Australia's High Court has ruled that Aboriginal owners stripped of land rights should be compensated for "spiritual harm," in a landmark ruling that could spark a slew of cases countrywide.

The court has ruled that the Ngaliwurru and Nungali peoples in the Northern Territory were entitled to compensation for being disconnected from their lands by the government.

Portions of the land in the isolated northern town of Timber Creek were used by the state government to build infrastructure, impinging, the court said, on "native title" rights and interests.

The court upheld a ruling that the group was entitled to compensation not only for the value of the land and lost interest, but "compensation for cultural loss".

The government had claimed the award for cultural loss was "manifestly excessive".

Awarding Aus$1.3m for "cultural loss" the court said it assessed the groups' "spiritual relationship" with the land and "spiritual hurt" by the disconnection.

The court has indicated that the assessment of compensation could vary according to the identity of the native title holders and their connection with the land or waters.

In advance of the ruling, legal experts said it would have "huge implications" for indigenous peoples and "will likely provide clarity on the significant amounts of compensation they may be liable for in the future." 

Both Queensland and Western Australia are rich in resources and a vast amount of land could be affected in both states.

Government officials have reportedly put the cost of potential compensation claims at more than Aus$1bn.