There was no need for major changes to the way Australia records foreign ownership of water, according to the Productivity Commission.
Currently, 11 per cent of Australia's water is owned by foreigners, with the highest proportion of foreign-owned water held in Queensland and Western Australia.
Since 2017, any foreign person who acquires a water asset has been required to notify the Australian Taxation Office (ATO).
Canada is the foreign nation that holds the most overseas-owned Australian water, ahead of China, USA and the UK.
Water is able to be owned because the water reforms over the past 30 years have supported the development of markets for water.
The thinking is that creating water entitlements as tradable assets has allowed water to be used more efficiently and has provided new opportunities to invest capital — from both domestic and foreign sources.
A draft report released by the commission on Tuesday found that few Australians were aware of the Register of Foreign Ownership of Water Entitlements, but that the information it provided was sufficient.
The report made three recommendations:
That state and territory governments link their water registers to the foreign register of water entitlements, and inform foreign entitlement holders to register with the ATO;
That future ATO reports identify farm landholders among water registrants;
That the ATO better explain the mandatory need for the foreign register and various terms linked to its use.
In its report, the commission noted that the public perception of foreign ownership of water was often not shared by mining and farming industries, which were responsible for most water ownership.
"The Australian community generally perceives the risks and threats associated with foreign investment more prominently than the benefits.
"In contrast, the commission has observed that the agricultural and mining sectors, which are the predominant holders of water entitlements, have few concerns about foreign investment in water entitlements and generally support it," the commission said in its report.
Not much would change
The report said that major industry groups from the farm and mining sectors rarely raised foreign ownership of water as a concern.
The commission said few water market participants referred to the register and suggested that "maybe not a great deal" would change if the register did not exist.
"The commission considers it unlikely that, in the absence of the register, the Australian Government would significantly tighten its policies for foreign investment or water markets in response to pressure from community members," it said.
However, the report said, that if the register did not exist, the government "might make small adverse changes".
"Indeed, establishment of the register may have pre-empted a more stringent policy approach," it said.
"Inquiry participants involved in the register's creation noted that it was viewed as a light touch policy measure that would deter calls for a more restrictive alternative," the commission found.
Level of information is sufficient
The commission's report said that non-compliance was "likely inadvertent" and unlikely to have a significant impact on the register's reporting.
It found that calls to add reporting data to the register could likely breach confidentiality provisions relating to tax laws, and may not be geographically consistent."
"These constraints aside, publishing more detailed information would increase the administrative costs associated with the register. These costs would not be justified by the benefits."
"The current level of information published in the statistical report, with figures published at the national, state and Murray Darling Basin levels, is sufficient to support confidence in Australia's foreign investment regime."
A final report is due to the federal government in December.
