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Small Block Irrigators Exit Grant Package

Water for the Future - Fact sheet
Department of the Environment, Water, Heritage and the Arts, April 2009

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What is the purpose of the Small Block Irrigators Exit Grant Package

The package is intended to assist small block irrigators in the Murray-Darling Basin who are affected by drought and climate change and who wish to cease irrigated farming.

The package is particularly intended to assist small block irrigators, in particular horticultural producers, in the Murray-Darling Basin who own irrigation properties of 40 hectares or less and wish to exit irrigated farming but to continue living on their farm and participate in the life of their communities.

What types of assistance is available

The Australian Government has initially set aside $57.1 million for this initiative, which provides assistance to eligible irrigators to leave irrigated farming and enable them to either change the type of farming they do or find alternative employment. The Australian Government will cover the extra costs associated with expansion of eligibility of the exit package. Assistance includes:

What are the key eligibility requirements

The package will provide exit grants to eligible small block irrigators who are prepared to sell to the Australian Government all of their permanent entitlements to extract water from a watercourse that meet the criteria for the Restoring the Balance in the Murray-Darling Basin program. The Australian Government will retain these entitlements and use them to restore the health of rivers and wetlands.

Eligibility will be determined on the basis of the area of land and the quantity of water entitlements held by the applicant.

Applicants must own their farms and must both collectively and separately own no more than 40 hectares of farming land, including the farm residence and its surrounds. The package is also subject to an assets test (more details are provided in section four).

An applicant will not be able to own, or part-own an irrigation farm business for at least five years after the exit grant is paid to them (more details are provided in section five).

Applicants must be prepared to sell to the Australian Government all of their permanent water entitlements to extract water from a watercourse that meet the criteria for the Restoring the Balance in the Murray-Darling Basin program (more details are provided in section six).

Access to the package was dependant upon State Governments agreeing to certain water reforms (more details are provided in section seven). All State Governments have agreed to these reforms and the Small Block Irrigators Exit Grant Package is now available in all Basin states.

What are the assets test arrangements

The net asset limit for access to a full grant of $150,000 is $350,000. However, net assets exclude the value of up to 40 hectares of land and the principal home (if any) on the same land title.

If the value of other total net assets is above $350,000, irrigators may still be eligible for a reduced grant. For every $3 in assets above the threshold, the exit grant reduces by $2. This means that a farmer cannot receive a grant of any amount if their net assets (excluding the land and house on the same title as outlined above) are worth more than $575,000.

Requirement to remain out of irrigation farming for five years

An irrigator can choose to stay on the farm providing he/she agrees to sell all of their permanent entitlements to extract water from a watercourse to the Australian Government. However, the irrigator must undertake that neither they nor any farm land they own, lease, or purchase will be involved in irrigated farming for at least five years after the date on which they received the exit grant.

Selling your water to the Australian Government

To be eligible for the Small Block Irrigators Exit Grant Package, an irrigator must sell all of their permanent entitlements (and have held at least 10 megalitres of permanent entitlements) to extract water from a watercourse that meet the criteria for the Restoring the Balance in the Murray-Darling Basin program as of:

These must be entitlements available for irrigation purposes. That is, the 10 megalitre threshold to be eligible for the package must be over and above any water entitlements irrigators may retain for stock and domestic purposes.

Details of the tender processes through which the Australian Government is purchasing Murray-Darling Basin water entitlements can be found at

http://www.environment.gov.au/water/mdb/entitlement-purchasing/index.html

Irrigators must also, where they are permitted to do so under state legislation, sell in the open market all other forms of water entitlements they hold that might be used for irrigation purposes, including groundwater and the right to intercept overland flows. However, they will be permitted to retain their entitlements for stock and domestic water.

Australian Government water reforms requested from the States

The Australian Government asked that Basin State Governments agree to water reforms that will enable delivery of the package to irrigators and improve the functioning of the water market. These included:

All Basin State Governments have now agreed to these reforms. This has enabled the Australian Government to offer the Small Block Irrigators Exit Grant Package in all Basin states.

How to apply

Irrigators are encouraged to seek professional advice from their accountant, lawyer or other professional adviser before deciding whether to exit the industry. Irrigators should carefully consider all factors in light of their personal circumstances (including financial and taxation issues).

Irrigators are also encouraged to have early discussions with their bank or other financial institution about any loans that may be secured against the property and/or business and the future arrangements for these, before lodging an application to exit the industry.

Small block irrigators will apply for the package and receive payment of the exit grant and any complementary grants offered under the package through Centrelink.

Interested irrigators are advised to consult Centrelink and submit an application form to assess their eligibility for the exit grant before selling their water entitlements to the Australian Government.

