Water entitlements
Learn how water entitlements affect property duty.
Key information
Most water entitlements transferred with land are not dutiable because they:
- do not come within the definition of dutiable property under the Duties Act 2000
- can be traded independently and therefore do not form part of the land.
In southern Victoria, the value of stock and domestic allowance has not yet been unbundled and can’t be traded independently from the land. We include its value when calculating the dutiable value of the land.
Apportioning non-dutiable components of a transfer
If a transaction includes non-dutiable water entitlements, their value is deducted from the total purchase price to work out the dutiable value.
You must support this deduction with a valuation of the water entitlements to apportion the consideration between the dutiable and non-dutiable components of the transaction.
We generally accept the apportionment made by the parties. However, the value for the land and improvements must reflect its market value. In assessing this, we consider:
- the land's accessibility to water
- any existing irrigation infrastructure.
Generally, the value of the water entitlement should be its tradable market price.
Valuation requirements
We may request a valuation if:
- we regard the apportionment made by the parties as an inadequate value for the land and improvements, or
- the parties are related.
A valuation must be prepared by:
- a certified practising valuer who is a member of the Australian Property Institute, or
- a member of the Real Estate Institute of Victoria with sworn valuer accreditation.
Correct methodology for valuation
The correct approach is to value the land and the improvements on the basis that the property operates as a going concern and the water entitlement remains available for its current use.
The Valuer-General has endorsed the following methodology where the valuation:
1. Confirms the consideration, being the sale price, i.e. a 'before valuation' of the:
- land
- water
- improvements including water delivery infrastructure such as irrigation channels, dams and pumps on the land.
2. Assesses the value of the property excluding the value of the non-dutiable water entitlement, i.e. an 'after valuation' of the:
- land
- improvements including the water delivery infrastructure at the same added value as 'before valuation'.
3. The difference between the before and after value is the added value of the water entitlement to the going concern asset.
Generally, the value of the water entitlement should not be greater than its tradeable market price.
Unbundled water entitlements
Unbundling separates water from land. It divides an irrigator’s water entitlement into separate components which can be transferred independently.
In northern Victoria, certain water entitlements were unbundled on 1 July 2007.
In southern Victoria, unbundling occurred for the Thomson/Macalister and the Werribee water systems on 1 July 2008.
You can get more information on water trading from the: