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Victorian Statutory Revaluation

Valuer-General Victoria and Municipal Group of Valuers

Guidelines on Valuation Methodology for the Classification of Land in

Irrigation Districts

Introduction

These guidelines are to be used when valuing land in irrigation districts for rating and taxation purposes.

The guidelines need to be used in conjunction with the General Provisions for Specialist Guidelines, which refer to the general requirements, legislation and procedures relating to all statutory valuations.

Background

Historically, valuation of properties in an irrigation district was relatively straightforward. Each individual property was recorded in a register of lands maintained by the local water authority. Each entry provided a total land area, broken up into that area commanded by gravity for irrigation, the area not commanded by gravity and the area deemed to be ‘swamp or unfit’ for irrigation. Each holding had a volumetric water right ‘attached’, as well as a stock and domestic allowance.

With irrigators seeking more efficiencies due to reduced water allocations, and the introduction of laser grading to lay out new land for irrigation, the break up of land areas has been subject to rapid change. More ‘mechanical irrigation’ via pivots, sprays, microjets and pipe and rise systems also made the traditional land categories increasingly less relevant.

After 1 July 2007, water assets were ‘unbundled’ from land, making water assets highly tradeable and portable, and subject to perhaps weekly change. Valuation of irrigation holdings including water assets then became true ‘point in time’ assessments.

From the 2008 revaluation, when water shares became non-rateable, a common methodology and approach to the valuation of land within irrigation districts for municipal rating purposes was needed. These guidelines put forward a suggested approach, and outline a discussion of the issues municipal valuers may confront in an irrigation district.

Definition

An acceptable classification for a water share is a water entitlement held by a water authority or person.

Victorian Government legislation enables all water rights and licences to be converted into water shares. The first conversions were put in place in July 2007.

Existing water entitlements held on land in irrigation districts in northern Victoria were unbundled (on 1 July 2007 in northern Victoria and 1 July 2008 in southern Victoria) and separated into:

Water share – a legally recognised, secure share of the water available to be taken in perpetuity (subject to availability) from a defined water system; a water share is specified as a maximum volume of seasonal allocation that may be made against that share.

Most water shares are classified as either high-reliability or low-reliability.

Guidelines on Valuation Methodology for Irrigation Districts – August 2011 of 17


When unbundling occurred a 10 per cent limit was placed on the amount of water shares in any water supply system that could be owned without being associated with land. In each water system there were separate 10 per cent limits for high-reliability and low-reliability water shares that could be held as unassociated water shares.

On 16 September 2009, legislation to remove the limit came into affect.

Delivery share – the right to have water delivered by a water corporation and a share of the available flow in a delivery system; a share in terms of unit volume per unit of time of the total amount of water that can be drawn from a water system at a certain point.

Water-use licences – the right to use water on a specific piece of land, or water-use registration; an authorisation to use water for purposes other than irrigation.

After unbundling, a water share is an asset separate from the land and can be traded and mortgaged.

Entitlements in declared systems in Victoria are automatically recorded in the Water Register, the public register of all water-related entitlements in Victoria.

Currently, unbundling does not apply to groundwater, unregulated waterways or recycled water.



Other definitions and industry terms

Water Right refers to the right of a user to use water from a water source, e.g. a river, stream, pond or source of ground water. In areas with plentiful water and few users, such systems are generally not complicated or contentious. In other areas, especially arid areas where irrigation is practised, such systems are often the source of conflict, both legal and physical. Some systems treat surface water and ground water in the same manner, while others use different principles for each.

Water Register was implemented for northern Victorian regulated systems on 1 July 2007 and declared water systems in southern Victoria on 1 July 2008.

The Water Register is shared between the Office of Water, rural water authorities and the Victorian Water Registrar.

