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1903, 2018

The ATO’s concern over SMSFs using reserves

By |March 19th, 2018|

The recent release of regulatory bulletin SMSFRB 2018/1 highlights what will spark the ATO’s interest where an SMSF is using reserves. The bulletin was issued in light of the 2017 super reform and the ATO’s concern that some SMSFs are implementing reserving strategies designed to circumvent restrictions imposed under the new law.

Overall, the Commissioner considers that the small membership nature of SMSFs means that the need to maintain reserves in SMSFs is distinct from the need to maintain reserves in APRA regulated superannuation funds. Consequently, the Commissioner expects the use of reserves by SMSFs to be extremely limited and, where an SMSF does hold reserves outside of such limited circumstances, the Commissioner will consider whether the trustee is acting in accordance with their obligations under the […]

1903, 2018

When is a Memorandum of Understanding or a Heads of Agreement Legally Binding?

By |March 19th, 2018|

We often see matters where clients have negotiated the terms of a business deal with another person and the parties then sign a short form document (usually called a Heads of Agreement or Memorandum of Understanding) that embodies the terms of the deal with the intention of executing a more formal agreement later.

What happens if the parties cannot agree on the terms of the formal agreement?  Can a party that wants to proceed with the deal force the other party to go ahead? Or can the party that doesn’t want to proceed walk away?

The answer to this question is the lawyer’s standard answer: “It depends”.

The document needs to be clear about the parties’ intentions as that will determine the issue.

 

Masters v Cameron

The leading decision in this area is the High Court case of Masters v Cameron (1954) 91 CLR 353.

That case established that there are 3 possible scenarios:

  • The parties have […]
1903, 2018

More Certainty for Victorians over their Medical Treatment Decisions

By |March 19th, 2018|

More Certainty for Victorians over their Medical Treatment Decisions

The law surrounding advance care directives and medical treatment decision-making has drastically changed with the introduction of the Medical Treatment Planning and Decisions Act 2016 (Vic) (“the Act”). The Act came into effect on 12 March 2018.

The Act repeals the Medical Treatment Act 1988 (Vic) and implements a single framework regarding medical treatment decision-making for people without decision-making capacity. This overhaul aims to ensure that people receive medical treatment that is consistent with their preferences and values. It is focused on personal autonomy.

The Act is in response to past legislative complexity and inconsistency. Previously, Victoria had four different Acts governing this area, each with their own definitions, tests for capacity and obligations. Now, medical treatment decision-making is solely governed by the Act.

The Act does not cover unlawful medical treatment, such as physician assisted dying.

 

What’s different?

Advance care directive (“ACD”)

The Act will […]

1312, 2017

Unpaid rent and outgoings: issues for Landlords to consider in commercial leasing

By |December 13th, 2017|

Often the owner of a commercial property (“landlord”) is left chasing unpaid rent, outgoings and other expenses from a tenant.

Before taking steps to end the commercial lease and re-enter possession of the property, a landlord should be aware of its rights under the lease agreement.

 

Some of the issues the landlord must consider are:

  • What amount is outstanding and when was it due?
  • Has there been any demand for payment?
  • Is there any dispute in relation to the outstanding debt?
  • What does the lease say about failing to pay rent, outgoings and other expenses?
  • Is the tenant in breach of the lease?
  • Is notice of the breach required, and, if so, how much notice is required?
  • What is the process to evict the tenant?
  • What are the consequences of re-entry by the landlord?
  • Is timing an issue?
  • What property would remain in the premises if the Landlord re-entered and took possession of the premises by changing the locks?
  • What happens next?

 

Generally, a […]

1312, 2017

Landholder Duty and Death

By |December 13th, 2017|

Where a private company or unit trust owns real estate with a value of $1 million or more then duty may be payable when there is a change in shareholding or unit holding. If duty applies it will be chargeable at the rates applicable to land transfers.

Duty will be chargeable where the acquisition of shares or units amounts to a ‘relevant acquisition’. In general terms, where the acquirer owns 50% or more of the ordinary shares in the company after the acquisition (20% for unit trusts) then the acquisition will likely be subject to duty.

The provisions can also apply where a shareholder or unit holder dies and as a result their shares or units pass to a beneficiary. Although an exemption from duty can apply a Landholder Acquisition Statement must still be completed and lodged with the State Revenue Office within 30 days of the relevant acquisition occurring. An application […]

1312, 2017

ATO ruling says penalty tax may be payable on holiday homes owned by trusts

By |December 13th, 2017|

According to the recently released TD 2017/20 a family trust that owns a holiday home will be liable to pay family trust distribution tax (FTDT) at 47% where friends of the family stay in the holiday home.

 

How can this arise you may ask?

A trust may make a family trust election (FTE) for a number of different reasons including:

  • to assist it in claiming prior year losses and debt deductions;
  • to allow beneficiaries to claim franking credits on franked dividends distributed to them; and
  • to help pass the no change in underlying economic ownership requirement in the new small business restructure roll-over relief.

If a trust has made a FTE then any ‘distribution’ of income or capital to a person who is not a member of the primary individual’s family group will be subject to FTDT.

 

What constitutes a distribution?

The definition of distribution to a person is expanded in section 272-60 and includes paying or crediting […]

2809, 2017

Estate Planning When Entering or Exiting Relationships – Are All Things Equal Between Married and De Facto Couples?

By |September 28th, 2017|

No matter what your view is on the marriage equality debate, understanding the rights of a married couple compared to a de facto (including same sex) couple is critical to enable a meaningful discussion with clients who are entering or exiting relationships about their plans on death and incapacity.

 

The difference between proving a marriage and a de facto relationship

At the very core, marriage is based on a couple’s mutual promise to one another and need only be proved by the production of one document (a marriage certificate) at most. It is immediate and undeniable.

A de facto relationship must be proved by evidence relating to living arrangements, sexual relationship, finances, ownership of property, etc. It often requires one or both partners to spend significant amounts of time, money and unnecessary stress to produce the necessary evidence.

Although most states allow de facto couples to register their domestic relationship a prescribed set of […]

2809, 2017

Just in the knick of time! Deciding whether to apply the super reform CGT relief

By |September 28th, 2017|

The transitional CGT relief in the superannuation reform allows an SMSF to reset the cost base of any assets reallocated or re-apportioned from retirement phase to accumulation phase to comply with the transfer balance cap or new transition to retirement pension arrangements.

The relief applies where the re-allocation or re-apportionment occurred between 9 November 2016 and just before 1 July 2017.

Ordinarily, if a pension is commuted from retirement phase to accumulation phase, the earnings on assets supporting the commuted balances will become taxable.

The relief operates to ensure that tax does not apply to unrealized capital gains that have accrued on assets that were used to support pensions up until that time. The rationale for this treatment is that such gains would have been exempt from tax if the SMSF had realized those assets prior to commutation.

The relief is provided by deeming the fund to have sold and reacquired the relevant asset […]