On 1 July 2016, certain Stamp Duties are to be abolished in New South Wales.
Firstly, mortgages executed on or after 1 July 2016 will not be liable to payment of Stamp Duty.
Further, any advances made on a pre-existing agreement after 1 July 2016 will not be subject to the imposition of Stamp Duty.
Secondly, Stamp Duty on a large number of business assets will also be abolished. Whilst this abolition has been promised for many years, it looks like this is the year where it will be removed.
The types of business assets which will cease to be subject to Stamp Duty include the goodwill of a business, a business’s intellectual property, statutory licences or permissions (for example, a taxi licence) and duty on gaming machine entitlements.
Stock in trade is already exempt from Stamp Duty.
There are some anti-avoidance measures. If an agreement was entered into prior to the 1 July which is subsequently replaced with an agreement after 1 July, then the transaction is still subject to payment of Stamp Duty.
Further, if a transaction has been entered into after 1 July 2016 as a result of an Option Agreement entered into prior to that date, then the Stamp Duty is still payable.
But wait there is more. As and from 1 July 2016 the government will also cease charging Stamp Duty on the Transfer of Shares in a New South Wales Company and on units in a Unit Trust Scheme registered in New South Wales.
Stamp Duty is best known as a tax which is paid by them when they purchase land and improvements.
Unfortunately, there appears to be no plans to abolish or reduce the rate of Stamp Duty payable on land transactions in New South Wales.
If you are planning to do a transaction involving a mortgage or purchase of a business or the transfer of shares or units in a trust, it may be advantageous to wait until after 1 July 2016.
If you have questions regarding Stamp Duty, we can at Everingham Solomons, provide the answers, because Helping You is Our Business.
News reports occasionally contain stories about individuals with influence in tendering processes who receive “kickbacks” for giving favourable treatment to certain tenderers. This can sometimes take the form of a tendering party receiving an invoice for “consulting services” of some type from a company associated in some way with the individual with influence in the tendering process. The invoice is paid and accounted for in the tenderer’s books, which then receives favourable treatment in the tender. The funds are then moved from the invoicing company in some way into the pocket of the individual with influence. On the surface, the payment can look legitimate but a bribe has been concealed.
In Australia, it often takes investigatory work of an anti-corruption watchdog to expose such activity. Political pressure then increases for prosecuting bodies to eradicate such practices and punish the offenders.
The Federal Parliament has recently made that task easier by enacting the Crimes Legislation Amendment (Proceeds of Crime and Other Measures) Act 2016. While mainly directed at the bribery of foreign public officials, the Act also has broad application domestically. The Federal Criminal Code has been amended to prohibit a company or an individual making, altering, destroying or concealing an accounting document:
with the intention to facilitate, conceal or disguise the giving or receipt of a payment not legitimately due to a person; or
reckless to the fact that doing so will have that effect.
Intentional individual offenders face 10 years imprisonment and/or a fine of $1.8 million. Recklessness can lead to five years imprisonment and/or a $900,000 fine. Intentional corporate offenders face fines the greater of $18 million, three times the value of the benefit gained or 10 percent of the corporation’s annual turnover if the value of the benefit cannot be determined. The fines are half for reckless corporate offenders.
Companies (and their directors) that do not review systems and cultures in their organisations that could allow such behaviour to occur may find themselves investigated and prosecuted on the basis of recklessness alongside the actual perpetrators of the bribery.
At Everingham Solomons, we advise and assist businesses to comply with their ever-increasing legal obligations because Helping You is Our Business.
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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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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.
The Building and Construction Industry Security of Payment Act 1999 (NSW) (“Act”) can be a powerful tool for subcontractors to use when seeking payment for work performed and materials supplied from non-paying or late paying builders.
When work has been performed or materials supplied entitling a subcontractor to make a claim for a progress payment under a subcontract, the subcontractor can serve a “payment claim” (a complying invoice) on the builder. Under the Act, the builder then has 10 business days to issue a “payment schedule” to the subcontractor setting out the amount of the payment claim it intends to pay. The builder has to set out also the items it does not propose to pay and its reasons for non-payment. The items in dispute can then be referred for adjudication.
If the builder fails to issue a payment schedule in time it becomes liable to the subcontractor for the full amount of the payment claim. That is the case even if the builder has contacted the subcontractor by telephone or email to raise issues about the work or materials within that period. If the subcontractor is not then paid the amount of the payment claim, he or she can sue the builder for the amount as a debt due to the subcontractor.
