Understand the “Permitted Use” in your Commercial or Retail Lease

Headshot of Ya Zhang - Solicitor at Everingham Solomons Tamworth

If you are a tenant, you need to understand how you can use the leased premises when entering into a commercial or retail lease. For example, you may intend to use the premises as a restaurant or as a bookstore in Tamworth. How you can use the lease premises is negotiated and agreed before you enter into the lease and is provided in the “permitted use” clause of the commercial or retail lease.

The permitted use clause should accurately describe how you intend to use the premises during the lease term, including what you will be doing on the premises now and in the future, and any products or services you will manufacture or sell on the premises. The permitted use clause, even just a few words, is an important commercial term in the lease.

First of all, the permitted use has an impact on the future of the tenant’s business. A broader description of the permitted use is preferred as it will allow a range of activities to be carried out. A narrow description may restrict the tenant’s ability to expand the business. Therefore, tenants need to consider if the permitted use is broad enough to adequately cover their core business and any ancillary activities.

Secondly, tenants should consider the ability to transfer the lease to a third party. A highly restrictive permitted use may affect the tenant’s ability to assign the lease if the landlord is not willing to consent to a change to the permitted use. This is particularly relevant if the tenant intends to sell the business. A broad description of permitted use in the lease would make it easier to find a purchaser of the business.

Lastly, permitted use is closely related to the development approval. Before entering into the lease, tenants should research and enquire about whether the premises are suitable for their intended use and ascertain whether their intended use is permitted on the premises. If the intended use of the premises has not been approved by the council, the tenant will need to lodge an application and obtain the development approval from the council.

If you have any inquiries in respect of your commercial or retail lease, please contact Everingham Solomons because Helping You is Our Business.

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Will your business be impacted by the change to the definition of “consumer” under ACL?

Recent amendments to regulations expand the applicability of the consumer guarantees regime under the Australian Consumer Law (ACL).

Under the current definition in section 3 of the ACL, a person is a “consumer” if the person acquires:

– goods or services that are priced at $40,000 or less;
– goods or services that are of a kind ordinarily acquired for personal, domestic or household use (regardless of the price of the goods or services); or
– a vehicle or trailer acquired for use principally in the transport of goods on public roads.

The consumer guarantees do not apply to goods acquired:

– for the purpose of re-supply;
– for using them or transforming them through processing, production or manufacture; or
– for repairing or treating other goods or fixtures on land.

From 1 July 2021, the definition of “consumer” under the ACL will be the same except that the monetary threshold of $40,000 will increase to $100,000.

Increasing the monetary threshold to $100,000 means many large commercial transactions that were previously not subject to the ACL will be subject to the consumer guarantees regime from 1 July 2021.

If you are a supplier who may be impacted by the change, you should immediately ascertain the price of your goods or services and find out whether your customers fall under the new definition of “consumer”. If your customers are considered “consumers” under the ACL, you should:

– seek advice on what consumer guarantees will be implied into your transactions and ensure that your goods or services comply with these guarantees;
– review your contracts and terms & conditions to ensure they are up to date and capture the requirements of the ACL;
– provide trainings to your employees so that they understand what rights and remedies consumers are entitled to under the ACL and ensure your employees do not accidently    mislead or misinform customers in a manner that contradicts the ACL;

Everingham Solomons have experienced Solicitors who can advise you on the Australian Consumer Law. Please do not hesitate to contact us for any legal advice you may need because Helping You is Our Business.

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Renewable Energy Projects – Part 3

What should be done during the Decommissioning and Rehabilitation Phase?

At the end of a renewable energy project’s operating life, the wind or solar farm will be decommissioned and all turbines, arrays and other infrastructure will be removed from the land. Following removal of all equipment and related infrastructure, the land will undergo a series of steps to ensure return to agricultural use. The obligations to ‘make good’ rests with the project owner.

Generally, the Development Approvals and the lease agreement contain provisions explicitly setting out the requirements for the decommissioning and the expectations around rehabilitating the land.

Further, the planning assessment process normally requires a Decommissioning and Rehabilitation Plan (DRP) to be prepared. A DRP typically sets out the requirements in relation to the removal of infrastructure and rehabilitation of land to an agreed state as negotiated between the landowners and the project owner.

