Just Us News

By Sam Ryall

Picture this: You’re down at your regular coffee haunt on a sunny Saturday morning and the conversation between your friends turns suddenly as to who (and who doesn’t) have an up-to-date Will. You look around and notice your friends nodding their heads in the affirmative. You however, sheepishly resign yourself to the fact that you have been procrastinating on this longer than George R.R. Martin has in producing the sixth installment in the Game of Thrones series and make a mental note to rectify this urgently. Compounding your growing unease is your uncertainty as to the property you own both overseas and in Australia and how this is to be distributed if something were to happen to you. Sound Familiar? Any takers?…Well, read on.

You don’t have to be Einstein (or a legal eagle for that matter) to know the importance of having a valid up-to-date Will. However, careful attention is needed where you possess property, whether it be real property (like a house or land) or personal property (such as moveable items, bank accounts, boats and household chattels) in more than one country.

Australia is part of several international Conventions^[1] which enable Australian made Wills to be valid in other nations that have also adopted the same Convention(s).^[2] One of the key benefits of being part of these Conventions is that an internationally recognised Will can reduce the probability of a dreaded ‘conflict of laws’ situation where it is unclear which country’s laws apply to the distribution or administration of a particular asset you own. However, international Wills are subject to various requirements and formalities prescribed by both the Conventions and laws of Australia.^[3] Thankfully (for your sake!) the detail of such requirements would be our concern, should you retain us to draft your Will!

So, what should you do?

Before you are ‘lulled’ into a false sense of security that below is a ‘one stop how-to’ guide, we must point out that the following is merely a set of ideas or strategies, amongst many others, to bear in mind when you ‘take the plunge’ and finally have your Will drawn up:

1. Seek advice on drafting both an Australian Will from an Australian legal practitioner and an overseas Will from a legal practitioner in the overseas country that you own property in. Whilst perhaps slightly more expensive at the outset, this method is one of the most cost efficient and simplistic methods in the long-term when dealing with the distribution of your assets in Australia and abroad.^[4]

2. Seek advice from the relevant legal practitioner of each Will and ensure that each Will deals solely with, and is restricted to, the distribution of assets in that country.

3. Find a legal practitioner experienced with legislation relating to Wills in the country, the language required to be used in the Will and the formal requirements so to reduce the likelihood of each Will revoking each other or bringing the intestacy provisions (which apply if you do not have a valid Will or no Will at all) of that country into effect.

4. If possible, select a local executor. Due to the logistical difficulties in an executor administering an estate (i.e. selling real estate, calling in outstanding money in bank accounts) that is located overseas and the constant travel that would be required, you can avoid unnecessary costs to the estate by appointing an executor who you trust and who is local to that country.

5. Consult with an industry tax professional or accountant as to any tax implications such as Capital Gains Tax (CGT) in disposing of assets overseas or to a beneficiary that is not a resident of the country where your property is located.^[5]

Should you need any assistance in navigating the unsteady territory surrounding Wills with an international element, feel free to contact one of our friendly solicitors at our Kelvin Grove or Wilston offices who would be happy to advise you about your future Will.

[1] See Hague Convention on Private International Law 1973 and the Convention Providing a Uniform Law on the Form of an International Will 1973.

[2]Dalpont, G & Mackie, K, ‘Laws of Succession’ (2012), Lexis Nexus [22.20], Australia.

[3]Succession Act 1981 (Qld) ss 33T-33YE.

[4] Hayward, Judy, ‘Legal Wise –a Fresh Look at Estate Planning – 4 September 2008 International Estate Planning and Estate Administration http://www.wills-estates.com.au/wp-content/uploads/2012/04/22572-International-Estate-Planning-and-Administration.pdf at 13.

[5]Ibid, 14.

Due to current changes in the property market in Australia, and partially to the Global Financial Crisis of 2008, it is becoming increasingly more common for lenders to require that certain types of Buyers have a guarantor on their mortgage or loan.

