Blog authored by Andrew Cannon   (email aac@peacockes.com)

Between the competing tensions of the all enveloping emergence and dependence of technology in modern Australian society, the innovation of legal firms to increasingly deliver digital services to clients’ against the fading abyss of traditional ‘paper’ conveyancing practices, the time for property and conveyancing transactions to be completed ‘paperless’ and electronically has come of age. Conversely, with the rise of the brave new world of breakthroughs consequence of technology’s introduction into the legal, property and conveyancing spheres, lawyers and conveyancers are also in equal measure becoming increasingly exposed to an unprecedented number and forms of cyber-risks, fraud and ethical dilemmas when transacting with clients and other parties digitally.

To date, such examples of the forms of cyber-risk and fraud omnipresent online are cited from, amongst others, Astell v Australian Capital Territory [2016] ACTSC 238, Infotrack’s ‘The Increasing Threat of Identity Crime – A guide to the VOI landscape’ and the Legal Practitioners’ Liability Committee ‘Security Warning for PEXA users’ in response to the well covered ‘Masterchef case’.

Subsequently, relevant government, law and policy makers have responded in kind to these examples of very real and present cyber threats of fraud and identity theft. As evinced in s12E of the Real Property Act 1900 (NSW) (“RPA”) practitioners must satisfy their professional obligations in conveyancing and property transactions for verifying a person’s identity or (“VOI”) of clients’ and/or their agents’ acting by either:

1. Applying the “VOI standard”; or
2. Verify the identity of a person “in some other way that constitutes reasonable steps”.

This requirement also applies to the identity verification of mortgagees.

Authorities and best practice guidelines derived from sources such as the Electronic Conveyancing National Law (NSW) section 23 and the Model Operating Requirements prescribed by the Australian Registrars National E-Conveyancing Council (ARNECC) Verification of identity confirm VOI is now a mandatory requirement for lawyers and conveyancing representatives in NSW, applicable to both traditional ‘paper’ and ‘new-age’ electronic settlements. VOI is also a mandatory requirement for all conveyancing transaction in Qld, SA, WA and VIC. However, NT, TAS and the ACT are yet to ‘get onboard’ and recognise formal requirements for VOI in conveyancing and property transactions.

Both electronic settlement platforms PEXA and Sympli also recognise the necessity for representatives to complete verification of identity for each of their client’s and/or acting agents’ in order to complete settlement, through the mandate of their respective participation rules and agreements with network users (ostensibly law firms).

Section 12E of the RPA, which also deals with the requirements of gaining client authorisation and certification, provides:

“…The Registrar-General may from time to time determine, in writing, rules for or with respect to the preparation and lodgment of documents to give effect to conveyancing transactions (the
"conveyancing rules" ), including rules for or with respect to the following:

(a) the verification of identity and authority, including:

(i) the standards to which identity and authority are to be verified, and

(ii) the classes of persons in respect of whom identity and authority are to be verified, and

(iii) the classes of documents in relation to which verification of identity and authority requirements apply, and

(iv) the classes of persons who can undertake verification of identity and authority, and

(v) any supporting evidence and retention requirements…”

Subject to s12 E of the RPA, the Office of the Registrar General’s Conveyancing Rules (“Conveyancing Rules”) sets out that a representative must take ‘reasonable steps’ to verify the identity of both:

• Each client; and
• Each agent that acts for the client (such as an adult child giving /taking instructions for their parents or a buyers’ agent etc).

The necessity for practitioners (lawyers and conveyancers) to verify the identity of clients and their agents’ applies to a broad range of conveyancing transactions and dealings with property to ‘cover the field’ including:

• To create, transfer, dispose of, mortgage, charge, lease or deal with in any other way an estate or interest in land;
• To register, note or record anything on the title to a property; or
• To get the registration, note or record of something on title changed, withdrawn or removed.

As per rule 4.1.1, the Conveyancing rules took effect on 26 November 2016 and places the onus on lawyers and conveyancer representatives to take “reasonable steps”, which are imposed as a professional ethical obligation owed to each client and their agents’, for identity verification. Furthermore, rule 4.1.5 of the Conveyancing rules provides a higher standard of ‘reasonableness’ for representatives to make further inquiries’ to verify the identity of each client and their agents’ in dubious or suspicious situations where:

“the Representative knows or ought reasonably to know that:

(i) any identity Document produced by the Person Being Identified and/or any Identity Declarant is not genuine; or

(ii) any photograph on an identity Document produced by the Person Being Identified and/or any Identity Declarant is not a reasonable likeness of the Person Being Identified or the Identity Declarant; or

(iii) the Person Being Identified and/or any Identity Declarant does not appear to be the person to whom the identity Document(s) relate; or

(b) it would otherwise be reasonable to do so.”

