Hi Paul
I am not sure what the law is in Queensland... maybe contact the accommodation association, someone in the head office if you're part of a chain, or the health department?
We personally don't have water in the rooms... we have a fridge at reception where guests can purchase water if they wish, or drink the tap water if not.
Did you ask the relief managers where they got their info? If I employed the relief I wouldn't be happy that this is how they handled the situation - surely you had a hand-over where they could have advised you of the 'law' and maybe sourced documentation to support this.