Access to water is an ongoing issue for all involved in the agricultural sector.
In the past decade, this resource has had ongoing regulation placed on its use and a person's entitlement to it.
The latest regulation put on water licences is a new reporting mechanism for water licences owned by foreign persons, which was established on July 1.
The register requires any holder of a water licence who is a foreign person (for example, if shares in a company that owns a water licence are acquired by a foreign entity) or ceases to be a foreign person (for example, a sale of the shares in the previous example) to update the register within 30 days.
In addition, any change to the volume of water that can be taken must also be updated on the register. The register is maintained by the Australian Tax office and is required to be completed on its website.
In the case of existing water licences owned by a foreign person, those owners have until November 30 to register their details.
In determining the requirement to register, there are two important considerations: what consitutes a 'water licence' and who is a 'foreign person'.
The relevant law casts a wide net in respect of what constitutes a 'water licence'. It uses two terms: 'registrable water entitlement' and 'contractual water entitlements'.
Each of these definitions has a number of sub-elements. It is intentionally broad so as to catch as many interests in water as possible.
It applies to conventional, state-issued water licences, irrigation rights - as defined in the Water Act 2007 - and also contractual rights to water, such as a lease.
Water rights that are excluded from the requirement to be registered include stock and domestic water rights, riparian rights and an annual water allocation.
In terms of who this change will apply to, the relevant law uses the same meaning for 'foreign person' as used in the Foreign Acquisition and Takeovers Act 1975. Generally speaking, a person is a foreign person if they are:
- An individual who is not ordinarily resident in Australia
- A foreign government or foreign government investor
- A corporation, trustee of a trust or general partner of a limited partnership where an individual not ordinarily resident in Australia, foreign corporation or foreign government holds a substantial interest of at least 20 per cent
- A corporation, trustee of a trust or general partner of a limited partnership in which two or more persons hold an aggregate substantial interest of at least 40pc.
Having a foreign investor/partner will not necessarily give rise to a requirement to register, as the above indicates that there are certain thresholds that have to be met. As always, legal advice should be sought if there is any uncertainty.
The purpose behind the register is to provide greater transparency, information and record keeping as to the number of foreign persons that control water licences in Australia. This register obviously compliments the register of foreign ownership of agricultural land introduced last year, given that water licences are commonly connected with such land.
If you are a foreign person, or if you have a company, trust or investment vehicle with a foreign person as a partner, and have an interest in a water right, you need to ascertain whether it requires registration on the register.
This must be done by November 30.
This article first appeared in the Stock Journal on Thursday 12 October 2017.