COVID-19 is continuing to have an enormous social and business cost in Australia and governments both State and Federal have been doing their best to provide assistance.
Currently many small businesses are relying upon government wage subsidies for ongoing viability. A leading economics research firm has projected that almost 1/4 of a million small businesses are at risk of failure.
The Federal Government recently announced new insolvency laws aimed at assisting small businesses to regain viability. These laws are modelled on legislation that has been in place in the US for many years commonly known as “Chapter 11”. The objective is to provide a process that potentially allows stressed businesses to take action to restructure before it becomes too late to save the business.
The key points of the new laws are –
• They are intended to commence on 1 January 2021 following the lifting of various temporary COVID-19 insolvency relief measures;
• They will be available to “small companies” which is defined as any incorporated business with liabilities of less than $1 million;
• A company wishing to access the provisions will have 20 business days to propose a debt restructuring plan during which the company can continue to trade;
• A new category of insolvency practitioner will be introduced specifically to assist companies with restructuring plans; and most importantly
• Unlike current insolvency procedures, during the initial part of the restructuring process, the company will remain under the control of its directors.
It is hoped that these new processes will be less costly to implement and more tailored to individual circumstances than existing measures.
The full details of the provisions are yet to be announced. The Business Law Team at Everingham Solomons will follow the developments closely because, Helping You is Our Business.
Land tax is levied by NSW Government on 31 December each year on all property you own that is above the land tax threshold.
Generally, you don’t pay land tax on your home, known as your principal place of residence or your farm, known as primary production land. There are further exemptions which cannot be dealt with in this article.
You pay tax based on the combined value of all taxable land you own, not on each individual property. If the combined value of your land does not exceed the threshold, no land tax is payable.
For 2020 tax year, the general threshold is $734,000.
Land tax is now able to be paid online. Property owners can easily register by visiting the land tax online portal and entering the Correspondence ID and Client ID found on their 2019 Notice of Assessment. If these details have not been received before, there is a pre-registration page on Revenue NSW website.
Once the online registration has been confirmed, property owners can opt-in to receive their future Notice of Assessment via email as well as:-
Lodge a return, request an exemption or make any changes to property details
View a summary of the assessment notice and account balance
Use the online calculator to estimate the amount of land tax liability
View or update contact details and foreign person status
Send documents to support an application, or in relation to a query
View an online service history summary
View land holdings and any exemptions
Track requests
If you have any questions on land tax or other legal issues, we have a team of experienced people who will be able to assist because Helping You is Our Business.
Click here for more information on Suzanne Hindmarsh.
Your payments to contractors may be subject to payroll tax if the worker is considered as an employee. The NSW Revenue considers a wide range of factors to determine whether a worker is an employee or contractor for payroll tax purposes. Even if a worker is identified as a contractor rather than an employee, your payments to the contractor may still be taxable for payroll tax purposes if a ‘relevant contract’ exists.
According to the Payroll Tax Act 2007 (“Act”), a ‘relevant contract’ is any kind of arrangement where you:
– supply services;
– are supplied with services; or
– give out goods for re-supply after work has been performed in relation to goods.
If your arrangement with contractors is identified as a ‘relevant contract’, your payments to contractors are deemed to be wages, which are subject to payroll tax.
There are some exemptions to the rule relating to ‘relevant contract’:
• The main purpose of a contract is to supply goods, and the services provided by the contractor are only ancillary to the main purpose.
• The services obtained from the contractor are not ordinarily required by your business and the contractor provides the same type of services to the general public.
• Your business ordinarily requires a specific type of service for less than 180 days in a financial year.
• The contractor provides the same or similar services to your business for less than 90 days in a financial year.
• There are certain services approved by the Commissioner as exempt.
• The contractor engages two or more workers to provide the contracted services to your business.
• The services provided by the contractor are incidental to the transportation and delivery of goods by means of a vehicle provided by the contractor.
If no exemption applies, you may still be able to claim a deduction for the non-labour component of the payments where the contractor provides materials and/or equipment.
Everingham Solomons have experienced Solicitors who can assist you in determining if your contractor payments are subject to payroll tax, or any other taxation advice you may require, because Helping You is Our Business.
The tension between business risk and responsibility dates from ancient times.
Plato said –
“Good people do not need laws to tell them to act responsibly
while bad people will find a way around the laws.”
