In 2007 superannuation laws were relaxed to allow superannuation funds (“Super Funds”) to borrow money to acquire assets.
At about the same time, a Global Financial Crisis happened. This resulted in there being very little use of these new laws by Super Funds for a few years but with the return of business confidence that changed . It is now very common for Super Funds to borrow, particularly to purchase real estate.
The rules for borrowing by Super Funds are complex but became well understood by financiers and advisors such as financial planners, accountants and solicitors who practiced in the superannuation area.
Advisors soon realized that –
The rules did not require that the lender to the superannuation fund be an external bank ; and
In many cases, it was more cost effective and convenient to bypass external lenders and use internal arrangements with members or associates of the Super Fund who had money available to them to lend.
These internal arrangements were often “win-win” in that they often delivered to the lender a better return than would otherwise be obtained from leaving the money in its bank account and from the borrower’s perspective, avoided some of the costs and frequent delays associated with external arrangements.
In September last year the ATO issued two interpretive decisions that signaled the possibility of assessing the income received by Super Funds from the assets acquired under these sorts of arrangements with penalty tax rates if the ATO considered that the internal loan was not on ‘arm’s length terms’.
The most recent ATO announcement was earlier this month with the issue of what is called a practical compliance guideline (“PSG”). In this document, the ATO sets out its view as to what would be accepted by it as an arm’s length arrangement with regard to loan conditions, including:
Interest rate
Term of the loan
The loan to valuation ratio
The security taken for the loan
Repayments
Documentation
The PSG is a surprising document. It would have been expected that the ATO measuring stick would have been the normal requirements of external lenders however in a number of significant respects it is more restrictive than that. One could be forgiven for thinking that the ATO policy was to actively discourage internal funding arrangements rather to provide “practical guidance” in any meaningful respect.
The PSG is not legally binding. It is simply an ATO policy document however it would be prudent to review any existing Super Fund internal loan arrangements and make specific decisions whether to restructure or not.
At Everingham Solomons, we have the legal expertise to work with your financial advisors to review these types of arrangements because Helping You is Our Business.
For a Will to be valid the person making it, the testator, needs to have the requisite capacity…sound mind, memory and understanding.
This means:
they must be able to understand what a Will is (the nature of the document) and what it does (the effect of the document);
they must be able to comprehend the extent of their property (what assets they have and how they are held) and how they wish to dispose of their property (who they want to inherit it);
they must be able to comprehend and appreciate any potential claims that could be made against their estate (eg family provision claim by an adult child excluded from the Will); and
they must not be suffering from any disorder of the mind that would prevent the exercise of their natural faculties thus influencing their Will.
When making a Power of Attorney, the donor needs to be able to understand 4 things:
that their attorney will be able to assume complete authority over their affairs;
that their attorney will, subject to any conditions or limitations imposed, be able to do anything with their property that they themselves could have done;
if creating an Enduring Power of Attorney, that the authority of the attorney will continue if they become mentally incapacitated; and
that if they become mentally incapacitated, the appointment will be irrevocable without approval from the court.
At Everingham Solomons, we have the expertise and experience to assist you with all your Estate Planning needs because Helping You is Our Business.
Increasingly a significant proportion of an individual’s personal wealth can be found in their superannuation. This can be particularly evident when a person dies because the amount invested in their superannuation and receivable by way of death benefit may well exceed the amount of funds in the estate. A recent Queensland case serves as a timely warning for executors and administrators of estates seeking to deal with superannuation.
In 2013 James died without leaving a Will but he was survived by his parents Elizabeth and John. The net assets of James’ estate amounted to $80,000 but the superannuation death benefits exceeded $450,000. There was no binding nomination left by James so the trustees of the superannuation funds were obliged to pay the benefits to the legal personal representative or to James’ dependant or dependants.
Elizabeth made application to the Court to be the administrator of James’ estate. In the application Elizabeth deposed to a high level of conflict between herself and John and said as a result she did not believe that a joint grant to them of Letters of Administration was workable. Elizabeth deposed that she understood that, if she were appointed administrator of her son’s estate, she was required to collect her son’s assets and pay his liabilities as soon as possible and distribute his residuary estate equally between herself and John. Elizabeth further deposed “I propose faithfully to do this”.
