Stamp Duty Changes for Self Managed Superannuation Funds

TROne of the biggest impediments to transferring property from one party to another is the exorbitant stamp duty costs payable to the State Government on transfer.

Under the current law, it is possible for a member of a self-managed superannuation fund to transfer an asset from his/her personal name into the superannuation fund and only incur nominal stamp duty. That is a significant concession and should be considered.

Once a superannuation fund is placed in pension mode, payments distributed to members are currently treated as tax free and accordingly there can be significant advantages in transferring assets into a self-managed super fund.

The property must be held by the trustee of the super fund solely for the benefit of the persons who transferred the property and for the sole purpose of providing a retirement benefit to the transferring member.

The State Revenue Further Amendment Bill (2014) is currently before the New South Wales Parliament and if passed, will increase the rate of duty from $50.00 to $500.00, which whilst more expensive is much cheaper than stamp duty calculated at normal rates and accordingly still makes such transactions attractive.

As many of our readers would know, self managed super funds can now borrow loan funds provided the purchase by the superannuation fund is effected by a custodian or bare trust company which holds the property for and on behalf of the superannuation fund.

There are exemptions in the Duties Act which enable stamp duty on the bare trust or custodian deed to be paid at a nominal fee of $50.00.

The above mentioned Bill proposes to increase the rate of duty from $50.00 to $500.00 on the bare trust document.

If however a trustees of self-managed super funds wish to avail themselves of the concessional duties, it is important that the documentation associated with such transaction are very carefully drafted to ensure that they meet the requirements of the Duties Act so as only concessional duty is paid. A failure to do so, could result in double stamp duty being payable at full stamp duty rates.

At Everingham Solomons we have the expertise and experience to assist you because Helping You is Our Business.

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What constitutes a workplace?

TRA recent decision in the Federal Court has broadened the definition of “workplace” under the Sexual Discrimination Act 1984 (Cth).

The case of Ewin v. Vergara involved co-workers in a Melbourne accounting firm. Ms Ewin and Mr Vergara initially struck up a friendship, working on joint matters and going jogging together at lunchtime.

The relationship deteriorated however when Mr Vergara attempted to take the friendship to the next level. Ms Ewin was married and rejected Mr Vergara’s attempts to establish a relationship.

The Sexual Discrimination Act prohibits sexual harassment in a workplace, which is defined as “a place at which a workplace participant works or otherwise carries out functions in connection with being a workplace participant”.

Ms Ewin’s allegations of sexual harassment by Mr Vergara included conduct occurring in a pub after work; working back at the office after-hours; outside a hotel; in a taxi travelling to a work meeting; and at a work function where Ms Ewin became intoxicated and “blacked out”.

The conduct complained of included turning the lights off at the office and inappropriate touching; use of sexually explicit language; forced kissing; and sexual intercourse without consent in the corridor & lift of the office.

The Court held that Mr Vegara’s conduct in the office, in the taxi and at the work function amounted to a breach of the Sexual Discrimination Act. The sexual harassment in the office and taxi were related to Ms Ewin performing her work responsibilities, and so fell within the definition of “workplace”. The non-consensual intercourse was also found to have occurred in the workplace as the Court implied that the entrance, lift, corridor and other common areas of an office formed part of a “workplace”.

Mr Vergara was ordered to pay Ms Ewin over $470,000 in damages.

This case demonstrates that any place (including a vehicle) which is attended by an employee for the purpose of performing work duties will be classified as a “workplace”.

It is therefore important for employers to implement an anti-discrimination policy and have procedures in place for dealing with allegations of sexual harassment. To avoid becoming the subject of a case under the Sexual Discrimination Act, contact the HR team at Everingham Solomons where Helping You is Our Business.

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Are Post Employment Restraints Enforceable?

TRIt is not uncommon for an employer to place a restraint upon a departing employee which typically prevents the departing employee from being involved in a similar enterprise, contacting the past employer’s customers, utilising the employer’s confidential information and not poaching the employer’s employees.

