After being dobbed in by an anonymous informant, regional restaurateur Annie Smithers has discovered she is breaking the law every time she waters her vegetables.

Smithers has been using water drawn from an abundant spring-fed lake on her property at Lyonville, 100km north-west of Melbourne. The water is piped to the garden where she grows fruit, vegetables and flowers for her Good Food Guide hatted restaurant, Du Fermier, in nearby Trentham.

The problem is not the amount of water she uses on the 877-square-metre plot. Nor that she uses the water to grow vegetables: liberal watering of a domestic garden is permitted. Smithers is a lawbreaker because she is using the water to grow vegetables that are used commercially; that is, cooked into dishes served at her 24-seat French farmhouse-style bistro.

She was baffled to learn that if she used the same water to grow beef cattle for sale, there would be no legal issue. “It’s OK to fatten calves but it’s not OK to grow carrots,” says Smithers.

“If I fed the carrots to my goats, it would be fine. If I grew carrots to show off on a garden tour, that’s OK. But as soon as I put the carrots in a braise at my restaurant, I’m breaking the law.”

The basis for Victoria’s water laws was established in the mid-1800s, when graziers dominated the early parliaments. Free watering of livestock has been retained through multiple iterations of the Water Act. “That history has certainly had an impact on the politics,” says Emma Germano, president of the Victorian Farmers Federation.

“Graziers and croppers have traditionally been far more connected politically than those in horticulture, who have often been new migrants. Do you see Italians as members of the National Party? Not so much. Do they grow the vegetables? Absolutely,” Germano says.

She is a vegetable grower with an Italian background. “Water security is one of the biggest issues we’ve got and is necessarily complex, but the red tape shouldn’t stifle small business.”

The global average water footprint for producing a kilogram of beef is 15,415 litres, although this can vary greatly according to farming style. The equivalent water footprint for a kilogram of potatoes is 290 litres while cucumbers and pumpkins use about 350 litres, according to Water Footprint Network, an international non-profit agency.

The lake at Smithers’ property is fed by springs and reliably holds 32 megalitres. The garden requires less than one megalitre a year.

“Water rights are crucial to manage and share water in Australia,” says water broker Richard Carter, who is now consulting to Smithers and her wife Susan Thompson. “For country people, it’s the first thing they think about. But it can be one of those blind spots when people move from the city to the country.”

Smithers cannot simply buy a licence. Her lake does not meet structural requirements for certification, partly because of its steep bank.

Buying a water allocation in her region depends on someone wishing to sell it and there has been a ban on new entitlements since 1996. Approval from First Nations landowners may also be required. “It’s a small market and often expensive,” says Carter. Penalties for water theft are severe – up to $990,000 for companies and $198,000 for individuals.

The Australian Food Sovereignty Alliance works to remove barriers for small farmers. “Our water laws are out of date and not fit for purpose,” says president Tammi Jonas. “It might cost a small farmer $30,000 or more to get access to water. Costs and red tape lead aspiring young farmers to abandon their dreams. The difficulty and expense should be appropriate to scale.”

Annie Smithers isn’t growing vegetables to save money. “It costs me between $30 and $50 a kilo to grow anything,” she says.

“I’m doing it because it’s synonymous with who I am as a cook and a person. We’re telling a story about provenance and food security, using a small piece of land to create an experience in a tiny restaurant.”

She may need to resort to water trucked in by tanker. “It seems there is a disconnect between the world we want to live in and the world the laws allow us. I believe a small horticultural operation should be permitted.”