From a landowner’s perspective, it is essential that the lease agreement clearly sets out the responsibilities for decommissioning and rehabilitation and provides for security of the funding to enable decommissioning.

In determining an agreed standard for the land at the end of decommissioning, landowners should consider the following:

• Removal of unwanted infrastructure and decision on which (if any) roads, access tracks, gates and/or fences and other infrastructure should remain on the land after the termination of the lease;

• Rehabilitation of land (e.g. pasture type and condition, erosion control, weed control); and

• Return or replacement of any landowners’ farm infrastructure (e.g. fences, gates, water points).

A landowner may also wish to seek ongoing evidence that the project owner has the capacity to fund the decommissioning activity and that such funds are set aside securely for that purpose. Examples include bank guarantees, a sinking fund, a trust fund or a deposit held by the landowner.

Everingham Solomons have experienced Solicitors who have represented landowners in wind and solar farm projects. Please do not hesitate to contact us for any legal advice you may need in relation to a renewable energy project because Helping You is Our Business.

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Renewable Energy Projects – Part 2 What Payments do Landowners Receive from the Developers?

Under an Option Deed and a Lease Agreement, the most common payments are the option fee and the rent. There are other types of payments such as reimbursement of legal costs and fees for grant of easements, but this article will only focus on the option fee and the rent.

Option Fee

In consideration of the landowner’s grant of an option to lease/purchase the land, the developer will pay an option fee to the landowner annually during the option period (e.g. 4 years). Typically, for the purpose of conducting investigations on the land, it is quite common that during the option period contractors for the developer will access the land with equipment to conduct different types of tests. Accordingly, when negotiating the amount of the option fee, the landowner needs to consider the potential impact on the landowner’s farming activities as well as the area of the option land.

Rent

Under the Lease Agreement, landowners for solar farms are typically paid an annual fixed amount per hectare leased. In contrast, landowners for wind farms are typically paid an annual fixed amount per turbine.
In a wind farm project, there are two common methods for calculating the rent:

1. a flat annual fee per turbine, regardless of size or capacity;
2. an annual fee based on the generating capacity of the turbine.

The second method is recommended because modern-day turbines have much greater capacity compared with turbines available previously and, therefore, can result in less turbines being hosted by the landowners.

Rent actually received may be less than you originally expected

At the initial stage of the development process, it is not uncommon for a developer to propose more turbines or solar arrays than will be finally approved or installed, which can result in landowners hosting less facilities, potentially earning less than original expectations. Accordingly, landowners need to ensure that necessary clauses are included in the Lease Agreement to protect their interests in relation to the rent (e.g. minimum amount of rent payable).

Everingham Solomons have experienced Solicitors who have represented landowners in wind/solar farm projects. Please do not hesitate to contact us for any legal advice you may need in relation to a renewable energy project, because Helping You is Our Business.

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Renewable Energy Projects (Part 1) What Documents are Typically Entered into by Landowners and Developers?

Renewable energy is booming in Australia. Data recently released by the Clean Energy Regulator suggests 6.3 gigawatts of total renewable energy capacity is expected to be delivered in 2020 – roughly equivalent in capacity to four large coal plants.

Wind farms and solar farms are usually located on cleared primary production land. In addition to wind turbines or solar arrays, developers also require certain area of land for access roads, transmission line easements and electrical substations.

Typical Documents

If a landowner is approached by a developer, the landowner will be provided with an Initial Licence Agreement (optional) and an Option Deed during the early stages of development, leading to an eventual Lease Agreement and/or Contract for Sale of Land once the development is approved by the authority and the option is exercised by the developer.

1. Initial Licence Agreement is a simple agreement allowing the developer site access to conduct preliminary investigations and feasibility studies. Depending on the project’s needs, not all developers sign this document with landowners.

2. Option Deed gives the developer an option to lease and/or purchase part or whole of the land from the landowner for construction and operation of the project. During the option period the landowner is paid an option fee.

3. After the project is approved and before construction commences, the option will normally be exercised and the developer will enter into a Lease Agreement with the landowner.

