FIRB – Water Rights

WHO SHOULD READ THIS

• Foreign investors who hold water entitlements or contractual water rights in Australia

THINGS YOU NEED TO KNOW

• Foreign persons with holdings in registerable water entitlements or contractual water rights are required to notify the ATO about any changes to these interests by the end of July.

WHAT YOU NEED TO DO

• Conduct a review of your water entitlements and contractual water rights and if required, notify the ATO before 30 July 2019.

The need to ensure ongoing compliance in respect of a foreign person’s obligations under Foreign Acquisition and Takeovers Act 1975 (Cth) is of the utmost importance, not only because of the potential penalties that can be imposed but also the ability for non-compliance to affect future Foreign Investment Review Board (FIRB) applications.

Foreign persons with interests in registrable water entitlements or contractual water rights in Australia are required to notify the Australian Taxation Office (ATO) about any changes to these interests on an annual basis and within 30 days of the end of each financial year.

Registrable water entitlements and contractual water rights

The terms ‘registrable water entitlement’ and ‘contractual water rights’ are defined in the Register of Foreign Ownership of Water or Agricultural Land Act 2015 (Cth).  These definitions are very broad and rely on state-based legislation. As such, most transactions involving agricultural land or a mining project have a registrable water entitlement in one way or another (including by way of contractual water rights).

What you need to do?

The annual review process requires a review by foreign persons of their interests in registrable water entitlements and contractual water rights to identify any changes that require notification to the ATO. 

If you are a foreign person who:

• 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; or
• holds an existing water entitlement or contractual water right and there has been a change in the characteristic of the water entitlement or contractual water right (e.g. a change to the volume of water, or the share of the water resource),

then you are required to notify the ATO of any change(s) before 30 July 2019.

Foreign persons who fail to notify the ATO or do not give notice on time may be liable to pay an administrative penalty in respect of each interest that they hold or cease to hold in a registrable water entitlement or contractual water right. In addition, as with any breach of the foreign investment regime, non-compliance can be a negative consideration for future applications for FIRB approval.

The federal and state governments have increased their information sharing capabilities in recent years and we expect to continue to see the ATO undertake audit activities that will identify non-compliance.

How can McCullough Robertson help?

The registration process itself is fairly straight forward, what is complicated is identifying which interest needs to be registered, as the relevant act, regulations, and rules provided a number of carve-outs.

Please contact our below team if you require assistance or clarification in determining whether you meet the requirements to notify the ATO.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.