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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:

next

Determine trading rules
and procedures

Buyers and sellers should also check:

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.

next

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.

next

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.

next

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.

diagram showing the key trading steps for entitlements

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:

next

Determine trading rules
and procedures

Buyers and sellers should also check:

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.

diagram showing the key trading steps for allocations

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