The water register – records who has been issued with water shares and the reliability, tenure,

location and holding in mega litres for each water share; records how much water has been allocated against water shares, how

much has been used, and where it was used; records interests in water shares, such as mortgages and leases; provides summary reports on volume of water shares in each water

system, annual allocation, use and the trading history, including average prices for each water system.

The Office of Water is responsible for the overall system. The water authorities manage water allocations, approve water shares and issue water use licences.

The Victorian Water Registrar is responsible for recording water share transactions including transfers, mortgages, limited term transfers and discharges of mortgage. The Registrar also ensures the accuracy, reliability and accessibility of water records.

High-reliability water share – A water share against which seasonal allocations are made as a first priority. High-reliability water shares are expected to reach 100 per cent allocations in 95 years out of 100.

Low reliability water share – A water share with a relatively low reliability of supply. In northern Victoria, these shares will be of the available water once there is enough water to meet higher-reliability water shares in the current year, and, with minimum inflows, to meet higher-reliability water shares in the following year.

Water Licence – A water licence Section 51 (Water Act 1989) grants the holder the right to take and use water from:

waterways both regulated and unregulated; dams both on stream and off stream; springs and soaks; works of an authority; and groundwater.

In order to access water under a Section 51 take and use licence, a person will also need to operate works. This may involve bore or dam construction and/or the use of pumping equipment. In order to do this a Section 67 works licence is also required and the two licences are normally incorporated into the one licence document. Separate licences will be required to construct, alter, remove or decommission any works on a waterway or a bore.



Any person can apply to hold a water licence including associations, partnerships and corporations. The holder of a licence may also apply for that licence to be transferred (traded) to another person on a permanent or temporary basis (Section 62).

Licences are issued from between one year and 15 years. Licence conditions may be changed at the time of renewal, or on transfer, or to ensure compliance with a management plan for a Water Supply Protection Area.

Diversion – You cannot take and use water from a waterway without a Surface Water Licence. Under specific circumstances and where water is only to be used solely for domestic and/or stock purposes, water can be taken without a licence under what is known as a Private Right. All other purposes require a Surface Water Licence.

A Surface Water Licence can be issued for a maximum period of 15 years, although most are issued for a period of one year.

A Surface Water Licence allows you to take and use water for domestic and/or stock, irrigation, commercial or other purposes. A licence details how much water you can take and use for the nominated purpose each year. Licenses also contain specific conditions which relate to maximum extraction rates, authorised purposes and other obligations you are required to adhere to ensure the licence remains valid.

Groundwater – All water occurring in an aquifer. Groundwater exists underground in pores and crevices of rocks and soil known as aquifers. It supports a significant amount of agricultural activity, provides urban supplies to a number of towns across Victoria and is an essential source of domestic and stock supply. Groundwater is also an important environmental asset that provides base flow to streams, and supports wetlands and other groundwater dependent ecosystems.

Bore – any bore, well or excavation or any artificially constructed or improved underground cavity used or to be used for the purpose of –

the interception, collection, storage or extraction of groundwater, or groundwater observation or the collection of data concerning groundwater; or

the drainage or desalination of any land; or in the case of a bore that does not form part of a septic tank system, the disposal

of any matter below the surface of the ground; or the recharge of an aquifer.

Unregulated river – A river that does not contain any dams or major diversion weirs that control the flow of water in the river.

Unregulated systems – An unregulated catchment is one that does not contain a storage managed by a water authority to provide releases in order to meet the water needs of downstream customers. An unregulated catchment may contain rivers, creeks and numerous small waterways and in the case of several unregulated catchments in Victoria, extend well over 1,000 km2 in area.

Streamflow Management Plans (SFMPs) aim to provide a balanced and sustainable sharing of streamflows between all water users in unregulated catchments. SFMPs are now recognised as Management Plans under the Water Act 1989 (as amended 2002) and are legally binding on individual water users and authorities.

SFMPs apply to unregulated streams. These are catchments where the flow in streams is not ‘regulated’ by controlled releases from publicly owned dams to supply water to downstream users. In these systems, flow is simply run of the river generated from rainfall runoff in the catchment.