In brief the law is that an employer must have a “legitimate interest” to protect and the reach of the post employment restraint must go no further than is reasonably necessary to protect that interest.

The Courts start from the premise that restraints are void, due to public policy. That is because a person should have the right to practice in his/her chosen occupation trade or profession.

That is not to say that a restraint is not worth the paper it is written on.  A carefully worded restraint which covers legitimate interests and is reasonable to protect that interest, is enforceable.

The employer has the onus of proving that the restraint is reasonable and the validity of the restraint is decided by reference to the circumstances that existed when the restraint was made.

What are “legitimate interests”.  It is clear that a desire to simply restrict competition will be primarily void and contrary to public policy.

The recognised “legitimate interests” for employers include:

  • Protecting customer connections;
  • Protecting confidential information which is not in the public domain; and
  • Restraining interference with the employers existing staff.

Once the appropriate interests are identified, then the area and duration of the restraint must be considered.  A restraint which seeks to impose an unreasonably wide geographic area and long restraint will in all likelihood  result in the whole clause being declared unenforceable.

Drafting, interpreting and enforcing restraints of trade is a complex area.

At Everingham Solomons we have the expertise and skills to assist you because Helping You is Our Business.

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Builders and Contractors need to protect their interests

TRMost media, focuses on the interests of the home owners being exploited by builders.

Builders however, have legitimate interests and as the contract proceeds, the builder will become vulnerable by investing a significant part of his working capital in the building project. In doing so, the builder is trusting the owners will pay him the agreed price for the contracted work.

Unfortunately, there are owners who will try to avoid paying the full price of their building contracts. The builder should protect his right to payment by:

  • fully documenting the building contract including all plans, specifications inclusions and PC items. The contract should
    contain all essential conditions and be signed by all parties.
  • fully documenting all variations and their likely costs in writing and having that document signed by the parties before any work is performed on the variation. This will clarify any confusion before the work is commenced;
  • making claims in writing for all properly available extensions of the contract term, immediately they occur. The general practice of seeking to catch up the time at the end of the project should not be adopted;
  • keeping a project day diary of events, worked carried out and conversations; and
  • immediately suspending the contract works, the moment the owners stop paying or start underpaying progress claims.

By doing these simple things will potentially save a builder or contractor much grief as it severely limits the owner’s opportunities for mischief at a later time.

At Everingham Solomons we have the expertise to guide you with all of your legal matters because Helping You is Our Business.

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National Buildplan (in Administration) … Who is Responsible?

TRNational Buildplan was a construction company involved in arranging construction of many large building contracts throughout Australia. A large number of those projects are Government funded infrastructure jobs, many of which are in the north west of New South Wales.

National Buildplan went into administration on 8 April 2013 and more than likely will end up in liquidation.

The collapse has left local contractors out of pocket for many millions of dollars.

We are yet to see the full effects of the insolvency which will involve contractors retrenching staff, contractors unable to pay their own debts resulting in further retrenchments and the closure of contractors’ businesses, some of which have already closed.

After the collapse of a number of high profile construction companies, the New South Wales Government commissioned the Collins Report last year.

The key recommendation was the establishment of a Statutory Construction Trust for projects greater than $1 million. The idea was that the Statutory Trust would receive the progress payments from the principal and the trustee would pay the sub-contractors direct.

Sadly the recommendations of the report have not been implemented however it is hoped that the anguish that our local contractors and employees are now suffering will motivate the Government into taking swift action to reform the building and construction industry.

I also ask, how long has the Government, which includes the Government departments who are administering contracts such as Health Infrastructure and Public Works, known that National Buildplan was in financial trouble?

There is evidence to suggest that various Government departments were well aware of the potential insolvency a number of weeks ago having met the company to discuss these issues.

Further anecdotal evidence suggests that National Buildplan were rejected as a potential tenderer for a large Government infrastructure job more than two months ago based on its perceived risky financial position.