A guarantor is someone who is willing to sign documents with the bank/lender that makes them liable for the Buyer’s loan or a portion of the Buyer’s loan in certain circumstances. In effect, a guarantor provides the lender with additional security in the event that the Buyer is unable to make the necessary re-payments under the terms of their loan. In practice, what this means, is that in the event that the Buyer defaults on their loan, the lender can pursue the guarantor for the missed payments or possibly the full loan amount. Guarantors are required to have existing assets, such as real property, stocks, shares, or businesses, which are used by the lender as security, in addition to the property which is being purchased.

So why would someone agree to be a guarantor? Banks have strict lending requirements, including evidence of genuine savings and large deposits. First home owners especially find it difficult to meet lending requirements and will require a guarantor to enable them to obtain loan approval.

Generally, guarantors are relatives or a business partner of the Buyer. Parents of the Buyer are the most common form of guarantor, and are able to provide additional security to the lender by virtue of having an existing investment property or substantial equity in an asset. The other most common guarantor situation occurs when a Buyer purchases a property in the name of a super fund trust, and the lender asks the Buyer to provide a personal guarantee for repayment of the debt.

If a Buyer has a guarantor on their loan, it is important to keep a few things in mind when it comes to the settlement of the property being purchased. The most important is that any guarantors to a loan also have to sign mortgage documents, and post the original documents with their signatures back to the lender. An easy mistake that many Buyers make is not ensuring that they have a longer period for the finance condition and/or settlement when their guarantors are interstate or overseas.

Another thing to ensure is that the assets that the guarantors are putting forward are in the correct name and match the current names of the guarantors – for example, if one of the guarantors has been married or divorced since purchasing their investment property and hasn’t had the title on the investment property changed, this may need to be done before the lender will settle on the loan.

Most importantly, Buyers will need to make sure that they advise their legal representation when there is a guarantor involved. This will assist in avoiding unnecessary delays in obtaining finance approval and settling on the property.

BY REMY FORSTER

Anyone who has bought or sold a property in the last few years understands how frustrating the current conveyancing system in Queensland can seem – for example, correspondence is mostly sent by fax between law firms, parties have to mail original signed documents back and forth and the money the Seller receives at settlement is still in the form of bank cheques. The good news is that conveyancing around Australia is progressively moving away from these outdated processes. In Victoria all property conveyancing is now done through electronic conveyancing, in NSW electronic conveyancing is being progressively rolled out for different types of conveyancing, and in Queensland electronic conveyancing software is now available for law firms and lenders to use.

Electronic conveyancing, or e-conveyancing, allows the parties to a conveyancing matter to conduct the process of the conveyance entirely online. The approved operator of e-conveyancing in Queensland is PEXA, and there are many benefits to having your conveyancing matter settled through PEXA whether you are a buyer, seller, agent, law firm or lender.

PEXA’s software set up means that all letters are drafted in the PEXA system, and each document is approved by the parties involved in the transaction simply with the click of a button. These documents are then signed by solicitors in the respective law firm offices via secure online signatures that only the relevant solicitors have access to. This is in place of law firms having to draft documents through their own software, mail the documents back and forth with original signatures, in reliance upon the signed documents being delivered to the right address, and then physically held until the settlement date. The online software also means that, if you are a Buyer or Seller, you no longer have to worry about these documents at all. Best of all: e-conveyancing means that the settlements are done fully online through the PEXA software. In the place of agents for all the parties involved in the conveyance having to physically attend the same location at the same time on the same day, all parties simply need to make sure everything is complete in the PEXA system by one hour before the scheduled settlement time. No physical settlements means that a settlement won’t be delayed by the settlement place being closed for a weather event, or an emergency, or that your settlement won’t go through because a bank cheque has been made out incorrectly. Following settlement, funds from an e-conveyance arrive as cleared funds in the nominated bank accounts the same day as settlement – there’s no need for someone to physically bank the cheques from settlement, or mail them out to the respective parties, because there are no physical bank cheques.