In the event that representative cannot be satisfied of a person’s identity to a transaction, arguably legal practitioners are availed the benefit under the s12E of the RPA and chorus of VOI best practice guidelines from property and conveyancing institutions to cease acting any further in the conduct of the conveyancing/property transaction in lieu of the exercise of due diligence and professional responsibility owed.

The Australian Registrar’s National Electronic Conveyancing Council (ARNECC) provides some guidance to lawyers and conveyancers on what ‘reasonable steps’ means under RPA legislation and the Conveyancing Rules when taking a client’s or their agent’s VOI. However, whilst “reasonable steps” is not a defined term under either the RPA or the Conveyancing Rules in NSW, the concept of “reasonable steps” does allow practitioners to demonstrate professional judgment and exercise their discretion and independence to assess what is reasonable in the circumstances of each case and the client when applying the VOI standard.

What is the VOI standard ?

The VOI standard, which is one method for representatives to verify a person’s identity, can be read as a two-tiered process requiring that:

• A “face-to-face” interview with the client/client’s agent to be identified; and
• Examination of original identity documents, from the list of approved and acceptable documents, be tendered and produced by a person to be identified.

Face-to-FaceTime interview ? – Issues with video technology for “face-to-face” for VOI interviews

Pursuant to ARNECC Model Practice Rules Guidance Note 2, “face-to-face” interviews conducted via video technologies such as Zoom, skype, FaceTime and others can be “manipulated and forged” and carry inherent risks for legal representatives to be cautious and aware of. As advised by ARNECC, when applying the VOI standard, such modern video technologies “…do not constitute a face-to-face in person interview, nor does it allow identification of original documents, as required by the Verification of Identity standard…” .

Where a representative “uses some other way that constitutes the taking of reasonable steps” to verify a client’s or their acting agent’s identity, there is scope within this ‘less rigid’ method and it may be more suitable and appropriate in some circumstances, particularly where currently the Verification of Identity standard is not. Examples where the use of skype or other similar technologies may be appropriate include for remote/regional clients with no or limited access to VOI agent services or the ability to attend their legal representative’s office. However, given the currency of the VOI laws (in NSW and Australia wide), there is yet to be a ‘test-case’ in NSW or another Australian jurisdiction on this point, determining the legitimacy and suitability for video technology to be used to conduct “face-to-face interviews”. ARNECC arguably eludes to the latter point by stating that:

“use of the (Verification of Identity) Standard is not compulsory and may not be practical in some circumstances.”

However, this was qualified with its submission that:

“where the standard is not used and there is a dispute the subscriber will be required to establish that the method used to verify the identity of a Person constituted “taking reasonable steps” in the particular circumstances.”

How can I complete my VOI ? – Paper and Digital services

Despite the strict requirements on all parties including buyers, sellers and legal representatives to ensure compliance with VOI, identity verification in NSW can be satisfied in several ways such as:

• In the office with your conveyancer/lawyer (usually at the time of, or just after the completion of exchange); OR
• VOI agent services such as Australia Post Land Title verification, ZipID, ID Secure and MaxID. These services aim to provide quick and accessible services, paper-based or digital forms. Additionally, most practitioners now have accounts with these VOI agent providers which allows them the equal convenience to access secure and confidential portals which produces and stores a client’s verification of identity, usually sent to the representative as a report.
• However, depending on the priority required/ordered, both your conveyancer/lawyer representative or VOI agent will likely charge a fee for the service of verifying your identity and authority (express or non-express) according to the standards prescribed by the RPA and the Conveyancing Rules.

To the latter point, only equal to the embrace of technology in the  conveyancing and property spheres has been the rising tide of tech enabled identity agents and providers, free from the constraint of legal ethical obligations, to make identity verification a viable ‘market’ and the ‘clients’ of law firms and conveyancing practices their ‘consumers’. In concert with settlements ever-increasingly being settled more efficiently electronically, VOI services today are arguably most popularly offered and delivered digitally, via tech enabled and online identity verification agents offering the convenience of well branded and trendy VOI apps. Most digital VOI agents’ services via apps are tailored for both apple and android powered tablets and smartphones, which comprise amongst other features, GPS mapping and sophisticated ‘real-time’ video and photographic technologies allowing identity verification to occur “some other way that constitutes reasonable steps” and in the broadest sense of the meaning, “face-to face”. As such, these digital VOI agent providers offer their services ‘anytime’, from either the convenience of work or from the comforts of home.