What did the Government think when sub-contractors walked off the Nepean Hospital job on two separate occasions based on non payment.

Surely the Government should have taken notice and immediately reviewed the financial position of the head contractor and taken action to protect the sub-contractor’s payments. After all, it was the Government who commissioned the Collins Report .They were fully aware of the risk that a subcontractors takes in such contracts.

Is the Government not required, prior to the tender and during the construction process to monitor the financial health of its head contractors? Was this done?

It is time for the sub-contractors, their workers and families to take a stand on this issue and seek a Government rescue package for the sub-contractors who are left stranded and to change the laws to prevent this situation happening again.

At Everingham Solomons we have the legal expertise to help with all your legal problems because Helping You is Our Business.

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Organ Donations – Should it be in your Will?

TRIt is not uncommon for a client to want to record their wish to become an organ donor in their Will. Is this the best way to notify family and doctors that you wish to donate your organs?

Unfortunately, by the time family members have turned their minds to firstly finding and then reading the deceased’s Will, their organs are unlikely to be of any use.

There are only very limited circumstances in which human organs can be ‘harvested’, and an extremely limited time window of opportunity to do so.

Only people who have suffered brain death, that is, their brain has died whilst the rest of their body has continued to function usually on a ventilator, are capable of donating organs.

If you wish to give the “gift of life” upon your death, the first step is to register your wishes by signing up to the Australian Government’s new Organ Donor Registry. Visit www.donorregister.gov.au. The registration process is easy.

You should also discuss your wishes with your loved ones, because doctors will rarely use a person’s organs if the grieving family members do not agree to it. According to statistics, less than 60% of grieving families give consent for organ donation to proceed. 43% of people say that they weren’t sure what the deceased person wanted.

According to the website there are about 1600 people on organ donor waiting lists in Australia, and they will spend on average between 6 months and 4 years waiting for the right organ donors to come along.

Previously the process for recording your intention to be an organ donor was different in every state. The new register is Australia wide and provides a one stop shop where people can easily and quickly confirm their intentions.

Doctors in emergency rooms across Australia have 24 hour access to the register so that they can begin the search for potential organ recipients from the earliest possible moment.

If you have previously registered on another register, it is important that you register on the National Organ Register so that your information can be linked to your Medicare number.

So the answer to the above question, is that organ donation is best recorded on the National Donor Register, rather than in your Will.

If you need any assistance in a legal matter, contact Everingham Solomons because Helping You is Our Business.

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Are all intergenerational rural land transfers stamp duty free?

TRIt depends. It is always important to review the requirements of the Duties Act in each case before assuming that a rural land transfer will be stamp duty free.

Mum and dad have owned a rural property since the 1970s. The farming business is carried on by a proprietary limited company. The shareholders and directors are mum and dad.

As the son and daughter-in-law now run and guide the farming business, mum and dad have decided to transfer part of the farming land to them valued at about $1.5 million. Mum and dad also propose to make the son and daughter-in-law directors of the farming operations company.

As the land was acquired prior to the introduction of Capital Gains Tax, there is no pre-CGT taxation on the transfer of the land.

Will the land however attract stamp duty of about $68,000.00 or will it be stamp duty free under the intergenerational transfer provisions contained in the Duties Act?

In order to obtain the benefit of the exemption, the primary production business must be carried on by the son and daughter-in-law and be continued to be carried on by them or a member of their family.

While the word “member” in relation to the family of the transferee (the son and daughter-in-law) is defined broadly and goes both up and down the family tree, it does not include family owned or controlled entities such as companies and trusts.

Since neither the son nor daughter-in-law will be carrying on the business and as the trading company is not a member of their family, the exemption will not be available. $68,000.00 stamp duty would be incurred if the transaction proceeds.

It is always important to review closely the requirements of the Act in each particular circumstance before proceeding with a family farm transaction.