It’s a bit broad brush to categorise as “bad” people who structure their affairs to avoid personal liability however it’s fair to say that the catalyst for the creation of the Company business structure was to shelter individual controllers from personal responsibility when things didn’t go as planned and sometimes even when they went exactly as planned.
The fundamental concept behind structuring a business through a Company is “limited liability”. That means that the controllers of a company will generally not be responsible for the obligations of the Company. This was traditionally justified on the basis of promoting business activity and innovation which was perceived as being for the overall public good.
Societal changes particularly over the last fifty years have seen the potential liabilities of Company directors increase significantly. Consumer/creditor protection has been a factor in this but protection of public revenue streams from various forms of taxation has also been significant.
For quite some time, company directors have had potential liabilities for income tax debts of their Company. Those same obligations however have not existed in relation to GST liabilities and that has resulted in a very significant loss of public revenue from companies controlled by unscrupulous directors. That is about to change.
Legislation just passed gives ASIC increased powers to combat conduct by directors intended to defeat creditors and also allows the Commissioner of Taxation to make Company directors personally liable for their Company’s GST liabilities in a range of circumstances. The latter provisions take affect from 1 April this year.
At Everingham Solomons we have the expertise and experience to help you with these issues because Helping You is Our Business.
When making a Will you need to be aware of special rules that apply to gifts to non-resident beneficiaries. These rules can even apply to gifts to Australian citizens who have lived overseas for a long period.
The general rule is that the beneficiary is taken to have acquired the assets on the day the testator died, and any capital gain or loss relating to a Capital Gain Tax (CGT) asset owned by the deceased is disregarded. That means-
• no CGT is payable from the estate
• no CGT is potentially payable by the beneficiary until he or she actually sells it; and
• the beneficiary will usually have access to a range of CGT concessions when he or she actually sells.
If however the beneficiary is a non-resident for tax purposes the outcomes can be very different. Potentially CGT can be payable as an estate expense which-
• brings forward the CGT cost; and
• corrupts the intended balance between beneficiaries as because it is payable as an expense of the estate, the cost will be borne by all beneficiaries, not just the non-resident.
Also, when the asset is ultimately sold by the non-resident, he or she may also not have access to the usual CGT concessions.
The potential tax costs to the estate are avoided if the relevant asset comes within the definition of “taxable Australian property” contained in the tax law. Broadly this refers to direct and indirect interests in Australian real property but even then the beneficiary may not get access to the usual CGT concessions when he or she sells.
From an estate planning viewpoint, the key points are –
• recognise the issue at the planning stage. Generally it will be too late to deal with the issue after death;
• where possible, avoid the issue arising by being selective in the type of gifts made to non residents e.g. cash rather than property; but
• If a tax cost is unavoidable, make sure it is borne by the appropriate party.
Many Wills involve complex and unexpected issues. At Everingham Solomons we have experts that can assist you to plan what happens to your estate or review what you have in place because helping you is our business.
When making a Will you need to be aware of special rules that apply to gifts to non-resident beneficiaries. These rules can even apply to gifts to Australian citizens who have lived overseas for a long period.
The general rule is that the beneficiary is taken to have acquired the assets on the day the testator died, and any capital gain or loss relating to a Capital Gain Tax (CGT) asset owned by the deceased is disregarded. That means-
• no CGT is payable from the estate
• no CGT is potentially payable by the beneficiary until he or she actually sells it; and
• the beneficiary will usually have access to a range of CGT concessions when he or she actually sells.
If however the beneficiary is a non-resident for tax purposes the outcomes can be very different. Potentially CGT can be payable as an estate expense which-
• brings forward the CGT cost; and
• corrupts the intended balance between beneficiaries as because it is payable as an expense of the estate, the cost will be borne by all beneficiaries, not just the non-resident.
Also, when the asset is ultimately sold by the non-resident, he or she may also not have access to the usual CGT concessions.
The potential tax costs to the estate are avoided if the relevant asset comes within the definition of “taxable Australian property” contained in the tax law. Broadly this refers to direct and indirect interests in Australian real property but even then the beneficiary may not get access to the usual CGT concessions when he or she sells.
