In brief - Proposed changes would take effect from 1 July 2017
Foreign persons who hold a "registrable water entitlement" or a "contractual water right" may need to register those interests with the Australian Taxation Office
(ATO) from 1 July 2017 if the Government's proposed changes to the Register of Foreign Ownership of Agricultural Land Ac
t 2015 are passed.
Foreign owners of agricultural land will be impacted by proposed changes
Foreign owners of land in Australia need to increasingly monitor the regulatory environment impacting their investments in Australia as it is moving on a range of fronts. One of those fronts relates to resource ownership attached to agricultural land.
In short, under the proposed changes, if you are a foreign person who holds, or will hold, a "registrable water entitlement" or a "contractual water right", then from 1 July 2017, you will need to register those interests with the ATO.
Foreign person definition includes individuals not ordinarily resident in Australia and foreign governments
The stated intention behind the amendments is to create a register of interests to enhance transparency to inform future policy. This transparency is intended to inform government and the community about emerging investment trends.
Under the Bill, a foreign person will have to register relevant interests with the ATO from 1 July 2017.
- an individual who is not ordinarily resident in Australia
- a foreign government or foreign government investor
- a corporation, trustee or general partner of a limited partnership where an individual not ordinarily resident in Australia, foreign corporation or foreign government holds an interest of at least 20%, or
- a corporation, trustee or general partner of a limited partnership in which two or more foreign persons hold an aggregate interest of at least 40%
If the Bill is assented to, then from 1 December 2017 foreign persons will have to notify the Commissioner within 30 days after a change to their interest.
Registrable water entitlements and contractual water rights
The triggers to the obligation of foreign persons to register their interests are if they hold a "registrable water entitlement" or a "contractual water right".
Registrable water entitlements comprise:
- an irrigation right relating to a water resource in Australia
- a right under a state or territory law to either hold or take water from a water resource in Australia
Registrable water entitlements do not include:
- stock and domestic rights
- riparian rights
- an annual water allocation
A "contractual water right" is defined as a contractual right that the person holds (alone or jointly) to another person’s "registrable water entitlement" or a right of a kind specified in the rules. This would include rights under a Deed, as well as a contract.
Penalties for breaches of registration requirements apply, but exemptions a possibility
Criminal and civil penalties apply for breaches of the registration requirements. These include maximum criminal penalties of $135,500 for individuals and $675,000 for companies, and up to three years' imprisonment and divestment orders.
The substantial penalties for non-compliance would mean that foreign owners (as that phrase is expansively defined) will need to conduct an audit of their agricultural landholdings and their interests in water resources to ensure that the relevant interests are properly registered.
The requirements to register will apply to some corporations, trusts and partnerships comprised of foreign interests, given the definition of foreign person.
It is likely that a final Bill will be considered by Parliament early in 2017. It is also possible that the Bill may be amended through the parliamentary process and there may be exemptions to registration which get passed.
Seek legal advice about registrable water entitlements rights and obligations
Foreign owners or those proposing to enter into a transaction for registrable water entitlements with a foreign owner, should seek legal advice about their rights and obligations.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2023.