Permanent water share and temporary allocation explained

We’ve had feedback from several customers encouraging us to make Victoria’s water entitlement system and trading terminology easier to understand. So, here’s a clear and simple explainer. 

In southern Victoria, water rights were separated from land ownership in 2008 through an ‘unbundling’ process, that allows individuals and businesses to buy, sell, and trade water independently of land transactions.  

Before unbundling, water rights were tied directly to land, meaning only landowners could access and trade water. 

Now, water rights are split into three entitlements: 

1. Water Shares – A permanent entitlement to a portion of the available water.
2. Water Allocation – The actual amount of water available to a water shareholder at a given point in a given season.
3. Delivery Shares – an entitlement paid to access the channel system.  

This system allows water to be bought, sold, and traded separately from land, making water management more adaptable and market driven. 

Now, let’s take a closer look at permanent water shares and allocation trades. While both relate to water use and access, they serve different purposes and function in distinct ways.  

Permanent Water Shares 

The Macalister, Werribee, and Bacchus Marsh irrigation districts are regulated water systems. A regulated water system is a river, reservoir or water storage system where the flow of water is managed and controlled using infrastructure such as dams, weirs, channels and pipes. 

A permanent water share in a regulated water system is an ongoing right to a specific volume of water within the system. 

This means that the water share holder owns a portion of the total available water in a system, regardless of yearly variations in supply.  

These shares are legally recognised property rights and can be bought, sold, or transferred, just like land or other assets. 

Each water share is classified into a category based on reliability. In Victoria, the two main types of permanent water shares are: 

• High-reliability water shares (HRWS): These provide water in most years and are more secure, making them more valuable.
• Low-reliability water shares (LRWS): These only receive water once the HRWS reach 100 percent, making them less predictable and cheaper. 

Water shares are separate from the actual amount of water received each year. We determine the available water allocation based on seasonal conditions, reservoir levels, and overall supply.  The water allocation determination is reviewed fortnightly to ensure current seasonal conditions are considered. Therefore, owning a permanent water share does not guarantee a specific amount of water every year. 

For example, if you own 100 megalitres of high-reliability water shares and we announce a 70 percent HRWS allocation, you will receive 70 megalitres of water to use, trade, or sell for that season.  This allocation percentage may increased throughout the season with favourable rainfall in the catchment area.

Allocation Trade 

A water allocation is the actual amount of water available to a water shareholder at a given time, in a given season.  

An allocation trade, also known as a temporary trade, involves the buying and selling of water allocations for a single season.  

The season duration in the Macalister Irrigation District runs from 15 August through to the 15 May. In the Werribee and Bacchus Marsh Irrigation Districts the season runs from 1 July through to 30 June.

Allocation trades are flexible and provide water users with a way to adjust their supply based on immediate needs. For example, a farmer experiencing a dry season may purchase additional water allocation from another user who does not need their full amount. Conversely, a farmer with excess water allocation can sell it for financial gain.  

In the Macalister Irrigation District, water allocation (and permanent water shares) can be traded online through our Southern Rural Water Exchange. 

Unlike permanent water shares, allocation trades do not involve ownership of an ongoing water entitlement. They are a short-term solution to manage water needs efficiently and respond to changing environmental conditions. 

Key Differences 

1. Ownership: A permanent water share is an ongoing water entitlement, while an allocation trade is a one-time transaction for seasonal water use.
2. Duration: Permanent water shares exist indefinitely, whereas allocation trades apply only for the current water season.
3. Flexibility: Allocation trades allow users to respond to seasonal water supply changes, while water shares provide long-term security. 

Water sales in regulated water systems 

From time to time, through modernisation efficiency projects we’re able to offer additional water for sale from our storages or surface water opportunities. This water, once converted, becomes a part of our water sales plan. More information can be found on our water auctions and sales page. 

Unregulated water systems 

A Section 51 take and use water licence authorises the holder to take and use water for a specific purpose, including diversions from unregulated and some regulated river systems and groundwater extraction.  

Unregulated water systems rely on natural flows without major infrastructure to control supply, meaning water availability depends entirely on rainfall and river conditions. 

Unlike permanent water shares in regulated systems, a take and use licence gives you a legal right to access and use a specific amount of water from a particular source. The licence is valid for a period of 15 years and can be renewed after this.

Since these licences are not part of the regulated water share system, they are not broken down into high and low reliability shares like regulated water.  

Instead, the conditions of your licence specify: 

• The maximum annual volume you can extract.
• The rate of extraction allowed.
• Any seasonal restrictions based on water availability. 

However, you can permanently transfer a take and use water licence (subject to approval) to another user within the same system, which functions similarly to a permanent water share trade. 

Allocation trade with a take and use licence 

Since take and use licences do not receive seasonal allocations like regulated water shares (except the Deutgam Water Supply Protection Area), allocation trading is not applicable in the same way it is in regulated systems.  

However, if you don’t need all the water your licence allows, you may be able to temporarily, or permanently transfer some or all your licensed volume to another user. We can only approve a transfer when we are confident it will not negatively impact the environment or other water users. 

Currently water allocation (and permanent water shares) can be traded online through our Southern Rural Water Exchange. 

Key Differences compared to water shares in regulated systems