Additional Victorian legislation and cases applicable to land in irrigation districts

The following Acts are also relevant to this topic:

Water Act 2007 (Commonwealth)Water Act 1989 (Victoria)Water (Resource Management) Act 2005 (Victoria)Water (Governance) Act 2006 (Victoria)

Other relevant material:

Victorian Water Register – www.waterregister.vic.gov.auTo carry out a search or to order water-related documents you will need information to identify the documents as follows –

Water Share Record – e.g. WEE123456 and/orWater Register Document – e.g. MOR654321

VBP Practice Note 2008 Exclusion of Water Shares – www.dse.vic.gov.au >property, titles and maps >valuation>the valuation profession>resources for valuers

Water Allocation Framework – www.ourwater.vic.gov.au/allocation/ Reform of Water Entitlements – www.ourwater.vic.gov.au/allocation/entitlements Australian Government Productivity Commission – Water Rights Arrangements in

Australia and Overseas, Annex C Victoria –www.pc.gov.au/research/commissionresearch/waterrights/annexc

Water entitlements in Victoria’s regulated systems are managed by the water authorities:

o Northern Victoria - Goulburn-Murray Water: www.g-mwater.com.au - Lower Murray Water: www.lmw.vic.gov.au

o Southern Victoria- Southern Rural Water: www.srw.com.au

For a complete list of water corporations, see www.ourwater.vic.gov.au>water industry and governance.

State Government – www.ourwater.vic.gov.au

Guidelines on Valuation Methodology for Water Shares – August 2011 of 17

http://www.ourwater.vic.gov.au/


http://www.srw.com.au/

http://www.lmw.vic.gov.au/

http://www.g-mwater.com.au/

http://www.pc.gov.au/research/commissionresearch/waterrights/annexc

http://www.ourwater.vic.gov.au/allocation/entitlements

http://www.ourwater.vic.gov.au/allocation/

http://www.dse.vic.gov.au/

http://www.waterregister.vic.gov.au/


Identification of properties

The categorisation of properties for the classification of land in irrigation districts depends on whether the highest and best use of a property is for irrigation or non-irrigation purposes. For water, like most resources, there is a rationalisation of areas based on a variety of issues such as soil type, surrounding farm use and farm practices to determine if there is a long term viability of service provision to the property or district.

A valuer will need to establish levels of value for three main categories or submarket groups of property:

1. ‘Going Concern Irrigation’ submarket group, with all water assets included, pastures maintained, structural improvements in use and likely to add full value.

2. ‘Land Available for Irrigation’ submarket group, for land within a serviced district, delivery share maintained, but not irrigated on an ongoing basis. Water specific infrastructure and improvements likely to continue to add some value. The site values for this submarket group will generally be below those for Going Concern holdings.

3. ‘Former Irrigation’ submarket group, for land within a supply district, but fully retired from irrigation, with delivery share relinquished, and water specific assets not in use, and unlikely to add significant value. Site values for this submarket group will generally be below ‘land available for irrigation’ values.

Site values for this submarket group may be below nearby dryland site values. This may be due to costs of remediation to allow a change of use, which can be taken into account by the valuer (as the sales reveal).

Termination fees are considered to meet the definition of a ‘charge’ under the Valuation of Land Act 1960 and should be ignored.

Selection of appropriate submarket groups, not necessarily on a geographical basis, but perhaps by an ‘observed use’ basis, will be crucial to enable consistent levels of value to be established for each of these classes of irrigation property. Widely varying results within the analysis for a submarket group will indicate that the properties within that submarket group may need review.



Property inspection – specific requirements applicable to land in irrigation districts

1. Investigate what water assets are associated with the property.

2. Inspect property and determine components of the property, such as: type of irrigation such as gravity, mechanical area commanded by each irrigation system level of the land – laser levelling dams groundwater bores plantings, crops or pastures and associated improvements such as

trellising.

3. What are the methods of irrigation used i.e. flood spray/sprinkle trickle/drip furrow.



Methodology

Site value

Water Shares became non-rateable from 1 July 2008. For rating valuations the key factors are:

Water Share – the value of the megalitre volume is now excluded from the value.

Delivery Share – is attached to the land and included in the value. Water Use Licence – is attached to the land and included in the value. Improvements associated with an irrigation (i.e. laser levelling) where the

highest and best use is as an irrigated property are included in the value.

With full portability and unbundling only a relatively recent event, the market is currently throwing up many mixed messages, with broad analysis of varying types of irrigation holdings often delivering disparate results, and consistency in values often difficult to discern. For example, analysis of a going concern irrigation holding may indicate that the underlying land appears to have contributed less to an overall sale price than unirrigated land in nearby dry land districts.

This situation is a result of an imperfectly functioning market, and will probably only occur during a transition phase. As vendors become more aware of the flexibility that unbundling has given them, fewer farms will be exposed to the market ‘in one line’ but rather with their assets available for separate sale, even where ongoing irrigation is the highest and best use for the farm. This will negate the ‘in one line discount’ problems, which are a feature of current market conditions.

As with all valuations, consideration of the highest and best use of the subject property is critical to the appropriate approach.

In recent times many systems have failed to deliver a full annual entitlement and properties that have been irrigated for decades are being either temporarily or permanently retired from irrigation. This has clear value implications, beyond simply the loss of the water’s value. Many of these properties will perhaps never be irrigated again.

In districts where soil types may not be ideal for irrigation, water supply or security is less than ideal, or dairy processing companies may impose ‘remote pick up penalties’, many former irrigation holdings are undergoing land-use change. Alternative land uses in irrigation districts may include dryland cropping and grazing, hobby farming or rural residential activity or various equine pursuits.

In irrigation districts or sub-districts where irrigation is no longer considered to be the highest and best use, a valuer will observe a high proportion of properties where permanent pastures are no longer maintained, and irrigation specific structural improvements, particularly dairies, are no longer in use. These observations will be crucial for the valuers approach to the assessment of site values in such areas.



Sales analysis

Sales of land available for irrigation, but without water assets included, should be the primary sales evidence. Failing this, analysis of land in an irrigation district with water assets included, will need to be analysed.

Generally, if the valuer has the view that ongoing irrigation is the highest and best use of the property, amounts will be added to the analysed site value, to reflect the advantages that irrigation brings to the holding. Items for consideration for addition to the base value may include:

irrigation layout (site value consideration); laneways (capital improved value consideration); close fencing (capital improved value consideration); water recycling infrastructure (site value consideration); on-farm water supply and delivery infrastructure (site value consideration); delivery share (site value consideration); proximity to maintained irrigation infrastructure. (site value consideration); and fixed mechanical irrigation systems (capital improved value consideration).

Delivery shares give an entitlement to have water delivered to land in an irrigation district, and a share of the available water flow in a delivery system.

It is linked to the land and stays with the property even if the water share is traded away, and is included in the site value.

Fees for irrigators with delivery share include: an Infrastructure Access Fee (IAF) for maintaining and renewing the delivery

share (based on the property’s delivery share); an Infrastructure Use Fee for all deliveries up to the Annual Delivery Allowance

(ADA). The ADA for a gravity irrigation property is equal to the delivery share multiplied by 270; and

a Casual Infrastructure Use Fee applies to all water deliveries that exceed the ADA.

Analysis of an ‘in one line’ sale may reveal that the land component in an analysed sale price is actually below the site values otherwise indicated by sales excluding water shares. This situation may arise in Category(2) sales, and is likely to arise in Category(3) sales.

