Minister for Sustainability, Environment, Water, Population and Communities
The Hon Simon Crean MP
Minister for Regional Australia, Regional Development and Local Government
Minister for the Arts
New approach to water recovery in the Murray Darling Basin
Joint media release
18 February 2011
The Gillard Government today announced a new approach to water recovery in the Murray Darling Basin that will further assist communities to plan for the future with confidence.
Minister for Regional Australia Simon Crean and Water Minister Tony Burke outlined the Government's initial response to issues raised in consultations and meetings with stakeholders in the Murray Darling Basin last year and subsequently by the Windsor inquiry into the proposed Murray Darling Basin Plan.
The Chair Tony Windsor MP has requested that the Government consider a new approach to recovering water for the environment, including reviewing taxation on irrigators for water-efficiency investment grants and consideration of more strategic water buyback.
In Dubbo for a Murray Darling Association forum, Mr Burke said that in response, the Government would move to change current taxation arrangements for irrigators who take-up water efficiency investment grants to allow more strategic infrastructure investment.
This will unlock the opportunity to open round two of the Private Irrigation Infrastructure Operators Program in New South Wales, which will make available up to $373 million for water providers to invest in water-saving infrastructure.
The Government will adopt a new approach to water buybacks by moving to a smaller and more consistent ‘rolling' round of tenders for buybacks in the Murray Darling Basin.
While individual tenders will be smaller the total amount allocated for buybacks will not be reduced.
"I am determined to achieve a plan for the Murray Darling that delivers healthy rivers, strong communities and continued food production," Mr Burke said.
"We've seen what drought did to farmers and regional communities and I am determined to make sure that the next drought doesn't look like the last in the Murray Darling Basin.
"This can only be achieved by investing in infrastructure upgrades and improving the efficiency and productivity of our irrigation industry while we recover water for the rivers."
Mr Crean said the tax changes announced today would give irrigators an opportunity to raise their productivity plus the infrastructure upgrades would boost local employment opportunities.
"This is another concrete example of how the Federal Government is committed, investing and responding to the needs of regional Australia," Mr Crean said.
"This program allows irrigators to upgrade and modernise their existing infrastructure to save water and also helps irrigators to get more productivity out of their water allocations.
"Local communities in the Murray Darling Basin will also see economic benefits, as it is expected that much of the work involved in these infrastructure upgrades will involve local contractors and regional businesses.
"The tax changes will have flow-on benefits for regional communities and will be backdated to April 1, 2010 to provide certainty to operators with existing grants," Mr Crean said.
Under current arrangements, payments under the SRWUIP would generally be taxable in the year they are received, either as ordinary income or as a subsidy or (to the extent that the payment is deemed consideration for the supply of the surrendered water rights) capital gains. However, for the most part, expenditure under the program would be deductible over three years, as water facilities used in primary production.
Mr Burke said the Government would seek amendments to the Income Tax Assessment Act to eliminate the timing discrepancy between when payments are taxed and when deductions are available for grant applicants under the Sustainable Rural Water Use and Infrastructure Program (SRWUIP).
A CGT exemption for payments under the SRWUIP would form a part of the measure.
The final form of the amendments would be determined in consultation with stakeholders.
"The changes mean that applications for water infrastructure grants will not have a tax bill to pay which they can only recover in future years – they can proceed with certainty that they will not be left with an unreasonable tax bill," he said.
"The changes will allow irrigation authorities to lead strategic infrastructure investments. It allows water purchasing to be accompanied by the closing of outer channels and manage concerns about stranded assets."
The first round of smaller, rolling tenders for water buyback will start on Monday with water purchase tenders in the southern-connected Murray River system, including Murrumbidgee. Up to $40 million will be available.
"In keeping with the Government's consistent approach to the recovery of water, purchases are only made when irrigators choose to put some of their allocation on the market," Mr Burke said.
"Water purchases through this round will count towards any reduction in diversions needed to meet the final sustainable diversion limits under the Murray Darling Basin Plan and complements our substantial investments in more efficient irrigation water delivery and use.
"Moving to smaller, more consistent water buyback will give communities the confidence that water purchasing will be gradual and staggered. It also gives irrigators who want to sell their water to the Commonwealth but who miss out on a round assurance that another round will be available soon."
The tenders form part of the Gillard Government's $3.1 billion Restoring the Balance in the Murray-Darling program under its Water for the Future Initiative.
The tender is being conducted in the southern-connected Murray River system, including the Murrumbidgee. The information and analysis which underpinned The Living Murray initiative provides ample evidence that there is a large unmet environmental need in this part of the system.
Guidelines and the application form are available from 21 February 2011 by calling 1800 218 478 or visiting www.environment.gov.au/waterpurchasing.