Inquiry launched into Australia’s register of foreign water owners

Productivity Commission review will examine whether the foreign ownership register achieves the law’s aim of increasing transparency and assess its cost to investors.

Australia’s Productivity Commission will undertake an inquiry into the effectiveness of the country’s Register of Foreign Ownership of Water Entitlements.

Federal government treasurer Josh Frydenberg last week requested the Productivity Commission undertake the inquiry in accordance with section 34A of the Register of Foreign Ownership of Water or Agricultural Land Act 2015. The clause requires the commission to assess the effectiveness of the foreign ownership register.

Under the terms of reference for the inquiry, the Productivity Commission will:

  • assess whether the information provided in the annual report of foreign registrations of ownership delivers on the policy objectives of the scheme of increasing transparency of foreign ownership of water entitlements;
  • identify the direct and indirect costs and benefits associated with maintaining the register and producing the report; and
  • identify the direct and indirect costs borne by foreign owners of water entitlements to ensure compliance with the law.

The 2015 Act requires the commissioner of taxation to keep two registers, the Register of Foreign Ownership of Agricultural Land and the Register of Foreign Ownership of Water Entitlements, as well as prepare an annual report summarizing statistics from those registers.

A spokesman for Kilter Rural, which manages the Kilter Water Fund and the Balanced Water Fund, told Agri Investor: “We’re all for transparency and anything that increases transparency in the market is a good thing.”

Another asset manager with involvement in Australian water markets told Agri Investor: “We don’t have any issue with a review. It might be an opportunity to examine one of the more curious aspects of the legislation: that is if one foreign investor in our fund holds 20 percent of units, or collectively several foreign investors hold an aggregate of 40 percent of units, then the entire fund’s holdings of water entitlements are deemed to be foreign owned.

“This is the case even if none of the investors can exercise control over the fund given our structure as an independent Australian-domiciled trustee and custodian, and the terms of the fund.”

The inquiry will commence in early 2021, with the final report handed to the government by December 7, 2021 before later publication.

The Productivity Commission said it will consult with key interest groups and affected parties, including Commonwealth, state and territory governments and stakeholders from the mining, irrigation infrastructure, urban water supply and agriculture sectors. It will also invite public submissions before publishing a draft report.

Last year, the Australian Competition and Consumer Commission found that water markets in the Murray-Darling Basin were in need of “comprehensive reform” in an interim report, but also found the market had brought “substantial benefits” to water users across the region. Investors welcomed the ACCC’s findings.