Reform progress
The establishment of efficient water markets is a key water reform objective. To achieve this objective, states and territories have agreed that water markets should:
- facilitate opportunities for trade within and between jurisdictions where river systems are physically connected
- minimise transaction costs on water trades achieved through good information flows in the market, and compatible water access entitlement, registry, and regulatory arrangements
- develop an appropriate mix of water products based on water access entitlements (these can be traded either in whole or in part, and either temporarily or permanently, or through lease arrangements or other trading options that may evolve over time)
- recognise and protect the needs of the environment
- provide appropriate protection of third-party interests, for example, the interests of financiers.
Other key areas of reform include:
- establishing a national registry system to support intra and interstate trade
- developing and introducing national standards for metering water extractions
- improving confidence in water intermediaries
- improving water market transparency
- improving trade process capacity of various authorities and agencies
- removing barriers to trade in water access entitlements
- the National Water Commission continuing to monitor and report on the impacts of trade to inform the 2009 review of permanent water restrictions.
Development of rules under the Water Act
The Water Act 2007 (Cth) created new roles for the Commission, the Minister for Climate Change and Water, the Australian Competition and Consumer Commission (the ACCC) and the Murray-Darling Basin Authority (the MDBA). Significantly in the context of water markets in the Murray-Darling Basin (the Basin), the Water Act provides for the creation of water charge, water market and water trading rules.
The water trading rules are an important part of the Basin Plan that the MDBA is required to prepare under the Act. The Commission will be responsible for auditing the effectiveness of the implementation of the Basin Plan.
Read about development of rules under the Water Act 2007.
Capital gains tax relief for irrigators
On 27 February 2009, the Assistant Treasurer, Chris Bowen, announced that the Commonwealth Government intended to provide capital gains tax (CGT) rollover relief for irrigators who transform their entitlement to water under an irrigation right held against an irrigation infrastructure operator into an individual water entitlement.
The rollover will facilitate transformation arrangements allowed under the new water market rules that will be made under the Water Act 2007 by deferring the CGT consequences of the transformation for irrigators until they subsequently deal with their individually held water entitlement.
The initial consultation will consider amendments to the Income Tax Assessment Act 1997 and closed on 27 March 2009. An exposure draft of the legislation will be released on the Treasury website for consultation after the initial consultation. The consultation paper can be found at the treasury website: