New approach to Murray-Darling Basin water recovery
The Federal Government has announced a new approach to water recovery in the Murray Darling Basin, which will include changes to taxation arragnement for irrigators.
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.
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.
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,” Mr Burke 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.
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.