Tenancy, wills, registration of interests and taxes

Water allocations may be granted from the conversion of pre-existing water entitlements such as water licences. Holders who have acquired water allocations as a result of this process may need to consider their tenancy arrangements and update their wills.

Third parties, such as financial institutions holding mortgages over land to which the previous entitlement was attached, may also need to register their interests over these newly-granted water allocations.

Tenancy arrangements

Tenants in common is a co-ownership structure that allows two or more individuals to own a fractional interest in a property. As tenants in common, each investor can hold a separate and distinct share in the property.

These shares can be equal or unequal. For example, if one party contributes one third more to the property than the other, as tenants in common they can own shares of two thirds and one third respectively.

If one of the owners dies, their share does not automatically go to the surviving co-owners, but must be dealt with under the deceased owner's will.

This type of ownership is popular with owners who don't necessarily want their share to go to the other owners (e.g. a group of friends, or a business partner).

A joint tenancy is an ownership structure where two or more persons are joint owners of property.

The unique aspect of joint tenancy is the right of survivorship—if one of the owners dies, their interest in the property automatically passes to the other owner(s).

A will does not override a joint tenancy.

This type of ownership is popular with married and long-term de facto couples.

Specifying tenancy arrangements

Water licences and interim water allocations do not specify tenancy ratios or how the entitlement is held—they list only the holders.

In contrast, (as for land) when buying a water allocation you can specify how you want to hold it (e.g. as tenants in common with share size specified, or as joint tenants). You may also change this ownership arrangement later if you wish.

Tenancy arrangements when converting a licence or interim water allocation

You can also specify the tenancy arrangements under which you want to hold the allocation before a water licence or interim water allocation is converted to a water allocation when a resource operations plan is approved.

Under the Water Act 2000, water allocations are granted to holders as tenants in common in equal shares (if there is more than one holder). If this is not suitable, holders can complete and submit a Request to modify interests in a water allocation (PDF, 34K)* to have this changed (e.g. to joint tenants, or tenants in common with a different share arrangement). No fees are payable for submitting this request.

Unless the department receives a modification notice before the resource operations plan is approved, the water allocation will be recorded on the register as the default arrangement (tenants in common in equal shares).

The notice cannot be used to add new holders for the water allocation (i.e. anyone who doesn't already have an interest or share in the entitlement being converted).

It is advisable to seek professional advice before changing tenancy arrangements.

For further information see Water allocations, tenancy arrangements and financial interests (PDF, 147K)* .

Wills

Water allocations are assets separate from the land, with their own registrable title. They are held as personal property and may be treated differently from land after the death of the allocation holder.

Anyone being granted or acquiring a water allocation should seek professional advice about issues that may affect their will.

Registration of interests

The Water Act 2000 permits the registration of interests over, or dealings with a water allocation, which may be registered on a land title under the Land Title Act 1994 (e.g. mortgages, leases, caveats, etc.). There are some exceptions (e.g. easements).

Though the Registrar of Water Allocations must record registrable financial interests over a water allocation, interests currently registered on a land title (e.g. a mortgage) will not automatically be registered if the allocation replaces a water entitlement that was previously connected to the mortgaged land.

It is the responsibility of the existing interest holder to register the interest on the Water Allocations Register.

To register financial interests over an allocation during the draft resource operations plan consultation process (before an entitlement has been converted to an allocation) existing interest holders may:

For further information see Water allocations, tenancy arrangements and financial interests (PDF, 147K)* .

There is no charge for submitting these notices, which the department must receive before the resource operations plan for an area has been approved.

The department will then record this information on the title of the water allocation.

Tax implications of water trading

There may be tax (e.g. capital gains tax) and duty implications as a result of water allocation dealings.

As the department staff cannot provide legal advice on this topic, you should contact your legal and financial advisor if you are unsure of your legal entitlements.

You can also engage the services of a qualified person to assist in any aspect of dealing with your water allocation, such as conveyancing.

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Last updated 10 June 2009

Water trading