Application forms are available from regional Centrelink offices in all Basin states.

Irrigators may also contact Centrelink on 1800 050 015 to request an application form for the package.

Assessment and approval for the exit grant will be based on a number of steps:

The key dates for all the processes in applying for an exit grant are set out in the table below:

Cut off date Sale of water entitlements
(Department of the Environment, Water, Heritage and the Arts)		 Applying for the Small Block Irrigators Exit Grant Package
(Centrelink)
30 June 2009 Submit an offer to sell all tradeable permanent water entitlements to extract water from a watercourse to the Australian Government via the Department of the Environment, Water, Heritage and the Arts (DEWHA). Submit completed application form to Centrelink for the exit grant.
Apply for advice and training grant.
Apply for removal grant.
30 September 2009 DEWHA accepts offer to sell all water entitlements to the Australian Government.  
31 March 2010   Provide all invoices and receipts to Centrelink to show that all requirements for payment of the grants have been met.
Before 30 June 2010 Payments received for water entitlements sold to the Australian Government. All payments under Small Block Irrigators Exit Grant Package made by Centrelink.

Frequently Asked Questions

When can I apply for the small block irrigators exit grant?

The small block irrigators exit grant is now available in all Murray-Darling Basin states. Applications must be lodged with Centrelink before the package closes on 30 June 2009.

Applying for the exit grant is conditional on selling all permanent water entitlements to the Australian Government through the Restoring the Balance in the Murray-Darling Basin water tender process.

When can I apply to sell my water to the Australian Government?

To be eligible to receive a small block irrigators exit grant an irrigator must also offer to sell their water entitlements through the 2008-09 Northern Basin Tender and Southern Basin Tender.

Offers to sell water entitlements to the Australian Government through the Restoring the Balance in the Murray-Darling Basin water tender process must be made before 30 June 2009. This will provide sufficient time to exchange contracts for accepted sell offers before 30 September 2009.

It is recommended that irrigators submit an application form with Centrelink, as early as possible, to assess their eligibility for the exit grant before selling their water to the Australian Government.

Does this package mean that the Australian Government intends to compulsorily acquire entitlements from irrigators?

No. The Australian Government will purchase water entitlements only from willing sellers.

Participation in the package is completely voluntary.

What if I own more than 40 hectares of land but only 40 hectares are irrigated - am I still eligible for this grant?

No. The Small Block Irrigators Exit Grant Package aims to assist small scale irrigators who live on holdings of 40 hectares or less. Eligibility is based upon the total area of land owned by an applicant (including the area occupied by their dwelling on the same title) and not the area of land under irrigation.

Do I need to own the farm to be eligible for assistance?

In order to be eligible for assistance under the package, farmers will need to show that they own the land they use for irrigation farming, or they lease the land and the term of the lease, including options for renewal that the farmer can exercise, is 10 years or more.

Do I have to sell my farm?

No. The package aims to assist irrigators on small blocks in the Murray-Darling Basin who wish to exit irrigation farming but wish to continue to live on their farm and continue to participate in the life of their communities.

What can I use the advice and training grant for?

Up to $10,000 is available for specialised professional advice and training across a range of areas to assist irrigation farmers to adjust to exiting irrigated farming and to transition into new employment or dryland farming. For example, the grant could be used for skill development, direction setting, succession planning and business advice.

The grant will be paid on a voucher basis up to $10,000. The final date for submission of invoices or receipts needed to support the claim for payment is 31 March 2010.

What can I use the removal grant for?

The removal grant will allow irrigators who have successfully applied for the small block irrigators exit grant to access up to $20,000 to assist in the removal of permanent plantings and above ground production-related infrastructure, including on-farm irrigation systems, closing bores and filling in dams and/or channels. Irrigators will be required to produce receipts to verify the work has been undertaken and will then be reimbursed, by the Australian Government, up to $20,000.

The removal of permanent plantings and other production-related infrastructure is a condition of the exit grant. The removal grant and exit grant will usually be paid at the same time.

The final date for production of receipts needed to support the claim for payment is 31 March 2010.

Am I still eligible for the exit grant if I have previously taken an exit grant under another agricultural exit program?

