An audit by the NSW water regulator has found 40,000 megalitres of water was overdrawn during the 2021-22 financial year, the equivalent of Oberon Dam or 16,000 Olympic-sized swimming pools.
The investigation by the Natural Resources Access Regulator used state of the art technology to monitor the activity of thousands of water users in NSW.
The regulator says while water users taking more than they should and paying it back later is not considered water theft, it is still unlawful.
"The historic practice was to reconcile those accounts at a later date," Grant Barnes from the Natural Resources Access Regulator says.
"It is contrary to the conditions of their license, we allege it is against the law, and it's simply not good water management practice," he says.
The audit shows that while a significant amount of water was overdrawn, only six per cent of water users are doing the wrong thing.
And he says taking the water without the right license conditions impacts others downstream.
"It may be that the downstream order is not fully fulfilled, because water has been siphoned off upstream," Mr Barnes says.
"It's all about everybody having a fair go, and ensuring that all get their fair share to their lawful entitlements."
The body's director of regulatory initiatives, Ian Bernard, says the regulator is focused on making sure water licence holders don't extract more than they’re allocated.
"It's a practice that's against the law and something we're going to be targeting over the next 12 months," Mr Bernard says.
"We have access to a huge amount of data, which enables us to be almost anywhere at any time with a click of a button, if you overdraw your accounts chances are we're going to know about it."
The regulator says the onus is on the water user to know whether they are doing the right thing.
In 2022, an irrigator in Carrathool in south western NSW was found to have overdrawn their water account by 2,280 megalitres.
As well as having to pay $80,000 to the local council, the landholder had to pay for the water taken and surrender some of their licenses.
There are around 38,000 water licenses held in NSW, with the vast majority used for agricultural purposes.