Significantly, the Act prevents the builder from cross claiming against the subcontractor in those proceedings or putting up a defence about matters arising under the subcontract. The builder’s hands are tied. It will likely have to pay up the subcontractor in full plus any interest and legal costs, and then sue the subcontractor separately for any counter claim. That is expensive and time consuming and a distraction from the builder’s business.
Of course, a subcontractor has to think very carefully before taking such steps because of the risk of causing long term damage to the relationship with the builder.
For subcontractors, clearly itemised invoices that inform builders that there are payment claims under the Act are important. For builders, efficient contract management processes are vital.
At Everingham Solomons, we have the knowledge and experience to advise builders and subcontractors on these and other aspects of the Act because Helping You is Our Business.
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Once there were 3 brothers who ran a very successful business via a company in which they all held shares and they all worked on a full-time (and a bit more) basis.
Like most brothers there were niggles between them from time to time but they got on and they certainly didn’t consider they needed to document their understandings of what should happen if one of them wanted to leave the business or if one of them died.
One of the brothers died unexpectedly leaving behind his wife and young family who depended upon the income from the company. His shares in the company passed to his wife under his will.
From the wife’s viewpoint she had no continuing right to income from the business nor any clear right to sell the shares.
From the viewpoint of the surviving brothers and the company, they lost the value of their brother’s personal input on a day-to-day basis, felt pressured by the needs of the family of the deceased but did not have any right to buy the deceased’s shares in the company.
In summary, a very unsatisfactory situation from both perspectives that could easily have been avoided with an appropriate Shareholders Agreement.
A simple Shareholders Agreement could have made provision for what should happen in the event of one of the shareholders dying and how the interest of that deceased person would be valued. That agreement should have been negotiated at a time when the issues from all parties perspectives would have been exactly the same whereas negotiations ultimately took place when interests were in conflict and when emotions were quite raw.
The end result was quite a hostile negotiation which left both the surviving brothers and the wife of the deceased dissatisfied with the result from a business perspective and ruined the once close relationships between the families.
At Everingham Solomons we help businesses and families to avoid these types of problems on a daily basis because Helping You is Our Business.
It is not uncommon for parties to a contract such as the sale and purchase of a business or a landlord and tenant of commercial premises to enter into Heads of Agreement prior to any contract being entered into.
If the Heads of Agreement are signed both parties, are the parties bound?
This has resulted in many disputes being submitted to the Courts for determination.
Normally Heads of Agreement are entered into as a gesture of good faith and a promise to proceed with the transaction. Usually Heads of Agreement are not meant to bind the parties to the terms of the agreement.
If you are entering into a Heads of Agreement you need to be explicit as to whether or not that document is intended to bind the parties. Normally Heads of Agreement will specifically state that the parties are not bound and will only be bound when contracts prepared by the respective parties’ solicitors have been approved and the parties sign them.
Heads of Agreement are usually symbolic of the mutual intention to proceed as usually the parties have not considered or documented the finer details of the agreement and are indicating their intention to proceed subject to accountancy and legal advice, whilst allowing them the opportunity to make necessary enquiries, conduct due diligence and allowing the solicitors from each party to negotiate and draft the precise terms and conditions of the substantive contract.
When parties enter Heads of Agreement it is usually a sign of commitment to enter into further legally prepared documentation at a later time. Whilst most of the time these agreements are not binding on the parties, they can be in certain circumstances.
If you are unsure as to the binding nature of Heads of Agreement you should obtain legal advice. At Everingham Solomons we have the expertise to assist you with all of your business and legal matters because Helping You is Our Business.
The Personal Property Security Register (PPSR) is an increasingly prominent tool for businesses, particularly for those that supply goods on credit or that lease/hire out goods to other businesses. But many businesses still do not understand the PPSR or how to apply it effectively.
The PPSR is an on-line noticeboard on which a person, who obtains an interest in another’s personal property as part of a transaction that secures payment or the performance of an obligation, can register their interest for the world to see. Personal property does not include land and fixtures but does include things like motor vehicles, household goods, plant and equipment used by a business, the inventory of a business, intellectual property and company shares.
By way of example, a supplier of equipment to a business that retains title to the equipment until it is paid in full will want to properly register a security interest on the PPSR over that equipment in the hands of the business until it is paid. If the business becomes insolvent, the supplier will only need to appoint a liquidator of the business to the PPSR in order to establish its title to the equipment.
