Australia: Foreign register of agricultural land and water entitlements - notice requirements

WHO SHOULD READ THIS

  • Any foreign person (both private and public) who has acquired or is considering acquiring interests in agricultural land and water in Australia.

THINGS YOU NEED TO KNOW

  • Foreign persons are required to notify the ATO of certain events in relation to interests in agricultural land and water. Notice must be given to the ATO within 30 days after the occurrence of an event. Penalties apply for failing to notify the ATO.

WHAT YOU NEED TO DO

  • Consider regularly reviewing your interests in agricultural land and water you hold to ensure that you are complying with the notice requirements. Seek advice on your registration obligations and the best strategy to adopt if you become aware of non-compliance.

Under the Register of Foreign Ownership of Water or Agricultural Land Act 2015 (Cth) (the Act), a foreign person is required to notify the Australian Tax Office (ATO) of certain events in relation to interests in agricultural land and water entitlements. All interests in agricultural land acquired before 1 July 2015 must have been registered by 29 February 2016. In addition, from 1 July 2017, amendments to the Act will require foreign persons to register certain rights in relation to water in a similar fashion to agricultural land.

These registration requirements demonstrate the increasing sensitivity of these types of assets from a national interest perspective, and represent further scrutiny by the Federal Government of foreign investment in Australia.

Register of water interests

The Act will require foreign persons to register their interests in 'registrable water entitlements' and 'contractual water rights' with the ATO. Generally, 'registrable water entitlements' includes perpetual and ongoing entitlements to water, irrigation rights, rights to hold and take water granted by a state or territory government (above an annual allocation) and 'contractual water rights' granted by one party to access another party's registrable water entitlement (whether created by deed or agreement) which are reasonably likely to run for five or more years. The Act specifically excludes the need to register stock and domestic rights, riparian rights and annual water allocations granted by a state or territory government.

The obligation to register existing interests commences on 1 July 2017, with an initial stocktake period running until 30 November 2017. All new interests in water entitlements must be registered within 30 days of acquisition. Penalties apply for late registration of any water interests acquired or held by a foreign person.

Trigger events

The obligation to register a water entitlement will likely be triggered when:

  • a foreign person starts to hold a registrable water entitlement or contractual water right
  • a person becomes a foreign person while holding a water entitlement or contractual water right, or
  • there is a change in characteristics of a water entitlement or contractual water right such as an increase in the volume held by a foreign person.

Registration process

Although the register is not available yet we consider it likely that a foreign person will be required to register the following:

  • how much water the water right provides
  • who granted or contracted that water right
  • any identifying information concerning the water right (e.g. licence number)
  • how long the water right runs for (if relevant), and
  • why the registering party is foreign.

Ongoing obligations

In addition to registering interests in water entitlements, obligations continue to apply for foreign persons to notify the ATO within 30 days if they acquire interests in agricultural land.

'Agricultural land' is defined under the Act as 'land in Australia that is used, or that could reasonably be used, for a primary production business'. This is an extremely broad definition and could be interpreted to extend to land that would not ordinarily be considered agricultural land, including land relating to mining and exploration.

Under the Act, the following events must be notified to the ATO before the end of 30 days after the occurrence of an event:

  • foreign persons who start or cease holding a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence which is reasonably likely to exceed 5 years
  • persons who become or cease being a foreign person while holding a freehold interest in agricultural land or a right to occupy agricultural land under a lease or licence which is reasonably likely to exceed 5 years, or
  • land which becomes or ceases being agricultural land while a foreign person holds a freehold interest in the land or a right to occupy land under a lease or licence which is reasonably likely to exceed 5 years.

Penalties for failing to notify

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 agricultural land or a registrable water entitlement.

Administrative penalties are calculated in accordance with the Taxation Administration Act 1953 (Cth) and range from $180 to $4,500 (per interest) depending on the number of days the notice is overdue and the size of the relevant entity.

Conclusion

Foreign persons should be aware that there are strict notice requirements in relation to interests in agricultural land and registrable water entitlements, and any contravention could result in the imposition of significant administrative penalties by the ATO. If you require any assistance on how to best manage your interests or consider that you may be in breach of the Act, we would be happy to assist you or provide you with advice on the range of strategies that could be implemented to ensure compliance with the Act.

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