From an estate planning viewpoint, the key points are –
• recognise the issue at the planning stage. Generally it will be too late to deal with the issue after death;
• where possible, avoid the issue arising by being selective in the type of gifts made to non residents e.g. cash rather than property; but
• If a tax cost is unavoidable, make sure it is borne by the appropriate party.
Many Wills involve complex and unexpected issues. At Everingham Solomons we have experts that can assist you to plan what happens to your estate or review what you have in place because Helping You is Our Business.
As many of you would know, there is a 5 business day cooling off period which applies to the sale and purchase of residential real estate.
The intent of the legislation which created the cooling off period was to encourage potential purchasers to exchange quickly to avoid being gazumped whilst retaining the ability to pull out of the sale at minimal cost if anything untoward was discovered.
There are a number of situations in which the cooling off period does not apply. One of those situations is where the property is sold at auction or is sold on the same day after a failed auction.
A recent Supreme Court case demonstrated that it is not always easy to say whether an auction has in fact taken place.
The case involved the sale of valuable Sydney house. On the day of auction, many people attended but there was only one registered bidder. The auctioneer and the vendor’s real estate agent negotiated with that registered bidder without actually proceeding to auction the property. Announcements were made to the crowd thanking them for their patience and indicating that negotiations were taking place with the registered bidder.
The negotiations with the registered bidder were successful and a contract was entered into and a 10% deposit paid on the day of the proposed auction. A few days later however the purchaser pulled out of the deal and relied upon the cooling off period provisions. The vendor said the cooling off period didn’t apply because of the auction.
The Supreme Court held that the cooling off period did apply as the auction never commenced. Merely the advertisement of the proposed sale by auction and the gathering of people to attend did not constitute offering the sale by auction. The auction process required the auctioneer to open the auction and request bids.
At Everingham Solomons we have the experience and expertise to assist you with all your property transactions because Helping You is Our Business.
Before answering this question, we should first understand what agricultural land is. Under the foreign investment framework, agricultural land means land in Australia that is used, or could reasonably be used, for a primary production business. The meaning and scope of a primary production business can be found in the Income Tax Assessment Act 1997. It includes, for example, cultivating or propagating plants, fungi or their products or parts, maintaining animals for the purpose of selling them or their bodily produce, or manufacturing dairy produce from raw material that you produced.
If your land falls into the category of agricultural land, then the foreign buyer must get approval for the proposed acquisition from the Treasurer if the threshold of $15 million is exceeded. You may think that the value of your agricultural land is below $ 15 million, so there is no need to worry about the approval. However the $15 million threshold is defined as the cumulative value of agricultural land holdings owned by the foreign person (and its associates). For example, if foreign company A proposes to buy your agricultural land valuing $5 million, but it (or its subsidiary company) has already acquired an agricultural land valuing $11 million in Australia, then the proposed transaction would be subject to approval by the Treasurer.
There are exemptions to the above general rule, for example:
1. No threshold applies to foreign government investors; ie; any investment by a foreign government needs approval;
2. Higher thresholds apply to non‑foreign government investors from certain countries (e.g. a $1,154 million threshold applies to US, New Zealand and Chilean investors, and a $50 million threshold applies to Thai investors, and these thresholds are not cumulative);
3. The thresholds do not apply to certain acquisitions of agricultural land by owners or operators of wind or solar power stations.
If the proposed sale of your agricultural land requires approval, the application should be lodged by the foreign buyer with the Foreign Investment Review Board (FIRB). You could not complete the transaction until an approval is granted.
Lastly, the foreign person’s acquisition of your agricultural land must be notified to the ATO, regardless of whether it requires approval and regardless of value.
If you should have any questions in respect to the purchase of land by foreign investors, please contact me at Everingham Solomons because, Helping You is Our Business.
Some businesses are lucky enough to operate in industries where payment is made before goods or services are supplied but most don’t have that luxury. For most businesses, getting paid after goods or services have been supplied is a daily issue.
Self-evidently, people don’t pay their debts for 2 reasons –
They don’t have the money to do so; or
They choose not to.
The first category brings the “can’t get blood out of a stone” cliché to mind. Usually after spending quite a bit of money to get there, bankruptcy (if the debtor is a natural person) or liquidation (if the debtor is a company) is the end result. In either case, the prospect of a creditor receiving a significant payment is alarmingly small
In 97% of cases, company liquidation does not result in any return to creditors; and
The average return to creditors from a bankruptcy is $.02 on the dollar.