This can be due to one or more factors, including: the cost of maintaining the delivery share, (known as the Infrastructure Access

Fee) with no real benefit accruing to the land; the on-farm irrigation infrastructure (water supply and delivery systems, lanes,

check banks and recycling systems) is no longer of any use to the holding, and makes the practice of alternative forms of agriculture more difficult. This can also be considered as the cost of remediation of the land, or the cost of returning the farm to a format suitable for dryland agriculture.

If irrigators no longer require part or all of their delivery share they can, while continuing to pay the Infrastructure Access Fee:

transfer all or part of their delivery share to another property; or surrender part or all of their delivery share and pay a termination fee

(previously known as an ‘Exit Fee’).

Once a delivery share is surrendered, there is no longer an obligation on the relevant water authority to maintain a delivery service to the property. If a delivery channel remains available and water is delivered, the Casual Infrastructure Use Fee will be charged.



The termination fee is currently set at a maximum of 10 times the Infrastructure Access Fee. However, the termination fee may be reduced or waived by the relevant water authority if the authority can avoid costs as a result of the delivery share surrender, through either a reconfiguration process or a channel rationalisation. This information can be found on the authorities’ website.

Termination fees are not triggered automatically when a water entitlement is sold. Sellers of water can retain their delivery share and continue paying the IAF.

Valuers working in irrigation districts need to be familiar with the Trading Rules for that district (they vary from district to district). These rules have an impact on the tradeable value of water and can be found on the website for the supply authority.

Victoria maintains a 4 per cent annual limit on permanent water trade out of irrigation districts in northern Victoria, in compliance with the National Water Initiative.

The objective of the limit is to allow irrigation communities sufficient time to adjust to changing circumstances by setting a ceiling on the rate at which water leaves an irrigation area.

The limit has recently been amended to provide some exemptions to support irrigation modernisation, and ensure smooth administration after the removal of the 10 per cent non-water-user limit.

Trading rules and maps can be found on the Victorian Water Register website atwww.waterregister.vic.gov.au/Public/RulesMaps.aspx?ReturnUrl=/Public/RulesMaps.aspx.

You can also obtain summary information at the website about transfer of water shares for a given trading zone source and reliability within the regulated water systems.

For example, you can find information on the number of transfers in the current season, the volume of water traded, price statistics on those trades, and a list of all transfers at www. waterregister.vic.gov.au/Public/Reports/WaterTrading.aspx .

There are numerous other websites recording water trades throughout the Murray Darling Basin, which will indicate current prices for various water shares in different systems.

Willing buyers can lodge their bids (after investigation that the water they are bidding on can in fact be delivered to their property) for all or part of various parcels of water offered. At the end of each exchange, the results are published, giving market feedback in regard to the current value of high and low security water entitlements, on a permanent and temporary trade basis.

A valuer working in an irrigation district will need to be aware of the tradeable value of water within their various districts, both at the date of any comparable sales utilized in analysis for setting value benchmarks, as well as at the date of the valuation. It should be recognised that water shares cannot be valued at more than their tradeable value, in any context.

An appropriate approach for the sales analysis and setting of site values for each of the three categories of irrigation properties is as follows.

1. ‘Going Concern’ submarket group, where ongoing irrigation is considered to be the highest and best use.


http://www.waterregister.vic.gov.au/Public/Reports/WaterTrading.aspx

http://www.waterregister.vic.gov.au/Public/RulesMaps.aspx?ReturnUrl=/Public/RulesMaps.aspx

http://www.waterregister.vic.gov.au/Public/RulesMaps.aspx?ReturnUrl=/Public/RulesMaps.aspx


The primary sales evidence would be of irrigation farms fully maintained and operational, but without water shares included.

If such evidence is not available, the valuer will need to establish the ‘insitu’ value of the water share by reference to comparison of an ‘in one line’ sale, and the sale of an ongoing irrigation property without a water share included.

This will establish the insitu value of water shares for this submarket group, acknowledging a ‘marriage value’ between the two components of the sale.

