State Revenue Office Changes – July 2017

If you are looking to purchase a residential property then you should be aware that the Victorian Government has now put in place several changes, which may assist in your decision making prior to signing a Contract.

The new changes will come in to effect on the 1st July 2017 and could affect you.

First Home buyers or investors looking to purchase property in particular, have been the mainstream group of people who will be affected by the changes.

Although you may not fall into one of these categories, it is always prudent that prior to signing any Contract, you receive pre purchase advice from an experienced Solicitor or a conveyancer under their direction, who deals with these matters on a daily basis.

We are more than happy to assist you with regard to any pre purchase queries you may have which could relate to your next purchase.

The Victorian State Government has introduced the following changes to commence on 1st July 2017,  with regard to tax and on stamp duty which relate to the following:

  1. Off the Plan stamp duty for investors not intending to purchase the property as their primary place of residence;
  2.  Certain matrimonial Transfers are no longer exempt from stamp duty;
  3. First Home Buyers – for some purchases will be abolished and/or reduced;
  4. Government Grant of $20,000.00 for First Homes buyers buying a new home within regional Victoria;
  5. A new tax is to be charged for certain vacant residential properties.

Each change has certain criteria which need to be met by the individual and again if you are not certain, please feel free to call or email us. Our experienced staff would be more than happy to assist you with any queries you may have.

Property and Leasing Update

Advisory Opinions for Essential Safety Measures in Retail Premises –Who will Pay?

A VCAT advisory opinion from Justice Garde VCAT reference VCAT 2015/478 available on the Small Business Commissioners Website. A first and welcome way of getting the message out to the Retail Leases Sector.

It covers off the issue of whether essential safety measures under the Building Regulations 2006 and the landlords repair obligations under the Retail Leases Act.  The opinion whilst being non binding will carry significant weight.

The regulations create the owners obligations to maintain and repair essential safety measures. The lease may have provision for this to be later collected from the tenant as an outgoing. The advisory opinion strengthens the argument that the Landlord is responsible for the maintenance of essential safety measures and is prohibited for passing that on to the tenant. The tenant  will not be responsible says the VCAT.

Valuations – Land Titles

Project with Land Victoria and Department of Environment, Land Water and Planning (DELWP) to now introduce a waterway notation to affected plans, to alert purchasers about the possible location and use of Crown frontage,initially on titles for land adjacent to licenses Crown frontages and then progressively, on plans of properties abutting Crown frontage, which will give more opportunity to identify licenses or requirements to obtain a licence for Crown land or riparian land.

Recent Cases

Cahill v. Kenna in NSW Supreme Court

The dispute was between property developers who had a joint venture. In the winding up of the JV dispute arose about the value to be adopted.

One valuer took into account that the land was a beachside suburb and it siting, the other did not so complain that he underpraised the land from the co Joint venturer. One considered planning advice as to the highest and best use of the land and the other could not get agreement from the JV partners to refer to its highest and best use in his report, which Judge said was the right way to handle it in the valuation.

One of the JV partners brought in Colliers valuation made for mortgage purposes.   Judge disregarded Colliers valuation and Judge sported the premise that Valuations are not an exact science and some matters may appear to be relevant  but are not relevant at all. And the lawyers were paid to argue over this!

Epping Hotels Pty. Ltd. v. Serene Hotels Pty. Ltd.

“Use of profit method to determine current rent” -   by valuer when determining the current market rental of a hotel.

Lease was for premises where tenant ran hotel business with gaming facilities. Appointed specialist valuer requested trading accounts which tenant supplied  but commented that Section 37 (2)  criteria the valuer  should  be cautious in using the  trading figures.

On appeal the Supreme Court found that it is permissible for a valuer to use the  “profits method” under Section 37 (2) of the RTA and further, the valuer is allowed to assume the existence of the tenants fixtures and fittings, for the purposes of adopting the profit method, provided  the value of those fixtures and fittings  is treated in the calculations in such a way, that the value is in effect “cancelled out”.

