New foreign water register transparency quizzed

Legislation to establish a new register for foreign ownership of water access entitlements in Australia passed the federal Senate last week but was also criticised for falling short on transparency.

It was part of a deal brokered between the Coalition and Greens late last year to pass new rules that tightened the Foreign Investment Review Board's (FIRB) threshold for scrutiny of foreign land and agribusiness acquisitions.

FIRB’s scrutiny trigger for foreign land purchases was eased from $252 million to $15m and the mark for agribusiness proposals was set at $55m.

An amendment to the legislation was moved by NSW Liberal Democrat Senator David Leyonhjelm last week and will require the Productivity Commission to investigate, within three years, the water register’s effectiveness.

Senator Leyonhjelm’s amendment will introduce a cost-benefit analysis of the foreign water register that will also require a report to be tabled, in each house of parliament.

The PC will also make recommendations within its report which must be submitted to the Productivity Minister within five years of the register’s commencement.

“I am confident it will find it is an utter waste of time and money,” Senator Leyonhjelm said of the investigation, during the Senate debate last week.

But Federal Agriculture Minister Barnaby Joyce welcomed the water register legislation passing the Upper House last week saying it help would to provide a clear and accurate picture of foreign investment in national water assets.

Mr Joyce said the water register would complement the government’s reforms that have increased the scrutiny and transparency of foreign investment in agricultural land, with lower FIRB thresholds and a land register.

He said the two registers would now help to address community concerns about insufficient information on the level of foreign ownership of Australian agricultural assets and natural resources.

“Water is one of our most vital natural resources; it is fundamental to our agricultural productivity and to our way of life,” he said.

“It is important that we have a clear and accurate picture of the level and trends of foreign investment in our water access entitlements.”

Mr Joyce said from December 1 next year the new register would require foreign persons with holdings in registrable water entitlements or contractual water rights to notify the ATO once each year.

He said people holding certain water rights, whose foreign status changes, would also be required to notify the ATO.

The ATO will make summary statistics on foreign ownership of water entitlements captured through the register – he said – which would be available on the ATO’s website.

Mr Joyce said Australia continued to welcome foreign investment, which played an important role in the growth and productivity of our agriculture sector.

But he said it was important to be confident those investments were in the nation’s long-term national interests.

“A commonly held perception that the level of foreign ownership in Australia has been increasing was confirmed recently through the implementation of a foreign land register,” he said.

“A total land mass of more than two times the size of Victoria is foreign owned and similarly, when it comes to water, we need to know who owns what.

“The register was developed jointly by the Treasury and the Department of Agriculture and Water Resources, in close consultation with stakeholders, including industry and state and territory governments.”

Victorian Farmers Federation President David Jochinke said his group had long argued for water register to be established because farmers deserved “a better understanding of ownership structures vital to our agricultural production”.

“It makes sense that the ownership register Australia maintains for foreign owned land should be extended to our water assets,” he said.

Mr Jochinke said previous scrutiny measures for foreign ownership of Australian agricultural land and water were insufficient but the new water register would help measure the transparency of an increasingly active water market.

“The water market is becoming more active year on year with once off or ongoing trades between owners, including the environment,” he said.

Greens agriculture spokesperson and Victorian senator Janet Rice said the legislation would fulfil her party’s longstanding commitment to create a register of water holdings by foreign nationals.

Senator Rice said it would increase the transparency of relatively new water markets and give the public access to information about who, where and how much water was held by foreign citizens.

She said since the beginning of the water reform period in the 1990s, water trading had provided limited successes in incentivising water efficiency and returning environmental flows.

But potential abuses of power in water entitlements and allocations, particularly in times of drought and water scarcity, had been identified.

“One of the first steps in dealing with these problems is to make information on market concentration and ownership structures better available to the public,” she said.

“Building broad awareness of the risks, opportunities, dangers and the current state of the concentration of water ownership by foreign investors would lay the groundwork for future tackling of problems with our water markets.”

Senator Rice said under the new reforms, any foreign person holding a registrable water entitlement or a contractual water right on July 1, 2017 would have until November 30 to register that entitlement or right with the ATO.

She said a person who holds a registrable water entitlement or a contractual water right on July 1 next year - but disposes of it before November 30 - would not need to register that interest.

“There are still some privacy implications for investors that will affect how detailed the data is going to be, but we have it on good faith from the government that they will attempt to maximise the degree of information without imposing onerous costs or breaching privacy law,” she said.

“Although the Greens were pleased with the first release of the land register, we were disappointed with the lack of granularity and detail that is in the foreign land register.

“We believe that what is being promised for the water register will be a significant improvement on the situation with the land register.

“By building on both the successes and the limitations of the agricultural land register, this bill will be a win for accountability and transparency in our water markets.”

Senator Rice said the Greens supported Senator Leyonhjem’s amendment but did not support his original amendment to insert a sunset clause into the bill that established the register.

Independent South Australian Senator Nick Xenophon said he was concerned the register would not be effective enough but added it was needed.

“We do need to find out who owns the water,” he said.

“Having an effective water register is fundamental in terms of transparency.”

Senator Xenophon said he was concerned the land ownership register had not been as transparent as it could be.

“I note that no less than Alan Jones, the broadcaster, has criticised the government for 'an utter betrayal of public trust', for 'whitewashing' the foreign land ownership register,” he said.

“I just hope we will not have that whitewashing with respect to this register.

“I hope that the government would have learnt from the criticisms regarding the land ownership register.”

One Nation Leader Pauline Hanson said the foreign water ownership register was “a long overdue measure” given there was currently as no comprehensive source of information.

But she said “There should be no foreign ownership of water in Australia - water should belong only to the Australian people”.

“If we are to prevent a continuing fire sale of our national resources, as a starting point we at least need to know what in already in foreign hands,” she said.

Senator Hanson said an apparent omission from the bill was the absence of “significant penalties for foreigners who fail to comply with this new law”.

She said in the event of a foreigner failing to disclose a purchase of water rights, the bill only provided for a minor administrative penalty, pursuant to subsection 286C in the schedule of the Taxation Administration Act 1953.

“We know that there are investors in this country who will disregard our laws if they see a profit in it and if they think that they can get away with it,” she said.

“I call on the government to impose significant fines that are at least equal to the value of the rights on foreign buyers of Australian water rights who fail to comply with this law and register their interest with the ATO.

“I do not believe that any foreign buyer should own our water, our land or anything in Australia”

Labor said it supported the bill but also did not believe the current level of transparency for both the land register and the proposed water register were sufficient.