This insitu water value would then be utilised to deduct from any gross sale prices (‘in one line sales’) used in site value analysis.

2. ‘Land Available for Irrigation’ submarket group, where opportunistic irrigation is considered to be the highest and best use. This land could well be reinstated to full irrigation, if water supply volumes improve.

Sales utilised to set site values for this submarket group should need little adjustment. They will be sales of lands which retain a delivery share, but include no water shares.

The on-farm irrigation infrastructure will probably continue to add some value, as will water specific structural improvements such as dairies, but probably at a substantial discount from Going Concern added values.

3. ‘Former Irrigation’ submarket group.

Again, sales utilised to set site values in this submarket group should need little adjustment. They will be sales of land where irrigation is clearly no longer the highest and best use, and where the delivery share and water shares are no longer associated with the land.

On-farm irrigation infrastructure will add no value (and may require a deduction for remediation costs), and water specific structural improvements will add little or no value.

Capital improved value

The primary approach used is summation. The primary evidence to use is that of recent sales of comparable properties analysed by category to indicate appropriate market comparisons.

Because this guideline is principally for the methodology of land in irrigation districts, the focus is on the value of the site. However, in using the summation approach the valuer needs to ensure that the value of improvements are taken into consideration in arriving at the capital improved value.

The following are some examples of improvements that need to be considered; depending on issues such as age, condition, obsolescence etc.:

fixed mechanical irrigation systems fencing pastures and plantings dairies sheds and outbuildings dwellings.

While improvements to the land may or may not add value to the site, their potential added value needs to be considered under the normal methodology of analysing comparable sales.



Sales analysis

When carrying out a sales analysis the first step for the valuer is to verify if the sale price is inclusive or exclusive of GST. The agent and or solicitor are the points of contact to ascertain this information.

The valuer should also ascertain if stock, plant and equipment component is included in the sale price, i.e. ‘walk in walk out’ price or ‘bare’ price.

What water assets, if any, are included in the sale price, for example: High Delivery Low Delivery Delivery Share Diversion Licences.

The valuer should also make enquiries to ascertain if there were any ‘quotas’ or contract delivery arrangements with any suppliers for the produce from the farm.

There is no requirement to have separate contracts of sale for water and land; however, there are statutory obligations to notify various authorities of the components of value. Under these circumstances the apportioned sale price may be an apportioned amount not representative of market value.

It should be recognised that in a ‘walk-in-walk-out’ basis the apportionment of the sale price back to each component may be a matter of convenience and/or negotiation by each party and their specific financial circumstances rather than any indication of market value.

It is critical for valuers to investigate and analyse sales to determine what the sale price actually included and then deduce an analysed value for the various components.

In establishing levels of value, the valuer will also need to consider:o dry land levels of land value deduced from sales analysis;o irrigable land levels of value deduced from sales of properties capable of

being irrigated where the water share is sold separately; ando irrigable land levels of value deduced from sales of irrigation properties

sold with the water share.



Sales questionnaire

The follow questions are provided as a guide when conducting a sales analysis in an irrigation district.

1. Total area of site.

2. Area of site under irrigation.

3. Layout of irrigation, i.e. laser graded or old style.

4. What Water Assets are included in sale price i.e.: High Delivery Low Delivery Delivery Share Water Use Licence Diversion Licences.

5. High Reliability Volume?

6. Low Reliability Volume?

7. Is there any Diversion Licence/Extraction Licence associated with the land and if so what volume?

8. What are the structural improvements i.e. sheds, dwellings, dairy, etc?

9. Does the purchaser intend to continue the current use of property?

10. Is the sale price inclusive or exclusive of GST?

11. Is there any stock, plant and equipment included in the sale price i.e. ‘walk-in-walk-out’ price or ‘bare’ price?

12. Are there any ‘quotas’ or contract delivery arrangements with any suppliers for the produce from the farm?



Industry information

For details of water corporations and rural water authorities, visit www.ourwater.vic.gov.au >water industry and governance.