So why isn’t e-conveyancing being done for your property settlement right now? The main issue is that e-conveyancing is not mandatory in Queensland, as so many law firms and banks have not yet progressed to obtaining the required PEXA software. If all the parties to a conveyance are not registered with PEXA, or don’t wish to do the settlement via e-conveyance, then the matter must be settled the old-fashioned paper way. Apart from having the software, there will be scenarios in which your conveyance may not be able to be settled through PEXA as yet – for example, currently you may have trouble settling via e-conveyance if your purchase involves a trust or a transmission application.

Just Us Lawyers are registered for PEXA settlements and would love to assist you in settling your conveyancing matter via e-conveyancing. 

By Remy Forster

Once you have bought a property in Queensland, your name (along with the names of the other buyers) will be listed on the title to that property. When you purchase a property with two or more buyers, you have two options for how your names can be listed on the property title – either as “Joint Tenants” or as “Tenants in Common.” What many buyers don’t consider prior to their purchase is which of these options is better for them.

“Joint Tenants” is a legal way of saying that all the people on the title own the property together. In other words, one person’s part of the property cannot be separated from the rest of the property. One result of owning a property as Joint Tenants, is that if one of the people on the title passes away, their name is simply removed from the title to the property; the property title itself remains whole, just with less owners. This option is more common between married or de facto couples, as the surviving spouse will receive their partner’s portion of the property.

In contrast, by owning property as “Tenants in Common”, buyers are able to assign shares of the title to the property as they wish. This is essentially the property version of cutting different sized pieces of a pie – you can decide how big each piece of the pie should be, and how many pieces you want. For example, four buyers can own a property as Tenants in Common with equal shares (25% each), or three buyers can own the property with one person owning 70% and the other two each owning 15% respectively. Another option, which is particularly popular for taxation purposes, is for one person to own a 99% interest in the property, and for the other to own a 1% interest in the property.

The other main difference in holding property as Tenants in Common, is that should one of the property owners pass away, their share in the property is distributed according to their will, rather than it automatically passing to the surviving owners of the property. It is most common for this option to be used for investment properties, or between parties who have purchased the property due to a business relationship.

Which ownership option is the best for you will depend on your personal circumstances, such as who you are purchasing the property with, the intended purpose for the property, how much money the buyers are each contributing to the property, and whether the buyers have current and valid wills. We would also recommend that you consult with your accountant and financial advisor to determine the benefits of each option prior to signing a contract of sale to buy the property.

BY NATALIE SMYTH

Presently, the Australian Securities and Investments Commission Act 2001 (“the ASIC Act”) affords protection to “unfair” behaviours in business dealings, rather than unfair contract terms. It should also be noted that the existing legislative protection is only available to consumers.

From 12 November 2016, the Treasury Legislation Amendment (Small Businesses and Unfair Contract Terms) Act 2015 (Cth) (“the Act”) will come in to effect, extending the current consumer unfair contract term protections in the ASIC Act and the Competition and Consumer Act 2010 (previously known as the Trade Practices Act 1974).

What small business contracts will the Act apply to?

The Act will extend the existing consumer protections for unfair contract terms to small business contracts that are for the supply of goods or services, or for the sale or grant of an interest in land.

Under the new legislation, a contract will be deemed to be a “small business contract” if the following applies:

• The contract is in a standard form contract; and
• at least one party to the contract is a business that employs fewer than 20 persons (casual employees exempt); and
• either the price payable under the contract does not exceed $300,000, or if the contract has a duration of more than 12 months, the upfront price payable under the contract does not exceed $1 million.

The new legislation allows for the Court to make a declaration that a term of a small business contract is unfair and void. If this occurs, the legislation provides for the rest of the contract to survive and operate without the unfair term, and for the contract to continue to bind third parties. [1]

What is an unfair contract term?

