Foreign ownership of assets register – annual notification of water rights

Foreign ownership of water

All foreign persons (including foreign owned companies and trusts) must notify the Australian Taxation Office (ATO) by 30 July each year if the foreign person acquired a registrable water interest during the previous financial year and continues to hold that interest at 30 June.

A registrable water interest means any ‘registrable water entitlement’ or ‘contractual water right’ exceeding five years. These notification requirements are unique to water rights. As discussed further below, unlike registrable water interests, foreign persons owning assets in other asset categories are required to notify the ATO of any relevant action in respect of that asset within 30 days of that action taking place.

If you are a foreign person who:

• started or ceased to hold a ‘registrable water entitlement’ or ‘contractual water right’;
• became or ceased 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 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 the change(s) before 30 July after each financial year that you hold the registrable water right.

New Register of Foreign Ownership of Australian Assets – moving forward what are your new obligations?

Following its introduction on 1 July 2023, the new Register of Foreign Ownership of Australian Assets (New Register) replaced the Register of Foreign Ownership of Water or Agricultural Land Act 2015 (Cth) (Act) and consolidated the existing requirements to register certain rights, including water rights and entitlements.

Unlike interests in water discussed above, the New Register requires foreign persons to register their ownership of certain Australian assets on an ongoing basis as opposed to once a year. As a reminder, under the latest reforms, a foreign person will now be required to notify the ATO within 30 days (with certain exceptions) when:

1. the foreign person acquires an interest in Australian land. This includes freehold land, an interest in a lease or licence for Australian land where the lease term (including any extension or renewal) is likely to exceed five years and shares or units in an Australian land corporation or trust. It does not include equitable interests in land other than certain equitable interests in agricultural land. This notification requirement applies regardless of the value of the land and whether or not the acquisition is subject to FIRB approval under the FATA;
2. the foreign person holds an interest in land and the nature of that interest in land changes (e.g. if it changes from agricultural land to commercial land);
3. the foreign person acquires an interest (other than an equitable interest) in an exploration tenement. Again, this applies regardless of the value of the exploration tenement and whether or not the acquisition is subject to FIRB approval;
4. the foreign person acquires an interest in an entity or business for which FIRB approval was (or should have been) obtained, including under an exemption certificate;
5. a foreign person takes an action for which they obtain FIRB approval under the reviewable national security action rules; and
6. a person (or entity) becomes a foreign person while holding an interest in:
   • land or an exploration tenement;
   • an Australian entity or agribusiness for which FIRB approval would be required if newly acquired; and
   • a national security business for which FIRB approval would be required if newly acquired or commenced.

These new reporting obligations will apply in respect of any acquisition, disposal, change of control or character of any of the above interests. Further a foreign person will be required to notify the ATO within 30 days of any acquisition, disposal or change of control or character occurring.

How can we assist?

While the registration process is straightforward, identifying which interests need to be registered can be complex because the relevant legislation, regulations and rules provide for a number of exclusions. Our FIRB team is able to assist you in identifying any registrable water (or other) interests and manage your ongoing compliance requirements.

Consequences for non-compliance

Foreign persons who fail to notify the ATO in accordance with the notification requirements for any type of asset may be liable to pay an administrative penalty in respect of each interest that they hold or cease to hold, including in respect of a registrable water entitlement or contractual water right. FIRB may also look unfavourably on foreign persons who have not complied with the FATA when considering future applications for FIRB approval.

Read our full article on the new register for further details here.

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.