How to trade
Water in Australia is currently traded through the buying and selling of water access entitlements and allocations. The water market has not developed extensive use of options, leases or other derivatives although these have occurred in a limited manner.
The figures below provide an overview of the key steps in conducting a water trade. Although there are fundamental differences between the water products and transactions available in each state and territory, these figures outline the steps in the trading process common across all jurisdictions.
Water brokers and exchanges play a facilitation role in the market by bringing buyers and sellers together, reducing search costs, improving information flows and assisting in obtaining regulatory approvals. The Australian Competition and Consumer Commission (ACCC) has published guides which may assist water brokers and exchanges and their customers to understand their fair trading obligations under the Competition and Consumer Act 2010. See the ACCC's Water brokers and exchanges page for more information.
See Water trading and taxation for information on the tax implications of water trading.
Water access entitlement trade
Step 1:
Conduct market research
Investigate market
Buyers and sellers should check:
- the characteristics of the product for trade
See Water products - prices
- Water market reports
- Trade processing times
Determine trading rules
and procedures
Buyers and sellers should also check:
- Rules and restrictions
- jurisdictional trading processes. See Trading in your state/territory.
Step 2:
Initiate Trade
Draft and match offers
to buy or sell
Traders may draft and match their own offers, or engage a water broker to assist in drafting and matching offers.
Check entitlement holders
and encumbrances
In some jurisdictions buyers may check the water register to ensure that the seller holds the entitlement, and that no encumbrances exist on that entitlement (e.g. liens, charges and mortgages). This step will be completed by the trade approval authority before trade is approved in all jurisdictions.
An encumbrance does not necessarily prevent the sale, however it may affect the market value. See Water registers.
Step 3:
Conduct trade
Prepare contracts
Traders may prepare contracts, or in some cases the approval to trade form may act as a contract. The information recorded may include:
- water access entitlement details
- price
- transfer period (permanent/temporary, duration of trade if temporary)
Traders may need to engage legal assistance at this point.
Obtain approval to trade
A single approval to trade form must be completed by the buyer and seller. See Trading in your state/territory for individual jurisdiction requirements.
In some jurisdictions the trade is registered by the trade approval authority when approval is granted.
Step 4:
Finalise trade
Perform trade settlement/ finalise payment
Finalise the payment and sign and exchange contracts.
Register trade
In some jurisdictions a water access entitlement transaction must be registered as a separate activity once settlement has been completed. Submit the relevant registration form to your water authority.
The buyer and seller will be notified when registration is complete and receive new/updated water access entitlement documents.
The water register will be updated within 24 hours of registration.
Most water access entitlement trades require approval of a Trade Approval Authority and registration of the transaction on the relevant water register.
Water allocation trade
Step 1:
Conduct market research
Investigate market
Buyers and sellers should check:
- the characteristics of the product for trade
See Water products - prices
- Water market reports
- Trade processing times
Determine trading rules
and procedures
Buyers and sellers should also check:
- Rules and restrictions
- jurisdictional trading processes. See Trading in your state/territory.
Step 2:
Initiate trade
Draft and match offers to buy and sell
Traders may draft and match their own offers, or engage a water broker to assist in drafting and matching offers
Step 3:
Conduct trade
Obtain approval to trade
For intrastate trade, a single approval to trade form must be completed by the buyer and seller.
For interstate trade, a single approval to trade form must be completed by the buyer and seller for the state of origin and an additional form must be completed by the buyer and seller for the state of destination.
See Trading in your state/territory for individual jurisdiction requirements.
Water traders will receive notification of trade approval. In some jurisdictions water account balances may be updated at this point.
Step 4:
Finalise Trade
Perform trade settlement/ finalise payment.
Finalise the payment
Once the transaction has been finalised the water account balances are updated, if this was not done at the trade approval stage.
Most allocation trades require approval of a Trade Approval Authority.
In order to use the water acquired through a trade, in addition to approval and registration a customer may also be required to obtain:
- a water supply works approval to construct and use a specified water supply work at a specified location, and/or
- a water use approval to use water from an interstate source.
For further information specific to a jurisdiction see Trading in your State/Territory