistent with the ordinary meaning of 'supply', being to furnish or provide. | Subsection 9-10(2) refers to two aspects of a supply; the thing which passes, such as goods, services, a right or obligation; and the means by which it passes, such as its provision, creation, grant, assignment, surrender or release. | (2) It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply. | Disputes often arise over incidents that do not relate to a supply. Examples of such cases are claims for damages arising out of property damage, negligence causing loss of profits, wrongful use of trade name, breach of copyright, termination or breach of contract or personal injury. | The most common form of remedy is a claim for damages arising out of the termination or breach of a contract or for some wrong or injury suffered. This damage, loss or injury, being the substance of the dispute, cannot in itself be characterised as a supply made by the aggrieved party. This is because the damage, loss or injury in itself does not constitute a supply under section 9-10 of the GST Act.


Related rulings: GSTR 2001/4 GSTR 2006/9 TR 2006/10
Legislative references: ANTS(GST)A 1999 9-5 ANTS(GST)A 1999 9-5(a) ANTS(GST)A 1999 9-10 ANTS(GST)A 1999 9-10(1) ANTS(GST)A 1999 9-10(2)(d) ANTS(GST)A 1999 9-10(2)(e) ANTS(GST)A 1999 9-10(2)(g) ANTS(GST)A 1999 9-10(2)(g)(ii) ANTS(GST)A 1999 9-15 TAA 1953 Mining Act 1992 (NSW) Div 2 Part 8 Mining Act 1992 (NSW) 31 Mining Act 1992 (NSW) 49 Mining Act 1992 (NSW) 138(1) Mining Act 1992 (NSW) 140 Mining Act 1992 (NSW) 141 Mining Act 1992 (NSW) 141(1) Mining Act 1992 (NSW) 141(4) Mining Act 1992 (NSW) 141A Mining Act 1992 (NSW) 141B Mining Act 1992 (NSW) 142 Mining Act 1992 (NSW) 262 Mining Act 1992 (NSW) 263 Mining Act 1992 (NSW) 264 Mining Regulation 2016
Case references: AP Group Limited v Commissioner of Taxation [2013] FCAFC 105 214 FCR 301 ATC 20-417