For maps and information on groundwater basins, visit www.dpi.vic.gov.au/vro >Victoria’s groundwater resource.

Commonwealth Murray Darling Basin PlanThe Water Act 2007 commenced on 3 March 2008 and implemented key reforms for water management in Australia.

In December 2008 the Water Amendment Act 2008 amended the Water Act 2007.

The key features of the Water Amendment Act 2008 are:

The functions of the Murray-Darling Basin Commission were transferred to the Murray-Darling Basin Authority. There is now a single body responsible for overseeing water resource planning in the Murray-Darling Basin.

The role of the ACCC was strengthened by providing for the water charge rules and the water market rules to apply to all water service providers and transactions.

The current powers of the ACCC were extended to determine or accredit determination arrangements for all regulated non-urban water charges.

It enabled the Basin Plan to provide arrangements for meeting critical human water needs.

The Water Amendment Act 2008 was based on a combination of Commonwealth constitutional powers and a referral of certain powers from the Basin States to the Commonwealth. The Act passed through the Commonwealth parliament following the passage of referring legislation through the Basin states - Queensland, New South Wales, Victoria and South Australia.1

Stream Flow Management Plans In June 2004 the Victorian Government released its Our Water Our Future (OWOF) action plan. An important component of OWOF is establishing Environmental Water Reserves, the legal share of water for the environment, for all Victorian rivers, streams and groundwater systems. Government introduced the Water (Resource Management) Bill 2005 to amend the Water Act 1989 and from 2006 the act legally recognises the Environmental Water Reserve as the legal share of water for the environment.

The preparation and implementation of a Streamflow Management Plan (SFMP) enhances the Environmental Water Reserve in priority, flows stressed, unregulated rivers. SFMPs, through the Victorian River Health Strategy released in 2002 and the OWOF action plan are recognised as a crucial part of achieving Government's river health objectives. 2

Water Shares, Delivery Shares and Water Use LicencesReliability of water sharesWater shares are classed according to their reliability, which is defined by the frequency with which full seasonal allocations are expected to be available.

Most water shares are classified as either high-reliability or low-reliability.

1 www.environment.gov.au/water/australia/water-act/index.html2 www.g-mwater.com.au/policy/watermanagementplans


http://www.g-mwater.com.au/policy/watermanagementplans

http://www.environment.gov.au/water/australia/water-act/index.html

http://www.mdba.gov.au/

http://www.dpi.vic.gov.au/vro%20



Who can hold a water share, delivery share and water-use licence?Water shares, delivery shares and water-use licences can be held by any legal person provided they meet certain requirements which vary depending on the type of entitlement held.

Water shares can be held by any legal person. Delivery share must be linked to land but can be held by any legal person. Water-use licences must be held by an owner/occupier of land.

How are water shares created and traded?Water shares exist in declared systems in northern Victoria and the Werribee and Thomson/Macalister water systems in southern Victoria.

When regulated waterways in Victoria became declared systems, water rights and Section 51 licences in these systems were converted to water shares. The process for this conversion is set out in Schedule 15 of the Water Act 1989.

Trade is the normal method for acquiring/purchasing a water share. Rules governing how and when water can be traded and maps of trading zones are available on the Water Register website: www.waterregister.vic.gov.au.3

3 www.water.vic.gov.au/allocation/water_allocation_framework/water_shares


http://www.water.vic.gov.au/allocation/water_allocation_framework/water_shares

http://www.waterregister.vic.gov.au/


Water LicencesWhat is a water licence?A water licence Section 51 grants the holder the right to take and use water from:

waterways both regulated and unregulated; dams, both on stream and off stream; springs and soaks; works of an authority; and groundwater.

