FRASER Coast Council will abandon its plan to turn Wide Bay Water into a commercialised business unit for now, after Queensland Treasury denied it a stamp duty exemption.

Mayor Gerard O'Connell said the council would not pay the estimated $65 million stamp duty bill and would put the CBU process on hold.

The council has pursued exemption from the bill since February.

Cr O'Connell said he would continue lobbying to have the law changed to allow councillors to sit on the board of WBW.

The council has already approached Local Government Minister David Crisafulli to argue for the legislative change.

"He has certainly been very amenable to it," Cr O'Connell said.

The Chronicle understands the council will also continue to make shared service agreements with Wide Bay Water, which would include transferring responsibility for departments such as IT.

The council will be able to transfer Wide Bay Water back under its control as a commercial business unit in two-and-a-half years without incurring any stamp duty.

The Treasury gave its official answer to the council's exemption application in a letter on Monday.

In the letter, Under Treasurer Helen Gluer said granting ex-gratia relief to the council would undermine existing restrictions on corporate reconstruction provisions.