If you have any queries regarding the above, please contact Pippa Sampson or Adriane Whiticker of our office.

Family Law Update

Pre nuptials and Binding Financial Agreements Risks

Binding Financial Agreements (“BFA”) are used as a genuine means of protecting assets, when entering into or living in a marriage or domestic relationship (including same sex relationships) and often used as an alternative to Consent Orders in the Family Court, for recording the end of a marriage or relationship.

Essentially a BFA is a contract between two parties.  Not all BFAs are necessarily “just and equitable” and for this reason require independent legal advice.

Due to the increasing risks, however, it is now increasingly prudent to have court orders instead of using financial agreements.

Either way, you need expert advice to make sure the right choice is made by you.  Consult our team, Angela McPhee and Adriane Whiticker.

Financial Agreements before, or during the marriage or relationship

A Financial Agreement can “quarantine” assets from the pool available for distribution at a future time if a relationship breaks down.

More and more people are challenging their prenuptial and financial agreements and an increasing number of decisions are causing lawyers and clients to question the benefits of BFAs.

They still however, remain popular as a more simple private contract and contracting out of spousal maintenance.  Lawyers are concerned that they no longer offer the protection to justify the costs of drafting them, and the costs are just getting larger.

Overall, it is best to consider that any Financial Agreement that departs from the principles set out in the Family Law Act can potentially be set aside.   Remember that the Family Court and the Federal Circuit Court does also have the power to alter and adjust property between separated spouses and ignore the legal structure of Trusts and Family Companies.

So What Do You Do About Asset Protection?

It is essential to consider asset protection in wider terms.  Consider:

  • Obtaining financial advice including the taxation implications of the terms of any proposed Agreement or Orders;
  • Stamp duty exemptions apply to transfers of land effected pursuant to the terms of a financial agreement or Orders;
  • CGT rollover relief may  apply on breakdown a relationship pursuant to a financial agreement or Orders (as long as the terms of the agreement do not in any way benefit any third party

Most importantly, consider making a Will that complements any Financial Agreement

Trusts and Family companies are also a financial and succession planning tool, but not necessarily the ultimate protection when marriage or relationship separation occurs.

As far as the protection of your assets in the event of marriage or relationship breakdown goes, it is always best to be guided by a Family Lawyer’s advice.

Your lawyer should take account of the entitlements of each party at the end of a marriage or relationship, not just at the beginning, and must pay particular attention to the range of entitlements under the Act.

So What is Separation? Separation – Voluntary and Involuntary Separation, the High Court of Australia and the Stanford case

Stanford – Not “just and equitable” to separate assets of elderly married couples just because they involuntarily separate when one spouse forced to move into nursing home.

The preferred approach for many years is to identify and value assets, resources and liabilities, assess contributions, consider s.75(2) factors and then make a just and equitable order.

Since the recent High Court case of Stanford to determine a just and equitable resolution, the Court now begins with identifying the existing legal and equitable interests of the parties in the property (as if between people who are not in a relationship).

Also, the bare fact of separation, especially if involuntary, does not give the Family Court power to consider property settlement between parties.  In the Stanford case, an elderly couple in different nursing homes, because of age and infirmary (not by choice), may not be a separation.

The High Court ruled, that there may be some circumstances when married parties separate involuntarily and a property settlement order can be made, eg. “if one party’s unmet needs cannot be met by a maintenance order it may well warrant the conclusion that its just and equitable to make a property settlement order.”

Clients need to make sure all their claims and entitlements are best safeguarded in the most cost effective and beneficial way.

For further information or to arrange a consultation, contact our team, Angela McPhee and Adriane Whiticker.

The above is general information only and does not constitute legal advice.

Employment Law Update

Employment Law

An employee who is dismissed from his or her employment has two different ways to seek compensation under the Fair Work Act 2010, if the dismissal is unlawful.

Claim for unfair dismissal

If an employee has been unfairly dismissed, then an application can be made to the Fair Work Commission within 21 days of the dismissal.  Note that the time limit is no longer 14 days – it is 21 days, as it was before the Fair Work Act was first enacted.

Late applications will only be allowed in exceptional circumstances.  If an application is even one day late, an employee must first of all obtain the leave of the Commission to allow the unfair dismissal application to be considered.  This can be a lengthy and costly exercise, and obtaining leave Commission is not guaranteed.

Therefore, employees should comply strictly with the 21 day lodgment rule so as to avoid the risk of a claim being rejected for being lodged out of time.

Claim for a breach of the General Protections under the Fair Work Act.

An employer can also make an application under the General Protection provisions in the Fair Work Act.  This is sometimes referred to as an adverse action claim.

Adverse action means:

(a)   an employee has been dismissed;

(b)   an employee has been injured in his or her employment;

(c)    the position of an employee has been altered to the employee’s prejudice; or

(d)   the employee is a victim of workplace discrimination when compared to how other employees are treated.

Adverse action is the effect of an employer’s actions. Adverse action will be unlawful if the action was taken by the employer against the employee because of one of the following reasons:-

(a)   violation of a workplace right;

(b)   interference with the employee’s rights to engage in lawful industrial activity; or

(c)    workplace discrimination (which in this context means a decision taken by the employer because of the employee’s race, color, sex, sexual preferences, age, physical or mental disability, marital status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction, or social origin).

So if an employee has been dismissed because of a violation of his or her workplace rights; or because of lawful Union or industrial activity; or because of workplace discrimination, the employee has a further remedy to seek compensation.

An application for an adverse action claim (breach of General Protections) must be lodged within 21 days of the dismissal. However, an employee must decide whether which action to commence: an unfair dismissal claim or an application under the adverse action provisions of the Act. An employee cannot lodge both.

The time limit for the second type claim [adverse action] was 60 days but the Government pegged it back to 21 days to keep in line with the unfair dismissal time limit.  This was done to prevent claimants from what is called “forum-shopping”.

In cases where an employee has not been dismissed but seeks compensation for, say workplace discrimination or a violation of workplace rights whilst still employed, there are different time limits and a different pathway to seeking compensation.  [See different link for discussion here].

Remedies

In the case of unfair dismissal, if re-instatement of employment is not deemed appropriate by the Commission, then compensation can be awarded up to a maximum of 26 weeks of the employee’s base remuneration, or $61,650.00, whichever is the higher.

The Fair Work Commission cannot award compensation for “pain and suffering” that is shock, distress or humiliation, or other hurt caused by the manner of the person’s dismissal.

Compensation will be awarded based on largely economic factors such as: the employer’s length of service; what reasonable steps have been taken to get other work [the duty to mitigate loss]; what income has been earned since the dismissal, if any; what would have been earned if the employee had not been dismissed; and the impact of any compensation order on the viability of the employer’s enterprise.

In the case of an adverse action claim, a dismissal case will typically start with a Conciliation Conference in the Fair Work Commission. If the case does settle at the conference and the Commission is satisfied that all reasonable attempts were made to resolve  the case, then the Commission will issue a Certificate to that effect.

A claimant can then commence legal proceedings in the Federal Court or the Federal Magistrates’ Court. There is no cap on the amount of compensation in the courts, which can include amounts for pain and suffering.

Claims for adverse action also have the advantage that once a claimant has established the breach, the onus shift to the employer to prove that the dismissal was not unlawful. This is a handy tool for a claimant who has been dismissed unlawfully – the employer must prove otherwise!

Potential claimants are strongly recommended to seek advice as soon as they are dismissed, because in both cases of unfair dismissal or adverse action there is 21 day time limit for lodging claims at the Fair Work Commission.

In some cases, claimants may have an alternative or better claim as a result of a breach of their employment contract; a possible discrimination claim at the Victorian Equal Opportunity & Equal Rights Commission (or at VCAT); or may be able to seek redress from the Fair Work Ombudsman for award breaches or violations of the National Employment Standards which contains the “safety net” of workplace conditions under the Fair Work Act.

For further information or to arrange a consultation, contact our team, Pippa Sampson.