Changes to the legislation behind the PPSR came in to effect on 1 October 2015 that particularly impact on those businesses that lease out goods that are required to be registered on the PPSR by serial number – motor vehicles, watercraft and aircraft most commonly. Until last week, a lease of a motor vehicle for more than 90 days would require registration on the PPSR if the lessor wished to properly protect its interest in the motor vehicle. Relevantly, the definition of “motor vehicle” captures a broad range of items that might not normally be considered to be motor vehicles.
From 1 October 2015, only leases of motor vehicles for effectively more than 1 year will have to be registered on the PPSR to properly protect the lessor. That change simplifies matters for the lessors of such goods but adds some uncertainty to those involved in a business sale who might be seeking to understand which assets of a business are in fact secured to or owned by a third party.
The PPSR is not easy to understand. At Everingham Solomons, we can assist you understand its application to your business because Helping You is Our Business.
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The number of self managed superannuation funds (SMSFs) is increasing exponentially. This growth has been particularly prompted by changed laws allowing SMSFs to borrow to purchase investments such as real estate.
The primary rule of self managed superannuation is a requirement that all the members (a maximum of 4) must either be trustees of the fund or directors of the trustee company if the fund has a corporate trustee.
Normally, trustees must act unanimously. Unless the prospect for dispute or deadlock between trustees is considered and dealt with upfront, disputes will ultimately find their way to the Supreme Court which is all of, very expensive, uncertain and time-consuming.
This means that it necessary in every case to consider how disputes or deadlocks between trustees will be resolved.
The most common type of SMSF is still the “mum and dad” version in which a married or de facto couple are the only persons involved in decision-making. Increasingly however we are also seeing more complicated relationships that present a greater degree of risk that disputes will arise e.g. SMSFs that include children, in-laws, other relatives or business associates.
A properly drafted SMSF deed can provide a process to resolve disputes relatively quickly and inexpensively. For instance, the rules of the SMSF may provide for decisions to be made on the basis of member account balances or by a certain majority of trustees in the event of deadlocks or disputes. Similarly, the Constitution of a corporate trustee might require that decisions of the board of directors of the company can be made on a pre-agreed basis.
The eventual result of a need to resort to a formalised dispute settlement process is generally that one or both of the disputing parties will leave the SMSF and make other ongoing arrangements. Whilst that can be inconvenient in some cases, it is certainly preferable to reaching the same position after a lengthy court battle.
The key points for planning are: –
Always consider at the outset who you share an SMSF with. Even in the best of families, parents and children don’t always see eye to eye particularly as children grow up and form their own relationships and families;
Anticipate and plan for the possibility of disputes. This means that you need to ensure that your SMSF documentation is properly drafted at the outset or, if that opportunity has passed by, have your current structure reviewed by an expert and where necessary restructure.
The laws relating self managed superannuation and trusts generally are complex. At Everingham Solomons we have the experience and expertise to assist you in all your superannuation and trust issues because Helping You is Our Business.
The Federal Government is currently legislating to allow unfair terms in standard form contracts that small businesses enter to be declared void. Currently, only consumers who enter into such contracts are protected against unfair terms.
Why is this important? Small businesses are regularly offered contracts by their larger and more resourced counterparties, or even other small businesses, on a “take it or leave it” basis. Small businesses often lack the resources to fully understand and negotiate contract terms. Competition is fierce and who wants to “bite the hand that feeds”. The profit margin in a contract may not be enough to justify obtaining legal advice. As a result, unfair terms remain in these contracts and the risks of the contracts get allocated to small businesses, which are not always able to manage those risks.
By providing small businesses with a remedy against unfair contract terms, the Federal Government seeks to discourage the inclusion and enforcement of unfair terms in small business contracts. The theory is that contract risks will be more appropriately allocated between the parties and that small businesses will become more confident when contracting.
So, some FAQs:
When? From early 2016, so now is the time to review contracts you issue for any unfair terms.
What is a small business? One which has less than 20 employees, so most businesses in our region.
What is a small business contract? One where the agreed price for the supply or sale at the time of the contract is less than $100,000 or $250,000 if the contract term is more than 12 months. For larger contracts, small businesses will still have to undertake careful due diligence.
What are unfair terms? Those that cause imbalance between the rights and obligations of the parties and are not reasonably necessary to protect the advantaged party, and which would cause detriment to the other party if relied on.
At Everingham Solomons, we can assist you to get your contract terms in order before the changes occur because Helping You is Our Business.
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The answer is yes and no.