Under the ASIC Act, an unfair contract term is one that:

1. would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
2. the contract term is not necessary to protect the legitimate interest of the party who would be advantages by the term, and
3. it would cause detriment (financial or otherwise) to a party if it were to be applied or relied upon.[2]

The court, in deciding whether a contract term is “unfair” will also take in to consideration the extent to which the term is transparent, and the contract as a whole. Under the ASIC Act, a term is transparent if it is expressed in plain language, is legible, presented clearly and is readily available to any party affected by the term.[i]

Section 12BH of the ASIC Act also provides a number of useful examples of what will constitute an unfair term. Some of these examples include:

• a term that permits one party (but not another party) to avoid or limit performance of the contract;
• a term that permits one party (but not another party) to terminate, vary the terms of, or renew the contract;
• a term that permits one party unilaterally to decide whether the contract has been breached; and
• a term that limits one party’s right to sue another party.

Other considerations

It is envisaged that the new legislation will give businesses more confidence to negotiate contract terms and to agree to contracts, allowing them to take full advantage of market opportunities.

To prepare for the enactment of the new legislation, it is recommended that businesses review their existing standard form contracts and ensure that they are free from unfair contract terms and compliant with the Act.

If you also require assistance in negotiating contract terms that will benefit your business dealing, or if you require legal advice with respect to reviewing a business contract, including due diligence enquiries, please don’t hesitate to contact our office.

[1] Memorandum to Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015

[2] Section 12BG Australian Securities and Investments Commission Act 2001

[i] Ibid.

BY NATALIE SMYTH

On 25 February 2016 the Tax and Superannuation Laws Amendment (2015 Measures No.6) Act 2016 was passed by parliament and received Royal Assent, introducing the new Foreign Resident Capital Gains Tax (CGT) Withholding Regime. A new measure, which is designed to assist the Commissioner of Taxation with the collection of foreign resident capital gains tax liabilities.

The new regime, which will take effect from 1 July 2016, imposes a position obligation on purchasers of certain Australian assets to withhold 10% of the first element cost base of the asset (usually the purchase price) when acquired from a “foreign resident” vendor, and pay it directly to the Australian Taxation Office (ATO) prior to or upon settlement.

The withholding regime will apply unless the vendor is able to supply the purchaser with sufficient proof of their Australian tax residency, in the form of a clearance certificate or declaration.

If you are a prospective purchaser and the new regime applies to your purchase, it is important that you have an understanding of your withholding obligations under the new law, and that you have considered the practical implications that the regime will have on the process and timing of the transaction.

Which assets and transactions will the new regime apply to?

The new regime applies to transactions for the acquisition of certain Australian assets, with a market value of or over $2 million, including:

• Taxable Australian Real Property (TARP) – land, buildings, residential and commercial property;
• Lease premiums paid for the grant of a lease over real property in Australia;
• Mining, quarrying or prospective rights;
• Indirect Australian real property interests (interests in Australian entities whose majority assets consist of the above such property interests); and
• Options or rights to acquire property.

Which assets and transactions are excluded?

Purchasers will be exempt from withholding obligations in the following situations:

• Transactions involving direct and indirect Taxable Australian Real Property interests, valued less than $2 million;
• Transactions conducted through a stock exchange or brokerage system;
• Certain arrangements that are subject to pre-existing withholding obligations;
• Securities lending arrangements; and
• Transactions involving vendors who are under external administration or subject to formal insolvency/bankruptcy proceedings.

What are the practical implications of the new regime?

For direct land transactions, Australian resident vendors will now need to obtain a clearance certificate from the ATO, which will need to be provided to the seller prior to Settlement. The ATO have indicated that requests for clearance certificates can take up to 28 days to process. It is therefore important that both purchasers and vendors factor this requirement when calculating settlement dates. [1]

For transactions involving sales of interests in landholding entities, or grants of options or rights, vendors may provide purchasers with a written declaration stating that they are an Australian resident. Declarations are valid for 6 months from the date they are declared.

Residency of the vendor

The withholding obligations apply to purchasers of certain Australian assets from foreign resident vendors only. Often purchasers will have limited information about vendors, however, it is up to the purchaser to determine whether or not the vendor is a foreign resident for tax purposes.

