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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Covid retail leasing update

Headshot of Clint Coles - Director at Everingham Solomons TamworthWith the recent and unfortunate resurgence of retail lockdowns it’s timely to revisit landlord and tenant obligations in the retail leasing landscape.

On 13 July 2021, the Covid Retail and Other Commercial Leases (Covid 19) Regulation 2021 enacted.

In its original form, it did not require that tenants and landlords renegotiate rent as they were required to through 2020, but instead provided simply that landlords could not take ‘prescribed action’ against tenants unless they had first attempted mediation.

That situation was altered, however, on 13 August 2021 as lockdowns continued and became more widespread across the state. From that date, sections 6C & 6D were added to the regulation which, in effect re-instated the obligation of landlords to renegotiate leases under the National Code of Conduct.

The code of conduct remains unchanged from 2020 and essentially provides that the leasing parties should negotiate rental reductions proportionate to the lessee’s downturn in revenue, with half of the reduction to be effected as a waiver and the remaining half as a deferral.

The most obvious difference between the 2020 and 2021 versions of the retail leasing relief is in the qualifying criteria. Under the 2021 regulation, a tenant will only qualify as an ‘impacted lessee’ if they are in receipt of either the Microbusiness Grant, Business Grant or JobSaver payments and have an annual turnover of less than $50m.

The current regulation runs to 13 January 2022, but does not apply to leases entered into after 26 June 2021.

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

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How to get what you deserve – ensure you get paid

Headshot of David Southwood - Solicitor at Everingham Solomons TamworthWhen you do a job, you rightly expect to be paid. Sadly, we often see clients that are chasing money for work they have done.

However, there are many things that can be done when you initially engage a client to reduce the risk that they will not pay you in the future. Similarly, in the event you are not paid, there are early steps that can be taken that will make pursuing the debt easier. Some things to consider when engaging a new client include the following:

  • Client Details: Make sure you correctly identify who your client is and ensure you have accurate details for the client. For example, are you dealing with a person or their company? Doing this will avoid a debate as to who is liable to pay you in the future and make pursuing them easier.
  • Security: If you have standard terms and conditions, you should include a clause whereby the client grants you security over their assets to secure payments due to you. If a client is concerned you can access their assets, this will increase the chance of them paying you to avoid this from happening.
  • Guarantors: Getting multiple people or entities to guarantee a debt will allow you to pursue them in the event that your client fails to pay you. In particular, if you are dealing with a company, it is wise to have another person, such as a director of the company, to personally guarantee payments due to you. This is because a company may not have any assets. Accordingly, if a company fails to pay you, when you pursue the company they may not have any assets to repay the debt to you. In comparison, a person will often have assets in their own name, such as houses, vehicles and other personal property.

At Everingham Solomons Solicitors, we can assist with ensuring your client intake process and contracting terms provide you with maximum protection. And, in the event you are still not paid, we have deep experience in debt recovery, as Helping You is Our Business.

Click here for more information on David Southwood.

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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More Help for Small 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.

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.

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What is land tax?

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.

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.

Click here for more information on Ya Zhang.

New responsibilities for Company Directors

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.

Click here for more information on Ken Sorrenson

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.

Click here for more information on Ya Zhang.

You attended an auction – or did you?

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.

Click here for more information on Ken Sorrenson