The second category, is surprisingly common. In almost 40 years of legal practice, I’ve lost count of the number of times that creditors have suffered from dealing with or continuing to deal with customers who had already exhibited a clear reluctance to pay their debts. Remarkably, but not infrequently, that’s been coupled with an explanation from the creditor to the effect that they knew that a particular customer was a “rogue” but thought that he “wouldn’t do it to them”.
Obviously, no business wants to deal with people who can’t pay them or who are likely to choose not to and relatively simple precautions and internal procedures can dramatically reduce the likelihood of dealing with these types of customers.
Those precautions and procedures revolve around making proper financial and other enquiries about potential customers, having good customer/supply documentation, sensible billing practices and having appropriately trained staff.
At Everingham Solomons we have the expertise to assist all businesses in the design and implementation of customer and debtor control procedures because, Helping You is Our Business.
Its my great pleasure to introduce Ya Zhang, who recently joined the team at Everingham Solomons with a most impressive and unique experience.
Ya completed her undergraduate qualifications in law in China. She was then admitted to practice as a lawyer in 2007.
For many years she worked from the Beijing and Shanghai offices of one of world’s largest law firms, primarily in their corporate and commercial law teams.
Ya then moved to the US where she obtained a masters degree in law from the Cornell Law School and shortly thereafter fulfilled the rigorous requirements entitling her to practice at the prestigious New York Bar.
Ya moved to Australia with her family in 2014 and is currently undertaking the Juris Doctor program through the University of Southern Queensland. Prior to coming to Tamworth, Ya worked in a specialist commercial law firm on the Gold Coast.
Ya speaks English and Mandarin and is excited by the opportunities of working in a vibrant regional centre.
Ya is a most welcome addition to the business law team at Everingham Solomons and brings to it an enormous amount of experience in very complex corporate and commercial dealings. Ya has a special interest in foreign investment, migration, corporate governance, restructuring, tax and business mergers.
If you require assistance with any commercial law enquiries, please contact Everingham Solomons because Helping You is Our Business.
A company is its own legal entity. While it doesn’t have a pulse, just like a person, a company can enter into contracts, incur debts, sue and be sued in its own name.
The directors of a company however must be living, breathing people. They are the people that control the company. Although the company is able to do things in its own name, it does so at the will of the directors.
Because a company is a separate entity from the directors that guide it, normally a company’s debts are repaid only from the company’s assets. The company’s creditors do not have access to the directors’ personal assets to repay the company’s debts. Understandably, this causes frustration for the creditors where the company is broke but its directors appear wealthy.
One of the few exceptions to this rule comes from section 588G of the Corporations Act which makes it unlawful for a director to causes a company to incur a debt knowing that the company cannot repay it.
If a director causes or allows the company to trade whilst insolvent , the creditor, the company liquidator, or ASIC can sue the director personally to have the director repay the debt either to the creditor or the company.
The proceedings against the company director are not only compensatory. They can be criminal in nature as well. ASIC has the power to prosecute directors for insolvent trading with the penalties including fines up to $220,000 and imprisonment for 5 years. The director can also be disqualified from acting as a director in the future.
A word of warning however: Insolvent trading cases are relatively rare. They are legally complex and expensive to pursue. Very few company liquidations result in insolvent trading prosecutions.
The practicality of dealing with companies is that creditors should be diligent in investigating the company’s creditworthiness and should often take written guarantees from the directors or shareholders behind the company.
If you have any commercial litigation enquiries, contact Everingham Solomons because Helping You is Our Business.
COVID-19 is continuing to have an enormous social and business cost in Australia and governments both State and Federal have been doing their best to provide assistance.
Land tax is levied by NSW Government on 31 December each year on all property you own that is above the land tax threshold.
Your payments to contractors may be subject to payroll tax if the worker is considered as an employee. The NSW Revenue considers a wide range of factors to determine whether a worker is an employee or contractor for payroll tax purposes. Even if a worker is identified as a contractor rather than an employee, your payments to the contractor may still be taxable for payroll tax purposes if a ‘relevant contract’ exists.
Its my great pleasure to introduce Ya Zhang, who recently joined the team at Everingham Solomons with a most impressive and unique experience.