Importantly, withholding obligations apply in situations where, at the time of entering in to the transaction:

1. The purchaser reasonably believes that the vendor is a foreign resident, or;
2. The purchaser does not reasonably believe that the vendor is an Australian resident, and either:
3. the vendor has an address outside of Australia according to any record that is in the purchaser’s possession, or
4. the purchaser is asked to provide a related financial benefit to the vendor to a place outside of Australia. [2]

Purchasers who are provided with a false declaration from vendors for purchases of other assets other than TARP assets are not subject to the withholding obligation, provided that they are not aware that the declaration is false.

Penalties and repercussions for non-compliance

Purchasers who fail to pay the withholding amount to the ATO on or before the date of settlement will face a penalty equal to the amount that was required to be withheld, and may also be required to pay additional interest on that amount to the ATO.

Important things for purchasers to look out for:

• Withholding obligations will apply in situations where clearance certificates are over 12 months old, and are therefore invalid.
• Withholding obligations will apply in the existence of any discrepancies between the name of the vendor on the clearance certificate and the relevant contract;
• Contracts entered into for the acquisition of certain Australian assets before 1 July 2016, will be subject to the new laws, if they are due to settle on or after 1 July 2016.
• Both purchasers and vendors will now need to factor in the time required in obtaining clearance certificates when calculating settlement time frames.

Other implications:

The Queensland Law Society in conjunction with REIQ have amended the standard REIQ contracts for residential and commercial sales to reflect the new tax withholding regime. For contracts entered into on and from 1 July 2016, the new editions will need to be used.

If you have any questions with respect to the new foreign resident CGT regime, or if you are unsure as to whether the withholding obligations apply to your purchase, please don’t hesitate to give our friendly staff a call at either our Kelvin Grove or Wilston Offices.

[1] https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Foreign-resident-capital-gains-withholding-payments/

[2] Explanatory Memorandum Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill 2015

All developers and other land users in Queensland have a duty of care to take “all reasonable and practicable measures” to ensure their activities do not harm Indigenous cultural heritage located in the relevant area. This broad-reaching duty applies across all land tenures, including freehold, and to cultural heritage regardless of whether or not it has been identified or recorded.

Significant penalties (up to $1,178,000 for corporations and $117,800 for individuals) apply for harming, excavating, relocating or taking away what a person knows or ought to know is Indigenous cultural heritage.

In fact, a person who is found to have harmed cultural heritage recorded on the Aboriginal and Torres Strait Islander cultural heritage register can be imprisoned for up to two years. Equally damaging are stop orders and injunctions that temporarily or permanently restrain persons from undertaking activities reasonably suspected of causing harm to cultural heritage. These and investigations into reported breaches can and have in our experience cause delay and cost blowouts to projects, both big and small.

So with all these duties and penalties, what can development proponents and/or contractors do to manage the risks of non-compliance?

Our solicitors, who have a wealth of knowledge gained from decades of experience in this specialised jurisdiction, suggest taking the following practical steps to ensure compliance with relevant statutory requirements:-

• consider cultural heritage compliance at the planning and development approval stage, not just before major earthworks and other high-risk activities are undertaken;
• undertake a search of the cultural heritage database and register (this can be done online) to see if there is any known cultural heritage in or close by the area proposed for development;
• determine whether the proposed activity can proceed in compliance with the “gazetted cultural heritage duty of care guidelines” (see below); and if not
• consider whether a voluntary or mandatory Cultural Heritage Management Plan or either a native title agreement or “another agreement” with an Aboriginal or Torres Strait Islander party is the best way to addresses cultural heritage compliance requirements.

The duty of care guidelines are a statutory assessment and compliance tool to enable land users to meet their duty of care. They recognise some activities are less likely to harm cultural heritage than others, having regard to the proposed activity and the nature/extent of past land uses. For example, resurfacing an existing car park in most cases is unlikely to require specific compliance measures to be taken and can proceed under the guidelines. Re-developing an urban block is also unlikely to require particular measures. However, care should be taken where the nature and extent of past land uses mean that cultural heritage may be present on site. This is especially important in rural, semi-rural and areas on the suburban fringe that are earmarked for development.

