Issue
Are water licences business real property, as defined in subsection 66(5) of the Superannuation Industry (Supervision) Act 1993 (SISA)?
Decision
No. Water licences are not business real property, as defined in subsection 66(5) of the SISA.
Facts
A superannuation fund currently owns a water licence
Reasons for Decision
Subsection 66(5) of the SISA defines business real property as: (a) any freehold or leasehold interest of the entity in real property; or (b) any interest of the entity in Crown land, other than a leasehold interest, being an interest that is capable of assignment or transfer; or (c) if another class of interest in relation to real property is prescribed by the regulations for the purposes of this paragraph - any interest belonging to that class that is held by the entity;
where the real property is used wholly and exclusively in one or more businesses (whether carried on by the entity or not), but does not include any interest held in the capacity of beneficiary of a trust estate.
The term 'real property' is not defined either in the SISA or in the Superannuation Industry (Supervision) Regulations 1994. The Encyclopaedic Australian Legal Dictionary defines real property as 'land and interests in land', while the Macquarie Dictionary defines real property as 'tangible and immovable property such as land and houses, buildings or any such structures on the land'.
A water allocation or entitlement authorised by a water licence is an asset which is separate from the land. It can be traded and ownership transferred without any impact on the title of the land. The licence is not a fixture or a structure attached to the land. The water licence has a value in its own right and can be transferred through a sale or a lease. Accordingly, a water right is not business real property as defined in subsection 66(5) of the SISA.