Against this background Elizabeth applied for and received $453,748.69 in superannuation benefits personally. John contested this payment which resulted in the matter going before the Court for resolution. In essence Elizabeth argued that she should be entitled to retain the benefit of all of the superannuation paid to her while John argued that Elizabeth should be required to account to the estate for those monies.
The Court determined there was a clear conflict of duty and interest contrary to Elizabeth’s fiduciary duties as administrator of James’ estate. “When the applicant made application to each of the superannuation funds for the moneys to be paid to her personally rather than to the estate, she was preferring her own interests to her duty as legal personal representative…She was in a situation of conflict which she resolved in favour of her own interests… The failure of the applicant to apply for payment to herself as legal personal representative was in breach of her fiduciary duty to act in the best interests of the estate, for which she may be held liable by the court”.
Accordingly Elizabeth was ordered to pay the superannuation monies back to the estate.
At Everingham Solomons we have the expertise and experience to assist you in all aspects of estate administration becauseHelping You is Our Business..
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The starting position in respect of a person’s last Will is that the Will Maker is entitled to dispose of his or her property entirely as he or she thinks fit.
Australia has various state legislations which erode the principle of complete testamentary freedom and permits Courts to redistribute a deceased estate under Family Provision Laws which can be contrary to a person’s Will.
An application must be brought within 12 months of the date of death, unless sufficient cause is shown to satisfy the Court then an application can be brought outside of time.
In NSW an application must be made by someone as defined under the Succession Act. There are six categories of relationship with a deceased that can make a person eligible to bring a claim. These categories are:
A husband or wife of the deceased;
A person in a de facto relationship with the deceased;
A child of the deceased (including natural and adopted children);
A former wife or husband of the deceased;
A person who is dependent of the deceased and who was a grandchild or a member of the deceased household; and
A person with whom the deceased was living in a close personal relationship at the time of death.
It is worth noting that family members such as brothers, sisters and parents are not included in these categories.
If someone makes an application within 12 months and is an eligible person, two questions must be then asked by the Court
“Has the Applicant been left with adequate provision for his or her proper maintenance, education and advancement in life?” and if not
“What provision ought to be made out of the estate of the deceased in favour of the Applicant?”
Certain conduct on behalf of an eligible person can give weight to the deceased’s intention to deliberately leave them out of the Will. This was considered recently by the Court.
“… in respect of children who treat their parents callously, by withholding without proper justification, their support and love from them in their declining years. Even more so where that callousness is compounded by hostility”.
If a person wishes to make a claim they must do so within 12 months of the deceased passing. Claims of this nature are highly stressful as people are still in a period of mourning and are often in dispute with family members such as siblings. It is important for a solicitor to be sensitive to this and avoid legal proceedings if possible.
At Everingham Solomons, we can assist with advising your rights in relation to such claims, because Helping You is Our Business.
Businesses that charge excessive payment surcharges are now on notice from the Federal Government to clean up their act or face hefty penalties.
The Competition and Consumer Amendment (Payment Surcharges) Act 2016 has passed Parliament and now “a corporation must not, in trade or commerce, charge a payment surcharge that is excessive”. A “payment surcharge” is an additional amount charged for processing payment for goods or services or for using one payment method over another. A payment surcharge will be “excessive” if it breaches standards to be set by the Reserve Bank of Australia (RBA), which has indicated that surcharges must not be greater than the actual costs of accepting payment by those methods.
Credit card surcharges in retail shops, cafes and restaurants, for example, will have to be reconsidered. The consumer group Choice has its sights set on booking, transaction and service fees, particularly in the airline, ticketing and taxi industries. A Choice investigation recently indicated that the major airlines credit card booking fees are 348.72%, 633.33%, 1,187.88% and 1,048.65% more than the actual cost to the airlines in processing those payments. Consumers may see those types of fees come down in coming months in anticipation of the publication of the RBA’s standards on excessive payment surcharges.