No. Consistent with Australian Government policy with respect to agricultural exit assistance, irrigators who have previously received an exit or adjustment grant assistance are ineligible to receive a grant under the Small Block Irrigators Exit Grant Package. In the guidelines for the Small Block Irrigators Exit Grant Package exit or adjustment grant means any of the following:

  1. a re-establishment grant under the program known as the Climate Change Adjustment Program;
  2. an exit grant under the program known as the Exceptional Circumstances Exit Package;
  3. a re-establishment grant under an agreement subject to the Rural Adjustment Act 1992 or the Farm Household Support Act 1992;
  4. a grant under the program known as the Pork Producer Exit Program;
  5. a dairy exit payment or a dairy-type grant;
  6. an exit grant under the Sugar Industry Reform Program 2002 or the Sugar Industry Reform Program 2004;
  7. a restructuring grant under the Tobacco Grower Adjustment Assistance Package 2006;
  8. a small block irrigators exit grant.

What is included in the net assets test? Will the sale of my water be included in the test, for example?

The net assets test includes the proceeds from the sale of the water entitlements, farm assets (other than up to 40 hectares of farm land and the principal home (if any) on the same land title) and any off-farm assets, minus any liabilities (which will include any termination fees, legal and other costs associated with the sale of water entitlements). The pre-approval process undertaken by Centrelink will assist you to determine the value of your net assets.

If I choose to stay on the farm but cease irrigated farming, can I diversify into dryland farming?

Yes, if you stay on the farm you undertake to cease irrigated farming, but you may still undertake dryland farming activities. However, it should be noted that farmers who receive the small block irrigators exit grant will not be eligible for any future Exceptional Circumstances assistance or other agricultural exit grant packages delivered by the Australian Government.

Can I sell the land after taking the exit grant?

Yes, you can sell the land after taking the exit grant. However, even if the land is sold it cannot be used for irrigation for a period of five years after receiving the small block irrigators exit grant. The removal of permanent plantings and other on-farm production-related infrastructure is also a condition of the exit grant.

During the five years after I take the small block irrigators exit grant, am I permitted to work as an employee on someone else's irrigation farm?

Yes. The requirement relates to the ownership of an irrigation farming business, not to the nature of an applicant's future employment.

I have an entitlement to draw groundwater water via a bore. Do I have to, or can I, offer this entitlement to the Australian Government for purchase under the package?

The Australian Government is not seeking to purchase groundwater entitlements. If you have groundwater entitlements that are tradeable separate from land, you will need to sell these in the water market.

If you are unable to trade your groundwater entitlements, you will need to close your bore and decommission all the infrastructure you use to access groundwater, other than where you can demonstrate that it will henceforth be used only to access water for stock and domestic purposes. The cost of this work can be reimbursed from the grant available under the package for removal of permanent plantings and other irrigation-related infrastructure.

A condition of receiving the exit grant is that you will not be permitted to use water from these or any other sources for irrigation purposes for a period of at least five years.

I have an entitlement in Victoria to intercept overland flows for my farm dam. Do I have to, or can I, offer this entitlement to the Australian Government for purchase under the package?

The Australian Government is not seeking to purchase entitlements to intercept overland flows. If you have entitlements to intercept overland flows that are tradeable separate from land, you will need to sell these in the water market.

If you are unable to trade your entitlements to intercept overland flows, you will need to decommission all the infrastructure you use to access them, other than where you can demonstrate that they will henceforth be used only to access water for stock and domestic purposes. The cost of this work can be reimbursed from the grant available under the package for removal of permanent plantings and other irrigation-related infrastructure.

A condition of receiving the exit grant is that you will not be permitted to use water from these or any other sources for irrigation purposes for a period of at least five years.

What are the arrangements for provision of stock and domestic water? Am I entitled to retain my access to stock and domestic water? Will there be a limit on how many megalitres I may retain?

The package will not prevent access to stock and domestic water on a property. An irrigator will be allowed to retain an entitlement to access stock and domestic water on their property according to the existing regulations that apply in their state.

I am in South Australia and, in line with current state requirements for temporary trade of water entitlements, I have leased my entitlement to someone else. Am I still able to offer to sell my permanent water entitlement to the Australian Government?

Yes. You are eligible to offer to sell your water entitlement to the Australian Government.

In South Australia leasing an allocation to another irrigator is currently achieved by leasing the entitlement for the duration of the irrigation season (or another time period agreed by the two parties). In this case the irrigator may not be able to establish a settlement date for the water entitlement until the entitlement is back in his or her control at the end of the lease period (unless the third party agrees to terminate the lease earlier). This will affect the settlement date but it does not mean that the irrigator is ineligible to offer the water entitlement for sale to the Australian Government or to apply for the Small Block Irrigators Exit Grant Package.

More Information

The Centrelink Hotline number for those irrigators wishing to obtain further information on the package is 1800 050 015.

For more information on the Restoring the Balance in the Murray-Darling Basin program can be obtained by calling 1800 218 478, or visit www.environment.gov.au/waterpurchasing.

Cover of Small block irrigators exit grant package - fact sheet

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