KEY TAKEAWAYS
New administrative requirements for property sales in South Australia where a water entitlement (such as a water licence and/or water allocation) is part of the sale have been published by the South Australian Department for Environment and Water.
The effect of these requirements is that a separate price for the water entitlement (that is distinct from the price for the land and other assets) must now be agreed and recorded by the parties on every occasion, and also disclosed on the water entitlement transfer forms.
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BACKGROUND
Until now, where land (or land and other assets) has been sold to a purchaser together with a water entitlement (such as a water licence and/or a water allocation) it has been possible for the parties to simply agree to a single ‘bundled’ purchase price for the whole of the transaction (although parties have commonly apportioned the purchase price across a number of items, including land, water entitlements and plant and equipment). However, ‘bundling’ the purchase price did at times result in a price of ‘zero’ or ‘not applicable’ being recorded as the purchase price for the water on the transfer form in respect of the water entitlement that was submitted to the Department for Environment and Water.
NEW REQUIREMENTS FOR AGREEMENT ON PRICE FOR WATER
From now on, an accurate, stand-alone price for the water entitlement must at all times be provided on the water entitlement transfer forms that are lodged with the Department for Environment and Water.
In practice, a stand-alone price for the water asset being transferred must be actively considered and agreed to by the parties (having regard to the then current value of the relevant water entitlement in the region), and also recorded in the agreement for the sale transaction.
Additionally, the water entitlement transfer application form will require details to be submitted in respect of:
- the nature of transfer (the reason for trade, such as sale of land and associated business); and
- the strike date (being the date the water trade price was agreed).
Importantly, parties should be aware that there may be stamp duty / tax ramifications of mispricing water entitlements.
ADDITIONAL RECORD KEEPING REQUIREMENTS
Separately, it is worth noting that, in accordance with the Commonwealth Water Amendment (Restoring our Rivers) Act 2023, from 1 July 2024, anyone making a water transfer application must ensure that all information on transfer forms is comprehensive and accurate and must keep records regarding both the reason for trade and price for a minimum of 5 years, where the transfer relates to water in the following prescribed areas:
- River Murray Prescribed Watercourse
- Eastern Mount Lofty Ranges Prescribed Water Resources Area
- Marne Saunders Prescribed Water Resources Area
- Mallee Prescribed Wells Area
- Angas Bremer Prescribed Wells Area
- Peake, Roby and Sherlock Prescribed Wells Area.
If you have any questions regarding how these requirements will affect your transaction, or how your transaction agreements should be updated to ensure ongoing compliance, please do not hesitate to contact us.
This Alert is intended as general information only. It does not purport to be comprehensive advice or legal advice. Readers must seek professional advice before acting in relation to these matters.