The Australian Competition & Consumer Commission (ACCC) can issue an infringement notice to a listed corporation (such as the major airlines) with a penalty of $108,000 or $10,800 for an unlisted corporation. An infringement notice can be withdrawn if the corporation satisfies the ACCC that its payment surcharge is not excessive.
Businesses should keep an eye out for information from the providers of their merchant facilities on the average cost of processing payments. The banks will be expected to provide such information. That average cost may then be passed on as a surcharge. Booking fees that apply to one payment method over another should be reconsidered and the fees cannot exceed the cost of processing payment by that method.
At Everingham Solomons we’re happy to advise and assist businesses with all their day-to-day compliance obligations because Helping You is Our Business.
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Legislators are hoping that property buyers in New South Wales will face less frustration with the new agents underquoting laws which came into effect on the 1 January 2016.
Under changes to the legislation, real estate agents must quote price ranges within 10% of the lowest estimated price (i.e. $500,000.00 – $550,000.00).
The new laws mean real estate agents who underquote, potentially face losing their commission and fines up to $22,000.00.
For Buyers it means a more accurate price estimate so that buyers will not be misled into believing that they can afford a property, spending money on building and pest reports and other costs when they are not in that price bracket. This is more of a big city issue.
The biggest change will, however, be with respect to making the sales process for sellers much more transparent. Agents must note the likely selling price in the Sales Agreement given to a seller. The estimated price must be backed up with researched based evidence such as comparable sales, location and market demand. That should mean more accurate price estimates and prevent agents from over estimating to win the listing.
Vendors will need to have a frank discussion with their selling agent so as they really know where their property sits in the market place from a price perspective so that the seller is not misled into expecting the market to pay a huge price when the property is not really worth that amount of money.
To promote the transparency in the industry, New South Wales agents will no longer be able to use terms such as – “offers above” and “offers over” and using symbols like “the plus sign” when quoting a property’s price range.
The legislation is aimed at ensuring that both buyers and sellers receive an accurate sales price estimate that is as realistic as possible.
It is hoped that the underquoting reforms will increase certainty around price expectations and that hopefully is good news for buyers and sellers.
At Everingham Solomons, we have the expertise to help you in all of your property related transactions because Helping You is Our Business.
In February the High Court gave its decision in CGU Insurance v Blakely.
The plaintiffs were liquidators. In winding up a company they suspected the directors had caused the company to trade while insolvent. The liquidators sued the directors for the insolvent trading. The directors were insured for this type of claim by CGU, but when the directors passed the claim onto CGU, CGU denied liability.
The directors would normally start their own proceedings against CGU so they aren’t left out of pocket. However, in this case they didn’t because they were staring down the barrel of bankruptcy themselves and had no interest in the outcome of any proceedings.
The liquidators applied to the court to have CGU joined to the proceedings. This was an unusual move because the liquidators didn’t have any contract with CGU. The contract was between CGU and the directors only and as a general rule, only people that are parties to a contract have the right to sue on it.
The court sided with the liquidators and added CGU as a defendant to the proceedings. If the liquidators won against the directors, the court would then examine the insurance contract to see if, in turn, the insurer was liable to the directors, and ultimately, to the liquidators.
Not surprisingly, CGU appealed, claiming that it was a stranger to the liquidators and that it should not be added to the proceedings.
CGU’s appeals in both the Court of Appeal and then the High Court were dismissed. The Court of Appeal said that in circumstances where an insured becomes insolvent and leaves behind an unpaid claimant to whom an insurer can respond, the situation becomes different from an ordinary private contract.
If you are involved in a dispute, particularly one involving complex commercial issues, contact Everingham Solomons because Helping You is Our Business.
In NSW it is an offence to drive a motor vehicle on any road without being licensed for that purpose.
NEVER LICENSED
If you drive a motor vehicle on a road without having held a licence of any kind in Australia for the previous 5 years, you have committed the offence of driving while never licensed.
For a first offence the maximum penalty is a fine of $2,200. For a second or subsequent offence the maximum penalty is a fine of $3,300 or imprisonment for a period of 18 months or both.