The above is general information only and does not constitute legal advice.

Specific circumstances vary and should be investigated before any action is commenced.

 

State Revenue Update 2016 / 2017

FOREIGN PURCHASERS

Stamp Duty Surcharge, when does it apply?

Foreign Purchasers are from 1 July 2015 liable for additional stamp duty on residential purchase where the purchase is after 1 July 2016. The higher rate of 7% will be applied on top of the usual rates of duty for the purchase of residential. There is no exemption for principal place of residence

It will also effect the “Off the Plan” purchases  where nomination done after 1 July 2016 where there is a trigger of  the sub-  sale provisions (development or consideration)  and will attract the duty.

All manner of sales will be effected including the following:

  • residential sales;
  • gifts of property;
  • leasing  in certain circumstances; and
  • transfers of estate interests in deceased estates.

There is still the exemption of land  transferred  under a will where it has been left to a foreign natural person, but otherwise the amendment has made no provision for concessional rates of duty applying,  as is the case now where a foreigner will not be eligible for pensioner discounts or any other concessions which may be offered in the future.

What are the key features?

Definitions - It will apply to residential property purchased by a foreign  purchaser, a foreign company or a foreign Trust.

Residential property is defined as:

  • land designed and constructed solely or primarily  for residential purposes  and maybe lawfully used as a place of residence
  • land that is vacant but will have a residential premises built on it.

Dual Purpose Property is also caught if the land  will be primarily used for residential purposes and in that case, the whole of the land will be dutiable including the commercial part.

 A Foreign Purchaser is defined in the negative – that is if you are NOT:

  • a citizen or permanent resident of Australia; or
  • a NZ citizen with special category Visa (444).

A Foreign Corporations  includes:

  • corporations incorporated outside Australia; or
  • incorporated in Australia if the natural person another foreign corporation or trustee of a foreign trust has a controlling interest. (see below).

A Foreign trusts is where a trust is where a foreign natural person corporation in the trustee of another trust has a substantial interest.

Controlling Interest means where a person or entity has:

  • position of control of 50% of votes (voting power);
  • more than 50% of the issued shares;
  • has the ability to influence  the outcome of the decisions about the companies  financial and operating policies (the practical influence- even if that practice or pattern of behavior involves the breach of an agreement or breach of trust);
  • associated person can include a relative, a partnership, another corporation or a trustee of a trust  (even if  not a foreign natural person).

Absentee Owners pay higher land tax with updates to the Land Tax  Act 1958  from 1 January 2016 and rising charges 1 January 2017

An additional Land Tax for absentee owners of additional 0.5% on all properties from 1 January 2016 –both commercial and residential.

From 1 January 2017 the rate will rise to a 1.5% surcharge for foreign buyers.

It equates to an extra amount of land tax payable of $5,000 per $1 million of unimproved land value.

Are you an Absentee Landlord?

‘absentee owner’

The concept of an ‘absentee owner’ is very similar to the concept of a ‘foreign purchaser’ relevant to the stamp duty surcharge. An absentee corporation or trust looks to see whether there is an absentee ‘controlling interest’ directly or indirectly in the corporation or trust.

Broadly, for a corporation, a ‘controlling interest’ is an interest of more than 50% of the shareholding, voting power or the ability to control the composition of the board. Similar to the stamp duty surcharge, it will apply to an Australian incorporated company that holds taxable land if there are foreign controlling interests up the chain.

It does not include taxpayers who actively conduct business or activities on the land.

There is discretion not to apply in both cases- exercisable by the State Treasurer where there is controlling interest in a foreign. It is to safeguard those investors who are adding or redeveloping and adding to the housing stock in Victoria.  Really to cover off those investors who are in the market already. Application will of course take time and effort. The guidelines are not yet in the Government Gazette.

The Government does not expect the charges to have any impact on foreign purchasers.  The charges of like surcharges are now current in New South Wales, Victoria and Queensland.

If you have any queries regarding the above, please contact Pippa Sampson of our office.