ARTICLE
6 July 2021

Do not delay – FIRB water register update

It is time for the annual update of the Foreign Investment Review Board water rights register. Are you ready?
Australia International Law

End of Financial Year FIRB Water Rights update

Unlike the Foreign Investment Review Board (FIRB) agricultural land register – which needs to be updated constantly, the FIRB water rights register only needs to be updated annually. And, it's that time of year again.

Under the Register of Foreign Ownership of Water or Agricultural Land Act 2015 (Cth) (Land and Water Registration Act), 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.

More so than in previous years, compliance in the foreign investment space has been a key consideration and driver for FIRB. Amendments to the Foreign Acquisitions and Takeovers Act 1975 (Cth) brought in at the start of 2021, demonstrate this by granting significantly greater penalty and investigation powers to FIRB. This coupled with a Federal Government's focus on water and water theft means an up to date water register will be a high priority for FIRB.

Registrable water entitlements and contractual water rights

The terms 'registrable water entitlement' and 'contractual water rights' are defined in the Land and Water Registration Act. These definitions are very broad and rely on state based legislation. As such, most transactions involving agricultural land or a mining project include registrable water entitlements 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:

(i) starts or ceases to hold a registrable water entitlement or contractual water right;

(ii) becomes or ceases to be a foreign person while holding a registrable water entitlement or contractual water right; or

(iii) 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 2021.

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?

While the registration process itself is fairly straight forward, the process of identifying which interests need to be registered can be complex, as the relevant Acts, regulations and rules provide a number of carve outs. Our FIRB team is able to assist you in identifying any registerable water rights, and manage your ongoing compliance requirements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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