Introduction

On 1 December 2016 the Commonwealth government passed legislation to amend the Register of Foreign Ownership of Agricultural Land Act 2015 (Cth) to establish a register of foreign ownership of water access entitlements. This builds upon previous amendments to the Foreign Acquisitions and Takeovers Act 1975 (Cth), which have now established registration requirements for foreign owners of land and water rights in Australia.

The Hon. Barnaby Joyce MP stated in a press release that this amendment was made in order to help address community concerns about insufficient information on foreign ownership of Australian agricultural assets and natural resources by enhancing transparency of the level of foreign ownership of water entitlements in Australia.

From 1 December 2017, foreign persons will be required to register their holdings of registrable water entitlements and contractual water rights with the ATO once each year.

From 1 July 2017 until 30 November 2017 there will be a stocktake period during which time foreign persons will be able to register pre-existing interests, providing a baseline against which changing levels of ownership can then be assessed.

Will this affect me?

This will affect foreign persons. Those entering into transactions with foreign persons that involve registrable water entitlements or contractual water rights should also be aware of the changes and factor the new registration requirements into their transactions.

A foreign person is:

  • an individual that 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%; or
  • a corporation, trustee of a trust or general partner of a limited partnership in which two or more foreign persons hold an aggregate substantial interest of at least 40%.

A registrable water entitlement is:

  • a right to receive water from an irrigation infrastructure operator; and
  • a right conferred by or under a law of a State or Territory to:
    • hold water from a water resource in Australia; and/or
    • take water from a water resource in Australia (e.g. a water access licence or entitlement).

But it is not:

  • stock, domestic and riparian rights;
  • certain water access or delivery rights; or
  • water allocations.

A contractual water right is a right under a contract or deed that the foreign person either alone or jointly holds to another person's registrable water entitlement under a contract with a remaining term (including any extension or renewal) that is reasonably likely to exceed 5 years at the end of 30 November 2017.

What do I have to do?

Under this amendment, foreign persons must:

  • Between 1 July 2017 – 30 November 2017 :
    • notify the ATO of all registrable water entitlements the foreign person will hold at the end of 30 November 2017;
    • notify the ATO of all contractual water rights the foreign person will hold at the end of 30 November 2017.
  • From 1 December 2017 : give notice to the ATO within 30 days of the end of a financial year in which the foreign person:
    • starts or ceases to hold a registrable water entitlement or contractual water right;
    • becomes or ceases to be a foreign person while holding a registrable water entitlement or contractual water right;
    • holds a registrable water entitlement or contractual water right which undergoes a change to the volume of water or the share of a water resource to which it applies.

Registration is executed by giving the Commissioner of Taxation a notice in the approved form (which is yet to be released).

Foreign persons who own entitlements to water, or those seeking to enter into a transaction for registrable water entitlements with a foreign person, should seek legal advice as to the effect of this legislation about their transaction and entitlements.

What happens if I don't register in time?

Failure to register within the above time limits will expose foreign persons to penalties, including penalties under the Taxation Administration Act 1953 of 1 penalty unit for each 28 days by which registration is delayed. At present, these penalty units are valued at $180, but can be two to five times higher depending on the income of the foreign person concerned.