4. Where necessary, the developer may also exercise its option to purchase part of the land for construction of a substation, in which case the developer will enter into a Contract for Sale of Land with the landowner.

The above documents are complex and lengthy. Further, developers will usually negotiate the Option Deed and other documents at the same time before entering into the Option Deed, with the Lease Agreement and Contract for Sale of Land as attachments to the Option Deed.

Everingham Solomons have experienced Solicitors who have represented landowners in wind/solar farm projects. Please do not hesitate to contact us for any legal advice you may need in relation to a renewable energy project, because Helping You is Our Business.

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Is the Redundancy “Genuine”?

Due to the unprecedented disruption caused by COVID-19, many employees’ positions have been made redundant throughout Australia. However, employers should note that if the redundancy is not “genuine”, the employer can be liable for unfair dismissal of employees.

According to section 389 of the Fair Work Act 2009 (the “Act”), to be a genuine redundancy all of the following requirements must be satisfied:

a. The employer no longer requires the employee’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise.

The employer must consider whether the job is no longer required and will not be performed by anyone else. If an employee’s job still exists after his/her dismissal and the job is performed by another employee, it would not be viewed as a genuine redundancy.

The Act does not define the term “operational requirements”. But some common examples include business downturn, business closure, restructure and introduction of new technology.

b. The employer has complied with the obligations under the applicable modern award or enterprise agreement.

For example, it will not be a case of genuine redundancy if an employer does not comply with consultation obligations under industrial instruments. Typically, this requires employers to notify the employees of major workplace change including its effect and engage in meaningful consultations about the change.

c. A redundancy will not be genuine if it would have been reasonable in all the circumstances for the employee to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer.

The employer should consider all available positions to see if there is any suitable position for the employee. In determining whether redeployment is reasonable a number of factors may be relevant, such as the nature of any available position, the qualifications required to perform the job and the employee’s skills and experience.

Where an employee has made an application for an unfair dismissal remedy, the employer must prove that the requirements of section 389 have been met; otherwise, the Fair Work Commission may determine that the dismissal was unfair.

Everingham Solomons have experienced Solicitors who can provide redundancy advice, or any other advice on employment law you may require, because Helping You is Our Business.

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Are your contractor payments subject to payroll tax?

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.

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Special tax considerations needed if any of your beneficiaries are non-Australian residents

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.

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Employ Skilled Migrants in Regional Areas

If your business need skilled workers that are in short supply, a good option for your business is to employ skilled migrants who are already in Australia on a skilled visa such as subclasses 189, 190 or 489/491. Many skilled migrants have high-level qualifications and years of work experience. You may find them valuable to the operation and development of your business.
In regional areas, the most common skilled visa held by migrants is 489 visa (to be replaced by 491 visa as from 16 November 2019). The 489 visa is also called Skilled Regional (Provisional) visa. Typically, under the invited pathway of 489 visa a skilled worker is nominated by an Australian state/territory or sponsored by an eligible relative and is then invited to apply for the visa. Once being granted a 489 visa, a skilled migrant is allowed to live, work and study in a specified regional area of Australia for up to 4 years (extended to 5 years under the new 491 visa). In New South Wales, a specified regional area means anywhere except Sydney, Newcastle, the Central Coast and Wollongong. For the new 491 visa, the specified regional areas in NSW are extended to cover anywhere except Sydney.
489/491 visa holders are eligible to apply for permanent residency if they have satisfied certain conditions relating to residence and work. Accordingly, they have a strong incentive to remain in employment with their employers in regional areas.
If you intend to employ a skilled migrant, you will need to first check if he/she has permission to work and any other work restrictions. You may use the free online service Visa Entitlement Verification Online (VEVO) to check the visa details and conditions of a particular skilled migrant.
When employing a skilled migrant, the employer must comply with Australian employment law. Migrants enjoy the same employment rights and protections as any other Australian employees do.
Employers are reminded that it is unlawful to disadvantage employees and job seekers because of their race, colour, descent, or national or ethnic origin. Therefore, it is important to ensure that your business have a discrimination-free workplace.
If you require assistance with any immigration and/or employment law matters, please contact Everingham Solomons because Helping You is Our Business.

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What if a foreign person wants to buy your agricultural land?

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.

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