In order to access water under a Section 51 take and use licence, a person will also need to operate works. This may involve bore or dam construction and/or the use of pumping equipment. In order to do this a Section 67 works licence is also required and the two licences are normally incorporated into the one licence document.

Separate licences will be required to construct, alter, remove or decommission any works on a waterway or a bore.

Both a Section 51 and a Section 67 licence can be refused on the grounds that they may adversely impact on the existing entitlements, the environmental water reserve, drainage or a waterway/aquifer.4

Who can hold a water licence?Any person can apply to hold a water licence including associations, partnerships and corporations.

The holder of a licence may also apply for that licence to be transferred (traded) to another person on a permanent or temporary basis (Section 62).5

It may sometimes be necessary for urban water corporations to apply for a licence for access to groundwater for urban supply. The Minister for Water issued guidelines to assist water corporations in this process, which complement the existing licensing guidelines for surface water.

What rights and responsibilities are granted under a water licence?Any entitlement to water is an entitlement to an amount of water that can be taken under specific conditions/specifications up to a maximum volume. Conditions that may relate to Section 56:

protection of a waterway or aquifer; the purposes for which water may be used; the maximum volume of water to be taken in a given period or given

circumstances; protecting the environment; the maintenance of the environmental water reserve (for example a Water

Supply Protection Area Management Plan); efficient water use; the protection or control in-stream water uses; and the installation and use of meters and pumps.

Penalties may be imposed for non-compliance with licence conditions including revocation.

Licences are issued for between one year and 15 years. Licence conditions may be changed at the time of renewal or on transfer or to ensure compliance with a management plan for a Water Supply Protection Area.6

4 Ibid5 Ibid6 Ibid



Is a licence required for construction of a farm dam?All farm dams used for irrigation or commercial purposes that were built before 2002 need to be registered in accordance with Section 51(1A) of the Water Act 1989, or licenced.

A licence to take and use water is required for all new farm dams supplying water for irrigation and commerical uses.

A licence is also required for all domestic and stock dams that are built on waterways.

A licence is not required for farm dams that are not on a waterway that are used for domestic and stock supplies.

A works licence is required for farm dams for public safety reasons (Section 67(1A)) of the Water Act 1989.7

Water Trading Water trading has been allowed in Victoria since 1991 after the Water Act 1989 allowed permanent transfers of rights and set trading regulations.

In 2004 the Council of Australian Governments (COAG) signed the National Water Initiative to reform the national water agenda and achieve a nationally compatible water market.

Victoria has developed policy and legislative approaches to support interstate water trade, including passing the Water (Resource Management) Act in 2005. This paved the way for reforms in water use and management, including trade and the unbundling of water entitlements.

Most water trade in Victoria is in the regulated water systems in northern Victoria, the Goulburn and Murray River systems.

Water can be traded as trade of allocation available in a given season, or through permanent trade of ongoing entitlement.

Tagging allows water allocated to an entitlement issued in one state to be physically taken in another. Permanent tagged water trading was introduced in 2007 to allow Victoria, New South Wales and South Australia to make interstate-tagged entitlement transfers.

The water market provides the opportunity for the most efficient uses of water. Victorian trading rules aim to promote this as much as possible while preventing adverse impacts on other water users and the environment.8

Water share trade and allocation trade in Victoria is governed by rules set by the Minister for Water. The trading rules aim to facilitate trade wherever possible, while minimising negative impacts on other users and the environment.9

Trading rules for Victorian regulated water systems and trading zones and summarised trading capability between zones for Victorian regulated water systems are available at www.waterregister.vic.gov.au/Public/RulesMaps.aspx.

Rules regarding trading in unregulated systems are available from the relevant water authority.

7 Ibid8 Ibid9 www.waterregister.vic.gov.au/Public/RulesMaps.aspx


http://www.waterregister.vic.gov.au/Public/RulesMaps.aspx

http://waterregister.vic.gov.au/Public/RulesMaps.aspx

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