At Everingham Solomons we have the experience to assist you with all your property needs because Helping You is Our Business.

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Farm Succession – Is it Straightforward?

TRMr Farmer died in 1988 leaving the farm to his wife during her life time and then to his son after her death.  The son has worked on the family farm since childhood and is now in his late forties.

As the son does not own the family farm, he has had difficulties negotiating funding with his bank because of his mother’s life interest.

His mother agrees to surrender her life interest in the family farm during her lifetime,  to enable the legal estate in the family farm to be passed to her son.

Stamp duty on the transfer of mum’s interest to the son is exempt under the inter-generational stamp duty exemption for primary production land.

The family farm is transferred to the son and the family is happy.

Are there any tax consequences of the release of the life estate?

Unfortunately, yes.

The mother’s surrender of her life interest constitutes a capital gains tax event and a market value is attributed to the mother’s surrender of her life interest. That gain must then be included in the mother’s taxable income for that tax year.

As the son has paid nothing for the land, the mother will need to find the money to pay the capital gains tax on the deemed gain on the disposal of her life interest.

The family particularly mum, are no longer happy.

Unfortunately, in this situation, it may have been better for the son to wait until the mother’s death so that the ATO would disregard any capital gain on the death of a life tenant.

Transfer of farming assets between family members is complex and professional advice should be sought.

At Everingham Solomons we have the expertise to assist you because Helping You is Our Business

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Changes to Business Name Registrations

TRAt present, business name registrations have been handled on a state by state basis by differing departments in each state. For example Fair Trading in NSW and Consumer Affairs in Victoria.

As and from 28 May 2012 the registration and renewal of business names will be managed by the Australian Securities and Investment Commission (ASIC) on a national level. Accordingly ASIC will oversee a national business names database and will handle all Australian business name applications and renewals.

This means that if you have the same name registered in multiple states, you will no longer need to renew them in multiple locations. All names will be registered from the various state locations on the new database. If you are in this situation it will be up to you to decide whether you ought cancel any duplicated names as they will all appear on the new national data base.

The change is about making it easier for businesses to operate in different states of Australia and making it easier for people to know who it is they are dealing with in a business, by cutting the red tape.

The change will not affect existing registered business names, as they will be automatically transferred to the new ASIC register and retain their existing expiry dates.

After 28 May, renewal notices will be sent from ASIC. Payment and renewal applications can be attended to online.

You should note however that the registration of a business name does not provide protection to you from someone else being permitted to register a similar business name. If this is what you require then consideration to registering a trademark ought to be considered.

If there are similar or identical names already registered in different states, then ASIC will register the names notwithstanding that they are similar or identical and will then identify them by indicating that the name was previously recorded in a particular state so that the public can differentiate the name when searching.

If you require any assistance with respect to business names, trademarks or any other business related matter we at Everingham Solomons have the expertise to help you because Helping You is Our Business.

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Do Designers and Architects Need to Comply with the Work Health Safety Laws?

TRAll those involved in the design of structures such as architects, engineers and building designers are now required to practice “safe design” under the new work health and safety laws.

The concept of “safe design” requires a designer to ensure, so far as is reasonably practicable that the plan, substance or structure is designed to be without risks to the health and safety of persons.

Designers will have a duty to provide a safety report and risk assessment to their clients for all design projects including residential housing.

A study in 2007 estimated that up to two thirds of the deaths in the construction industry was linked to poor design and planning.

The purpose of the new laws is to minimise the number of deaths and injuries associated with construction.

In this regard the designer must consider the building or structure during the construction phase, maintenance and end of life demolition.

Examples of safe design include:

  • Specifying non toxic paints
  • Placing permanent anchor points on the roof for maintenance
  • Ensuring the risk from overhead power lines is shown on plans

It is likely that designer’s costs will increase however if the aim of eliminating deaths and injuries is achieved, the cost will be justified.

At Everingham Solomons we can service all of your legal needs because Helping You is Our Business.

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