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News

The new GST withholding obligations for buyers

June 28th, 2018

From 1 July 2018, purchasers of new residential property across Australia will need to withhold the GST component of the purchase price of their property and remit it directly to the ATO as part of the settlement process.

The changes introduce fairly onerous obligations on buyers of new property and new residential land to ensure that even if they are not notified, if there is GST payable on a purchase, they provide it to the ATO.

There are also very large penalties for failure to comply.

The changes have been introduced to capture GST payments from property developers directly as part of the sale process.

What do sellers need to do?

Sellers of all residential property will be required to provide a notice to prospective buyers telling them whether they will be purchasing new residential property, and whether or not they will need to withhold an amount for GST at settlement.  This means that not only property developers will be affected by the changes, but all sellers of residential property.

A failure to provide this notice can attract a penalty for the seller of up to $21,000.00 per occurrence, and failing to provide an accurate notice can attract the same penalty.

There are some obvious flow on effects for sellers that will have their GST withheld at settlement.  Cash flow will be impacted and where a mortgagee is involved, they will have to take less than the full purchase price at settlement.

What do buyers need to do?

What is onerous for buyers is that their obligation to withhold GST is not in any way effected if the seller fails to give a notice about the GST withholding obligation.

This means that if a notice is not given by the seller, buyers will need to make their own determination about whether the property is new residential property, and whether withholding is required.  A failure to withhold could result in a penalty of an amount equal to what the buyer was required to withhold (10% of the purchase price).

If a notice from the seller is provided about GST withholding, the buyer is entitled to rely on that notice, provided it is reasonable to do so (i.e. the buyer is not aware of any circumstances that might indicate they are required to withhold when the seller has told them they do not have to).

It also may not be easy to determine whether residential property is new or not: what if it has been rented for a number of years?  Is it an independent living unit in a retirement village?

New standard contracts will be issued prior to the changes coming into effect, so Real Estate Agents and sellers should be very aware of the new changes when entered into or negotiating contracts closer to 1 July.

Make sure you don’t get caught out!

If you have any questions about the changes, or would like assistance with your conveyance please contact Lauren Doktor at Miller Harris Lawyers.

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The Restructure of the Family Courts

June 21st, 2018

The government last week announced a proposal to restructure the family court system.  The proposal is one of most significant changes to Australian family law in many years.

The proposed changes have been met with widespread media attention and scrutiny.  Several of our clients and referrers have asked us what the proposed amendments involve.

The current system

Currently, the Family Court system across Australia comprises of two courts:

  1. the Federal Circuit Court of Australia – which deals with the vast majority of general family law matters; and
  2. the Family Court of Australia – which deals with complex, lengthy and involved parenting and property disputes.

The Family Court of Australia is the higher court.  Its judges bear the title of “Justice” while the Federal Circuit Court judges are titled “Judges”.  Often judges in the Federal Circuit Court will transfer a matter to the Family Court if they consider it complex enough to warrant the transfer.  Examples of matters dealt with by the Family Court include high nett worth and complex property disputes, international relocation applications and parenting matters containing serious and significant allegations of abuse against children.

The proposed changes

The government’s proposed changes can be summarised into three main points:

  1. A merger of the courts

The Family Court and Federal Circuit Court will be merged to create a new court called, the Federal Circuit and Family Court of Australia.

There will be a single entry point to the court.  All family law disputes, regardless of how complex and involved, will be commenced and dealt with by the new court.

Initially, there will be two divisions of the new court.  Division 2 will essentially be the Federal Circuit Court as we know it. Division 1 will essentially be the current Family Court.

  1. One set of rules and forms

Currently, the Family Court and Federal Circuit Court have an individual set of rules and forms.  Under the new court, there will be a single set of rules and forms.

  1. The eventual extinction of the Family Court and its judicial officers

Division 1 (the new Family Court) will eventually cease to exist under the proposed changes.  Judges are required to retire upon turning 70 years of age.  The government will not appoint any further Family Court judges.  Upon the retirement of the current Family Court judges, the Family Court, or the new division 1 will become extinct.

The scrutiny

There has been significant media attention and debate following the government’s recently announced changes.

A lot of scrutiny appears to be regarding the lack of prior consultation that the government had with relevant family law bodies and the current Family Court themselves, about the proposal.

Much attention has also been focused on the failure of the government to propose further funding for the Family Court system or appoint new judges, in a court system which is considered by many to be suffering from lack of funding and lengthy delays.

On the other hand, the government has received praise for its attempts to simplify and cut unnecessary delays and costs from the courts.

Where to from here

While it may be one of the most significant changes to Australian family law in some time, we are likely to see many more changes in the next three years.  In late 2017, the government appointed a commission to conduct a review of family law in Australia.  The review is separate from the government’s proposed changes to the court system and is likely to bring with it significant change to family law in Australia as we know it.

For more information please contact our family law team on 07 4036 9700.

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World Elder Abuse Awareness Day – 15 June

June 15th, 2018

Today is World Elder Abuse Awareness Day.

Elder abuse is a global issue which affects the well-being and human rights of our older generations.  It is an issue that deserves worldwide attention.

Elder abuse is any act that that causes harm or distress to an older person by someone they know and trust.  Elder abuse can take various forms such as physical, psychological, financial, emotional or sexual abuse. It can also be the result of intentional or unintentional neglect.

Elder abuse is not always easy and obvious to detect.  Behaviours a person may exhibit when experiencing elder abuse include:

  • withdrawing from normal activities;
  • making roundabout statements or excuses, for example “My son does not like me going out on my own”;
  • being unable to talk on the phone or only being able to talk on the phone when someone is present;
  • suddenly moving away;
  • avoiding eye contact; or
  • becoming irritable or easily upset.

Elder abuse is everyone’s business and I strongly believe that community awareness is the key to reducing elder abuse.  I urge you to engage in discussion with your family and friends and continue the dialogue.  Look out for the elderly members of our community and don’t be afraid speak up if you suspect abuse is occurring.

If you or someone you know is experiencing elder abuse, please contact the Elder Abuse Prevention Helpline on 1300 651 192.

For more information on elder abuse, please contact our Associate, Bianca Stafford on 4036 9732.

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Reduction in first home owner’s grant

June 14th, 2018

Attention first home buyers!

 

The government has recently announced that on 1 July this year the first home owner’s grant will be reduced from $20,000 down to $15,000.  Any contracts entered into after 30 June will only be eligible for the reduced amount.

In order to be eligible for the grant you must meet the following criteria:

  • you must be at least 18 years of age;
  • you must be an Australian citizen or permanent resident;
  • you or your spouse must not have previously owned property in Australia that you lived in;
  • you must be buying or building a brand new home;
  • the value of the home, including land, must be less than $750,000; and
  • you must move into and live in the home within 1 year, and stay there continuously for at least 6 months.

If you meet the above criteria, in order to take full advantage of the first home buyer’s grant you should strive to enter into a contract before 1 July.

If you have any questions about eligibility for the grant, or conveyancing questions in general, please feel free to contact us on 07 4036 9700.

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How to reduce tax and protect your wealth for future generations through the use of a testamentary discretionary trust

June 13th, 2018

Do you want to minimise tax implications and ensure that your hard earned assets are passed on to future generations in a protected environment?  If your response was “Yes!”, then a testamentary discretionary trust might be just what you need in your estate plan.

What is a testamentary discretionary trust? 

A testamentary discretionary trust (or “TDT”) is a trust that is created by the provisions of a will and only comes into effect upon a person’s passing, as opposed to during their lifetime.

Like a normal trust, a TDT provides for a range of beneficiaries, in addition to the primary beneficiary, all of whom are discretionary beneficiaries – so that it is up to the trustee of the trust to determine in any particular year who should receive the income or capital of the trust.

The beneficiary of a testamentary discretionary trust does not have any defined interest or fixed entitlement to the trust assets unless and until the trustee makes a determination in their favour.  The beneficiary merely has a right to be considered and have the trust administered in accordance with the terms of the trust.

What are the advantages of a testamentary discretionary trust?

Asset protection

I find that the main reason clients choose to implement TDTs in their wills is for asset protection.  By giving a primary beneficiary of the estate the option to inherit via a TDT, the primary beneficiary does not have to inherit those assets personally.  This would be attractive if you have a beneficiary who:

  1. faces the prospect of financial difficulties or bankruptcy arising from carrying on business, giving guarantees or failure of insurers;
  2. faces difficult family or domestic circumstances (e.g. the breakdown of a marriage or de facto relationship);
  3. is poor at handling their finances;
  4. suffers from an addiction; or
  5. has the prospect of a contested personal estate when the primary beneficiary subsequently dies.

Example of how it works – asset protection

To illustrate the benefits of a TDT where a spouse has a high risk profile and exposure to bankruptcy, I will use the factual scenario of Tom and Jane.

  • Tom and Jane are married with two children, Jack aged 9 and Kate aged 12.
  • Tom is a director of a company and has a high risk profile.
  • Tom and Jane are looking at buying a new house. Their accountant suggests that Jane purchase the house in her name (as the low risk spouse) so that the house is not exposed to creditors.
  • This asset protection measure could unravel if Jane passes away and leaves everything to Tom absolutely, as the house would then be exposed to creditors.
  • Instead, if Jane gifts her assets into a TDT (of which Tom, Jack and Kate are beneficiaries) then Tom will not have direct ownership, which offers better protection of the house against creditors.

