Insights / February 24th, 2017

Registration of foreign ownership of water entitlements, are you exempt?

Public consultation is now open on the draft rules (‘the Rules’) in support of the Register of Foreign Ownership of Water or Agricultural Land Act. As part of the foreign investment framework reform package, legislation to establish a water register which requires foreign persons to notify and update their interests in water entitlements with the Australian Taxation Office was passed by parliament on 1 December 2016.

The Act, which does not require the registration of water rights until 1 July 2017, also provided for Rules to exempt certain water rights from the definition of a ‘registerable water entitlement’ and certain foreign persons from the registration requirement.

Registerable water entitlement

The Rules propose that the following water rights will be exempt from the definition of ‘registerable water entitlements’:

  • Harvestable rights – a right to use water harvested from rainfall for stock and domestic purposes; and

  • Irrigation infrastructure operator additional water loss – water held by an irrigation infrastructure operator to meet requirements under an irrigation right with a customer or conveyance water which is additional water which may be lost in transit or through seepage or evaporation.

Exemption for foreign persons holding water entitlements or contractual water rights

The Rules also propose to exempt certain foreign persons from the requirement to register a ‘registerable water entitlement’ or a ‘contractual water right’ on the Register.

To be exempt, the foreign person will need to meet the following criteria:

  • have started to hold the ‘registerable water entitlement’ or ‘contractual water right’ by way of enforcement of a security held solely for the purposes of a money lending agreement; and

  • be the person who entered into the money lending agreement or a subsidiary or holding company of that person.

To be classified as a money lending agreement, the agreement must:

  • be entered into in good faith, on ordinary commercial terms in the ordinary course of carrying on a money lending business or otherwise providing financial accommodation (except an agreement dealing with a matter unrelated to the carrying on of that business); and

  • for a person carrying on a money lending business, or a subsidiary or holding entity of a person carrying on a money lending business, be an agreement to acquire an interest arising from a money lending agreement.

If a foreign person satisfies the above criteria, they will not be required to register their ‘registerable water entitlement’ or ‘contractual water right’ on the Register.

Have your say

The Rules are currently available for public consultation. The closing date for submissions on the Rules is Friday, 3 March 2017.

When it comes time to register a ‘registerable water entitlement’ it will be important to carefully consider if one of the exemptions applies.

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