Demand for lithium for batteries is growing rapidly with the global push to decarbonize energy systems. The Salar de Atacama, Chile holds ~42% of the planet’s reserves in the form of brines hosted in massive evaporite aquifers. The mining of these brines and associated freshwater use has raised concerns over the sustainability of lithium extraction, yet large uncertainties remain regarding fundamental aspects of governing hydrological processes in these environments. This incomplete understanding has led to the perpetuation of misconceptions about what constitutes sustainable or renewable water use and therefore what justifies responsible allocation. We present an integrated hydrological assessment using tritium and stable oxygen & hydrogen isotopes paired with remotely sensed and terrestrial hydroclimate data to define unique sources of water distinguished by their residence time, physical characteristics, and connectivity to modern climate. Our results describe the impacts of major drought on surface and groundwaters and demonstrate that nearly all inflow to the basin is composed of water recharged >65 years ago. Still, modern precipitation is critical to sustaining important wetlands around the salar. Recent large rain events have increased surface water and vegetation extents and terrestrial water storage while mining-related water withdrawals have continued. As we show in this basin, poor conceptualizations of these complex hydrological systems have perpetuated the misallocation of water and the misattribution of impacts. These fundamental issues apply to many similar regions globally. Our new framework for hydrological assessment in these arid basins moves beyond calculating gross inputs-outputs at a steady-state to include all compartmentalized stores that constitute “modern” budgets.