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Are water entitlements dutiable?

Water entitlements transferred with land (excluding stock and domestic allowance not yet unbundled in southern Victoria) are not dutiable because they:

  • do not come within the definition of dutiable property under the Duties Act 2000
  • can be independently traded and therefore do not form part of the land.

The value of stock and domestic allowance not yet unbundled in southern Victoria can’t be traded independently from the land. As such, it is taken into account in calculating the dutiable value of the land.

Apportioning non-dutiable components of a transfer

For duty purposes, where the consideration for a dutiable transaction includes consideration for non-dutiable water entitlements, it is necessary to deduct the value of any non-dutiable water entitlements that are transferred with land from the total purchase price.

This requires you to provide your own valuation in relation to the water entitlements and use this to apportion the consideration between the dutiable and non-dutiable components of the transaction.

This applies to all water entitlements in northern and southern Victoria. It applies to all contracts entered into on or after 1 July 2007 and for unbundled water in northern Victoria, all contracts which settle on or after 1 July 2007.

We generally accept the apportionment made by the parties between the land and improvements and the non-dutiable water entitlements. This approach is, however, subject to the resulting value for the land and improvements reflecting its market value, taking into account the land's accessibility to water and any existing irrigation infrastructure.

Generally, the value of the water entitlement should be its tradeable market price.

Unbundled water entitlements

Unbundling separates water from land and divides an irrigator’s water entitlement into components which can be readily transferred.

Certain water entitlements in northern Victoria were unbundled on 1 July 2007 and in parts of southern Victoria (Thomson/Macalister and the Werribee water systems) on 1 July 2008.

More information on water trading can be obtained from:

When is a valuation required?

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 may be requested.

The valuation should be from 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 valuation approach is to value the land and the improvements on the basis that it is a going concern and the water entitlement will continue to be available for the particular use.

The Valuer-General has endorsed the following methodology:

  1. The valuation should confirm the consideration, being the sale price, i.e. a 'before valuation' which identifies the value of the:
    • land
    • water, and
    • improvements including water delivery infrastructure such as irrigation channels, dams and pumps on the land.
  2. It should then assess the value of the property excluding the value of the non-dutiable water entitlement, i.e. an 'after valuation' of the:
    • land, and
    • 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.

Last modified: 15 September 2023
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