The Commonwealth Government recently announced changes to the Indigenous Procurement Policy (IPP) (see the announcement by the National Indigenous Australians Agency). The changes reflect feedback from consultations and recommendations from parliamentary inquiries and aim to strengthen the IPP and increase the economic empowerment of Indigenous people and communities.

The revised IPP introduces updates to eligibility criteria, procurement targets and measures to address misleading conduct, known as 'Black Cladding'. A significant change is the increased eligibility threshold – now requiring a business to be at least 51% (rather than 50%) owned and controlled by Indigenous persons, or alternatively, to be registered with the Office of the Registrar of Indigenous Corporations (ORIC), to be considered an Indigenous business under the IPP. This adjustment will ensure that Indigenous business owners can exercise control as majority owners, aligning with the primary objective of the IPP changes to ensure that benefits flow to Indigenous communities as intended.

These changes will have various practical implications for Indigenous businesses and contracting parties, including significant impact on small family businesses. For example, existing 50/50 ownership and control structures will need to be reviewed and restructured, control dynamics may shift, and there will be a need to develop succession plans that ensure ongoing compliance with IPP requirements. The government is set to release transitional arrangements that are expected to address some of these matters.

This article outlines the key changes to the IPP and discusses some of the potential practical implications of the new eligibility criteria.

Changes to the IPP

The changes to the IPP are intended to align with Outcome 8 in the National Agreement on Closing the Gap, focused on strong economic participation and development of Indigenous people and communities.

The main changes to the IPP are outlined below.

1. Eligibility criteria:

• Indigenous businesses must be 51% or more Indigenous owned and controlled (or registered with ORIC) to be considered Indigenous businesses under the IPP (an increase from the current requirement of 50% Indigenous ownership and control).
• Transition to the new criteria will begin on 1 July 2026 – with further details of the transitional arrangements yet to be announced.

2. Procurement targets:

• The Commonwealth’s Indigenous procurement targets increased from 2.5% to 3% of the total value of contracts starting 1 July 2025.
• Targets will rise annually by 0.25% until they reach 4% by 2030 – the government will also review the methodology for the target calculation and measurement.

3. Tackling 'Black Cladding':

• The government will work with regulators to address disingenuous conduct, or 'Black Cladding' designed to gain access to the IPP.
• 'Black Cladding' is a term used to define illusory arrangements between Indigenous and non-Indigenous persons and businesses for the purpose of obtaining work under Indigenous procurement policies (which may also give rise to liability for misleading and deceptive conduct, akin to 'greenwashing' or 'social washing').
• The National Indigenous Australians Agency (NIAA) will work with relevant regulators and support services to identify opportunities to make it easier for Indigenous people to report Black Cladding that might amount to unlawful conduct and provide targeted education, guidance and support for Indigenous business owners.

4. Transparency and support:

• The feasibility of increasing transparency of suppliers’ performance against Indigenous participation targets contained in high value contracts (Mandatory Minimum Indigenous Participation Requirements) will be explored.
• Targeted education, guidance and support will be provided for Indigenous business owners.

Practical implications of new eligibility criteria

The increased eligibility criteria from 50% to 51% Indigenous ownership and control required for Indigenous businesses to be eligible to contract under the IPP are likely to have a number of practical implications. The new eligibility criteria are set to apply from 1 July 2026, and it is expected that transitional arrangements will be announced that will address some of the practical matters arising from the change, including impact on businesses already contracted under the IPP

The 51% ownership and control threshold will not apply to businesses registered with ORIC, who will be eligible under the IPP where they meet the Indigeneity requirements under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth) (CATSI Act). The CATSI Act requires an Aboriginal and Torres Strait Islander corporation to have at least a majority of Indigenous directors and, where the corporation has five members or more, for at least a majority of the members to be Indigenous persons. These criteria are aligned with the criteria for non-CATSI corporations under the IPP. Many CATSI corporations set higher Indigeneity requirements in their governing document.

Some practical implications of the change to eligibility criteria under the IPP are explored below, some of which may be addressed by the yet to be announced transitional arrangements. At this stage, it appears that the new eligibility criteria will only apply to Indigenous businesses (as defined in paragraph 1.8 of the IPP) and not Incorporated Indigenous joint ventures (as defined in paragraph 1.9 of the IPP), which will continue to be subject to the existing requirement to be registered with Supply Nation and be at least 50% owned and controlled by Indigenous persons.

1. Restructure

Businesses that do not meet the new eligibility criteria and that either already contract, or are seeking to contract, under the IPP as Indigenous businesses, may need to restructure to meet the new eligibility criteria (subject to the transitional arrangements). Where businesses currently have 50% Indigenous ownership and control, changes will be required at both the member and Board level to achieve the required 51% threshold.

2. Control dynamics (negative to positive control)

A change in Indigenous ownership and control from 50% to 51% may have significant implications on control dynamics in Indigenous businesses - this will be dependent on existing shareholder agreements (if any exist) and which decisions are governed by majority or unanimous decisions. It is a good reason to revisit shareholder agreements. In businesses with 50/50 ownership and control, this typically results in a form of 'negative control' (with approval required from both Indigenous and non-Indigenous persons before ordinary resolutions can be passed, and each having the ability to block a resolution). The change to a majority (i.e. 51%) Indigenous ownership and control means a change to 'positive control' (with Indigenous persons able to pass ordinary resolutions at the member and Board level by comprising a majority in the absence of a shareholders agreement prescribing a different voting threshold).

In equal ownership and control arrangements, this will change the dynamic to majority control by Indigenous persons. This change is intended to ensure the benefits of the IPP flow back to Indigenous communities more directly and that decisions of Indigenous businesses are representative of the interests of Indigenous persons. This change may have a marginal impact on economics (e.g. 1%) but may have significant governance implications which need to be considered.

3. Governance

The change from 50% to 51% control at the Board level means that Indigenous persons must be actively involved in decision making processes and daily management of Indigenous businesses. This change is intended to reduce the risk of 'Black Cladding' and circumstances where businesses are Indigenous in name only, without substantive involvement of Indigenous persons in decision making.

Indigenous businesses may need to re-evaluate their governance structures to ensure that control (defined as the ability to influence key business decisions) will remain in the hands of Indigenous people, which can have implications on Board composition and voting rights.

4. Succession planning

Businesses will need to assess the importance of eligibility to contract under the IPP, including value of any current IPP contracts, and if necessary, engage in succession planning to futureproof the business and ensure ongoing eligibility to contract under the IPP. Businesses owned by non-Indigenous and Indigenous persons (including family businesses) will need to consider a succession plan, ensuring the transfer of ownership occurs in a manner consistent with the new IPP (with at least 51% ownership and control remaining with Indigenous persons). This will have implications in terms of the identification and training of potential successors.

There will be a need to invest in developing future Indigenous leaders who can take over control of Indigenous businesses. This emphasises the importance of mentorship programs, leadership training and professional development opportunities for Indigenous business leaders.

The change in criteria may necessitate revisions to wills, trust documents and other legal instruments to ensure that the ownership and control thresholds are maintained after the original owners or leaders have passed on.

A broader consideration is how Indigenous businesses diversify revenue streams over time to expand beyond IPP contracts so as to broaden the range of potential exit opportunities (i.e. expand the range of potential suitors).

5. Shareholder Agreements

In addition to looking at decision making contexts (which decisions are majority compared to unanimous or another threshold depending on how many shareholders there are), new or updated shareholder agreements may be required to clearly define how shares can be transferred or sold, ensuring that the 51% Indigenous ownership requirements under the IPP are upheld in the event of transfer or other succession event.

6. Family dynamics

In family-owned Indigenous businesses, the new criteria could complicate family dynamics, especially in situations where not all family members are Indigenous or when there are blended families involved.

7. Certification and verification

Businesses that are not registered with ORIC may need to undergo new certification or verification processes to prove their compliance with the updated criteria. This might involve providing additional documentation or evidence of the Indigenous ownership and control structure. At this stage, the mechanisms the government will use to assess compliance with the new eligibility criteria (once they take effect in 2026) are unclear.

8. Supply chain impact

Organisations that rely on Indigenous businesses as part of their supply chain for meeting Indigenous procurement targets, and who adopt eligibility criteria that align with the IPP, may need to assess their partnerships to ensure these businesses meet the new criteria.

9. Compliance monitoring

Government agencies and entities may need to enhance their monitoring and compliance processes to ensure that all businesses engaged through the IPP are meeting the revised ownership and control criteria. As above, the mechanisms the government intends to adopt to assess compliance with the new criteria have not been detailed at this stage, though it is anticipated more information will be released as part of the foreshadowed transitional arrangements.

10. Confidence in the IPP

The changes are intended to increase confidence in the IPP's integrity, ensuring that the policy delivers its intended outcomes and supports genuine Indigenous economic development.

These implications underscore the need for current and prospective Indigenous businesses to evaluate their ownership and governance structures carefully and develop a succession plan where appropriate to ensure ongoing compliance with the IPP requirements. For government agencies procuring goods and services from Indigenous businesses, it will be crucial to understand the revised IPP to ensure compliance with the amended IPP and support the IPP's underlying objectives of Indigenous economic participation and empowerment.

How MinterEllison can assist

MinterEllison has extensive experience working with Indigenous businesses and advising government and non-Indigenous businesses on contracting with Indigenous businesses, including to meet Indigenous procurement targets.

Our services include:

Structuring advice: We provide strategic advice in relation to business models and advice on the most appropriate legal structure, including differing corporate forms and joint venture models.

Restructuring and M&A: We can assist with advice and support with restructuring, including changing a business' ownership and control structure. We also work on M&A, strategic alliances, joint ventures and winding ups.

Governance and compliance: We can assist with the development of robust governance, compliance and risk management frameworks – including drafting and reviewing constitutions, policies and compliance and risk management systems.

Ongoing support and advice: We have extensive experience in the Indigenous business and social impact sector, assisting with the full spectrum of legal advice, from structuring advice, start-up entity formation and charity registration (where applicable), through to governance, compliance, financing, contracting, risk management and restructuring support.

Advice on engaging with Indigenous businesses: We provide advice to government and corporates on engaging with Indigenous businesses, including embedding Indigenous businesses in supply chains to meet Indigenous procurement targets.