And, of course, if you have any questions or concerns about cultural heritage compliance just give Colin or Ted from our office a call …… they’ll get you through the system!

BY SAM RYALL

Whether you are planning that ‘dream’ overseas holiday, have a loved one who is losing capacity to make decisions on their own or you are in need of your own ‘peace of mind’, it is important you consider the benefits of obtaining a valid and correctly executed power of attorney.

A power of attorney is a legally binding document in which a person (‘the principal’) appoints another person(s) (‘the attorney(s)’) to act on their behalf in making decisions with third parties. The decisions an attorney can make can be either personal (i.e. relating to the care and well-being of the principal such as medical treatment, living arrangements etc) or financial (i.e. selling property, paying bills or administering the principal’s income/bank accounts).

In Queensland, powers of attorney are governed by the provisions of the Powers of Attorney Act 1998 (Qld), specifically Chapter 2 and Chapter 3. Broadly speaking, there are two types of power of attorney: a ‘general power of attorney‘ or an ‘enduring power of attorney’.

• A ‘general power of attorney’ involves the principal appointing an attorney to make financial/personal decisions for a specific time frame (i.e. the principal can elect for the power of attorney to commence immediately or on a certain date/occasion). A common example of where a general power of attorney would be applicable is where the principal may be travelling overseas for a short period and need the attorney to sell property on their behalf, sign legal documentation (such as the Contract of Sale or transfer documentation) and (or) pay any rates/water/electricity or other outstanding accounts. The power of attorney is valid whilst the principal has capacity (a formal term for the ability to make decisions of your own violation) and ceases upon that principal losing capacity.
• An ‘enduring power of attorney’ follows the same procedure as a general power of attorney but has a key difference. With an enduring power of attorney, the principal can appoint an attorney to make financial decisions (either immediately or upon a certain event such as the principal losing capacity) and personal decisions (commencing on the person losing capacity). However, unlike a general power of attorney, these decision making powers ‘endure’ or continue beyond the principal losing capacity.

So you may ask, why register a power of attorney?

Whilst there is no obligation to register a power of attorney, you will be required to register the document with the Department of Natural Resources and Mines (‘DNRM’) should it be used to make decisions about land transactions involving the principal (such as selling, leasing, assigning or transferring property).

A general power of attorney can be registered on the Powers of Attorney Register provided it complies with Section 161 and Section 162 of the Land Title Act 1994 (Qld) (in relation to execution and witnessing of documentation) and does not explicitly exclude the attorney from dealing with the principal’s property. An enduring power of attorney can also be registered on the Power of Attorney Register if it provides for the attorney to make financial decisions on the principal’s behalf and also does not explicitly exclude the attorney from dealing with the principal’s property.

The registration process is relatively straightforward and can be completed ‘over the counter’.  The process involves the following steps:

1. A person (can be the principal, attorney or the solicitor acting for the principal or attorney) lodging the original and fully executed power of attorney with DNRM; and
2. The drafting of a request to register a power of attorney on the power of attorney register (‘Form 16’). This form is to accompany the lodgement of the power of attorney and is to be signed by the person making the request such as the attorney, the principal or the solicitor for the principal or attorney; and
3. Making payment of the sum of $169.00 as the prescribed registration fee (which may be subject to change annually); and
4. Ensuring the power of attorney is adhered with an official DNRM sticker indicating a 9 digit ‘dealing number’.

Whilst the entire process can be completed without legal advice, there is always the possibility of error, such as incorrect witnessing/execution or drafting ambiguity as to when the power of attorney is to commence. For convenience and ensuring your power of attorney is correctly drafted (and/or registered) we strongly recommend you obtain legal advice from one of our friendly solicitors at our Kelvin Grove or Wilston office. We would be more than happy to advise you of your rights and obligations in respect of your power of attorney.