End of Financial Year FIRB Water Rights update
It is that time of year again - foreign investors must register their water rights with the Foreign Investment Review Board (FIRB) under their annual notification requirements.
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 annually and within 30 days of the end of each financial year.
FIRB increasingly values compliance from foreign investors. This is indicated by the recent expansion of FIRB's powers to investigate and issue significantly greater penalties provided under the 2021 amendments to the Foreign Acquisitions and Takeovers Act 1975 (Cth). This, coupled with the Federal Government's focus on water and water theft, means an up to date register that gives the government the greatest visibility on water ownership in Australia is 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 satisfy the definition of registrable water entitlements or contractual water rights.
What you need to do?
If you are a foreign person who:
(a) starts or ceases to hold a registrable water entitlement or contractual water right;
(b) becomes or ceases to be a foreign person while holding a registrable water entitlement or contractual water right; or
(c) 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.
How can we assist?
While the registration process is fairly straight forward, identifying which interests need to be registered can be complex because the relevant Acts, regulations and rules provide a number of exclusions. Our FIRB team is able to assist you in identifying any registrable water interests, and manage your ongoing compliance requirements.
Consequences for non-compliance
Foreign persons who fail to notify the ATO 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. Non-compliance can also be a negative consideration for future FIRB approval applications.
We also expect to see the ATO undertake audit activities to identify non-compliance given the increase in information sharing capabilities between the States and the Federal Governments.
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.