DRIVE WHILE SUSPENDED OR DISQUALIFIED
Your licence can be suspended by the Roads and Maritime Service (RMS) for example for speeding or accumulation of demerit points whereas licence disqualification is a penalty imposed by the court for a traffic related offence. To drive while disqualified is to contravene a court order and is the more serious of the two offences.
For a first offence the maximum penalty is a fine of $3,300 or imprisonment for 18 months or both and a minimum disqualification period of 12 months. For a second or subsequent offence the maximum penalty is a fine of $5,500 or imprisonment of 2 years or both and a minimum disqualification period of 2 years.
If you have been charged with driving without a licence the Solicitors at Everingham Solomons can assist you in preparing and presenting your case to obtain the best possible result because Helping You is Our Business.
When spouses separate it is important that assets, liabilities and all financial matters are dealt with in order for parties to move forward.
Property settlements occur between married couples and de-facto partners and are governed by the Family Law Act.
When the assets, liabilities and financial resources of parties are determined, the Court examines the contributions made by the parties to the acquisition, conservation and improvement of the assets. It also takes into consideration factors such as the health and age of the parties and their earning capacity.
When assessing contributions there is no presumption of an equal 50:50 entitlement between the parties, as each case will be decided differently based on its own facts and circumstances.
Problems can arise however when parties separate but they remain financially enmeshed or where financial matters between separated parties are not finalised until sometime after separation.
The case of Z & Z concerned a 19 year marriage and two adult children. The parties separated in 1994 but property proceedings were not commenced by the wife until 2002. The property pool in 2002 was valued at over $3 million, which had increased significantly since 1994 as a result of the husband’s business, his investment in a company and superannuation interests separate to that of the wife.
At first instance the court split the matrimonial pool of assets 70:30 in the husband’s favour.
The husband appealed, and sought to reduce by 5% an adjustment made to the wife during the first trial. The husband asserted that the wife had made no contribution to his earnings and to the development of his business post separation.
The court determined that in relation to the post separation contributions:
“The husband’s skills in his initial interest in the company acquired during the marriage provided the foundation from which the husband was able to acquire his post separation assets and make substantial contributions to his superannuation fund”.
The court dismissed the husband’s appeal and the matrimonial assets were divided in accordance with the original judgement.
Factors such as the length of the relationship, one party’s care of young children, the disparity in income and the nature of the parties’ financial relationship post separation, will be taken into consideration by the court when making an adjustment for financial contributions post separation.
At Everingham Solomons we have the expertise and experience to assist you with property settlements because Helping You is Our Business.
Before Charles Dickens was a successful writer he worked in a legal office as a clerk so it’s not surprising that Lawyers have prominent roles in many of his books.
One of his most famous books is “Bleak House”. A major plot point in the book is a legal case that went for so long that all the money in dispute was spent in legal fees. Dickens usually did not portray lawyers in a favourable light. In this book he described the lawyer character as “always looking at the client, as if making a lingering meal of him with his eyes”.
Dickens’ fictional court case was inspired by a real case that had been going on for about 55 years at the time the book was first published.
The real case arose out of the death of William Jennens in 1798. Mr Jennens had various nicknames but “William the Rich” fitted him very well. When he died at the age of 97 he was regarded as “the richest common in England” leaving an estate of about $750 million in present terms.
Despite his enormous wealth and business acumen, he died without leaving a Will. He was also a bachelor and apparently did not have any children so relatives from near and far made claims upon his estate.
The various court cases associated with his estate went on for 117 years and ultimately only concluded when all the money had been spent on legal fees.
The moral of the tale is that failure to take a prudent legal step – in that case to make a Will – can have enormous ramifications future for you and your family.
Everyone needs a properly drawn Will. Every business owner, and in our area this applies particularly to farmers, needs a properly prepared business succession plan. Failure to plan ahead almost always leads to very significant financial and personal costs in the longer term.
At Everingham Solomons we have the expertise to help you with all your personal and business planning needs because Helping You is Our Business.
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In 2007 superannuation laws were relaxed to allow superannuation funds (“Super Funds”) to borrow money to acquire assets.
When spouses separate it is important that assets, liabilities and all financial matters are dealt with in order for parties to move forward.