Income tax benefits

There are also significant taxation benefits, particularly where any beneficiary is under the age of 18 years.  Unlike a family trust (set up in your lifetime), children under the age of 18 are eligible for tax concessions for the income they receive from a TDT.  Income received by minors through a TDT is taxed at normal adult rates, which means that they are entitled to receive the benefit of the tax free threshold.  A TDT enables the trustee to stream or split income amongst the beneficiaries, depending on their personal marginal tax rate, to reduce the amount of tax incurred.

Example of how it works – income tax benefits

  • Jane had a life insurance policy worth approximately $400,000.00. After Jane passes away, those proceeds are invested, earning 7.5% of income per year (i.e. $30,000.00).
  • If Jane did not include a TDT in her will and gifted everything to Tom, then Tom would have to pay tax on the income generated, $30,000.00, at his personal marginal rate. If Tom is already a high income earner, that could be at 47%, which is $14,100.00.
  • Instead, if Jane has a TDT set up in her will, the trustee could resolve to distribute this income equally between Jack and Kate to be used towards their schooling fees.
  • As Jack and Kate have no other income, the distributions to them ($15,000.00 each) are tax free, as each distribution to the child is below the current tax free threshold of approximately $20,000.00.

As you can see, TDTs can allow for some significant tax savings.

Should I have a TDT in my will?

In my experience, TDTs generally appeal to people who:

  • want to pay less tax;
  • have children or plan on having children;
  • want to ensure that their assets are protected for future generations;
  • have beneficiaries who are high income earners; or
  • don’t trust their beneficiaries with money.

TDTs can be quite flexible and therefore appeal to a diverse range of people.  It is important to remember that TDTs cannot be created retrospectively and must be included in the willmaker’s will before death.  For this reason (and the fantastic benefits of TDTs outlined above), TDTs should at least be considered by every person when they prepare a new will.

If you would like more information about TDTs, please do not hesitate to contact Bianca Stafford, an Associate in our Wills and Estate Planning team.

*Disclaimer – The information provided in the document is current at the date of publication and is a general summary which is not intended to be nor should it be relied upon as a substitute for legal or other professional advice.

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Major changes to the BCIPA and QBCC Act remain on hold

June 12th, 2018

Major changes to the Building and Construction Industry Payments Act 2004 and QBCC Act which were expected to commence as early as July this year remain on hold.

Minister for Housing and Public Works, Mick de Brenni, has made a media release today announcing further amendments to the Building Industry Fairness (Security of Payment) (BIF) Act which are expected to commence operation from 17 December 2018.   A discussion paper will be released for industry consultation in coming weeks.

The Minister has also announced the appointment of four professionals to the panel assessing and evaluating the implementation of the new legislation: Ms Bronwyn Weir, Ms Jennifer Robertson; Mr Troy Lewis and Ms Fiona Aitchison Reid.

For more information on the Building and Construction Industry Payments Act, please contact our Senior Associate, Rowan Wilson of the Building and Construction team on (07) 40 36 9725 .

 

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Bon Voyage! Travelling overseas with your children after separation

June 6th, 2018

While it is not uncommon for a parent to want to travel overseas with their children following a separation it can sometimes be a point of conflict between parents.

Applying for a passport

The first hurdle for many parents will be applying for a passport for their child.  A passport will only be issued by the Australian Passport Office if both parents provide consent and sign the application form.  If one parent refuses to sign the application form then the other parent may need to apply to the Family Court in order for their child to be issued a passport.

Seeking consent from the other parent to travel

Regardless of whether a child has a passport, a parent who wants to travel with their child should obtain the consent of the other parent before taking the child overseas and prior to making any travel arrangements.

If the other parent does not consent to the proposed travel then the parent who seeks to travel with the child will need to make an application to the Family Court that the child be permitted to accompany them on a holiday.  The court will consider, amongst other things, the following factors:

  1. the length of the proposed travel;
  2. whether the travel will interrupt the other parent’s time with the child and if so, whether alternate make up time is offered;
  3. the destination country; and
  4. whether there is a risk that the child may not be returned to Australia.

Preventing a parent from travelling with a child

If a parent has concerns that their child may be taken overseas by their former partner without their consent, then immediate legal advice should be sought.

The Family Court has the power and discretion to:

  1. prevent a parent from travelling overseas with their child;
  2. require that a child’s passport be held by one parent or by the court; and
  3. place a child’s name on the Family Law Watchlist (previously known as the Airport Watchlist).

Our family law team has significant experience in assisting parents with issues concerning overseas travel.  For more information please contact one of our experienced family lawyers today on 07 4036 9700.

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