Who is required to complete VOI ? Natural/legal persons and Australian/foreign and overseas status

VOI in NSW is required to be taken for all applicable conveyancing and property transactions regardless of whether the entity is:

• A natural or legal person; or

On the basis of citizenship status is:

• Australian citizen or resident;
• Foreign citizen or resident;
• Overseas at the time of the relevant conveyancing/property transaction.

The Registrar General’s Guidelines for Verification of Identity on the NSW Land Registry Services (“LRS”) website sets out the minimum documents requires for persons who are Australian citizens or residents, including a identifier declaration, as well as the requirements for foreign persons and/or residents. The documents which most readily satisfy the identity verification standards in NSW include, but are not limited to:

• A current valid Australian drivers’ licence;
• Australian passport; and
• Birth certificate.

During the conduct of the examination of the original documents to be verified, the (lawyer/conveyancing) representative or VOI agent must be satisfied, so far as reasonably possible, that the original documents tendered, photographs taken (if any) and/or searches conducted for verification are true and confirm the identity of the person to the transaction. A representative lawyer or conveyancer should also verify the identity of such entities like appointed individual acting for a company or as power of attorney. For a Company, VOI can be satisfied by:

• Conducting and producing an ASIC search confirming such records of the existence and identity of the registered company name; and
• The identity of the individual duly appointed Officers (Directors and Secretaries) whom are authorised to sign or witness documents on behalf of the Corporate body in such capacity, including the affixation of the Company seal.

Reasonable steps for taking VOI in NSW for a power of attorney can also be satisfied by:

• Confirming the currency and validity of a certified original copy of the power of attorney appointing the person as power of attorney for another party to the property/conveyancing transaction; and
• Verifying the identity of the person appointed to act as power of attorney.

In relation to overseas clients and/or their agents’, one method legal/conveyancing representatives may use to satisfy the requirements for VOI in NSW involves:

• Instructing clients and or their agents’ acting to have their ID documents certified at their nearest Australian embassy or Australian Consulate office which will sign, date and endorse copies of the original identity documents; and
• The certifying Australian embassy or Australian Consulate officer completing with the client and/or their agent acting the approved Australian Embassy/High Commission/ Consulate identity/ witnessing certification (certification) and client authorisation. Other methods may include, with the legal representative taking further ‘reasonable steps’, having overseas client verify their identity at an international law firm.

How long does my VOI last for once completed?

However, once a person’s VOI is confirmed, it need not be updated for a period of 2 years and should be held securely (either paper or electronically) by the representative (lawyer or conveyancer) for a period of 7 years.

Expiry of Personal Property Security Interests:

The Personal Property Securities register reached its 7 year anniversary on 30 January 2019.

The default registration period for a security interest starts at 7 years (although a security interest may of course be registered for a different period).

In any case, anyone who manages security interests should regularly check whether their registered interests are due to expire and consider whether the registration of their security interests may need to be renewed/extended.

If you have registrations that need to be extended, they must be extended before they expire to maintain priority.

If you require our assistance to renew/extend any registrations or have any other queries in relation to securities interests then please contact our office on 02 6882 3133.

 

 

Our Christmas/New Year Office Hours

The Directors and Staff wish you the compliments of the season and advise that this office will close at 5.00 pm on Friday, 21 December 2018 and will re-open at 8.30 am on Monday, 7 January 2019.

 

Blog authored by Tim Cullenward

Criminal Law Changes and Impacts

The Rural Issues Conference held in Sydney on 26 October 2018 was attended recently by several members of the firm and proved informative on a number of relevant issues. Once such issue was the recent changes to the Crimes (Sentencing Procedure) Act 1999.

Many people would have heard the term “section 10” mentioned in professional and social contexts, when discussing potential outcomes to PCA offences or other criminal matters. The expression "section 10" refers to section 10 of the Crimes (Sentencing Procedure) Act 1999. This section allows a Court that finds you guilty of an offence, to discharge you without recording a conviction. Because there is no conviction, there is no criminal record. This blog intendeds to demonstrate the changes to that section and others, in terms of relevant sentences available to offenders.

As of 24 September 2018, sentencing options available to offenders changed in accordance with the Crimes (Sentencing Procedure) Amendment (Sentencing Options) Act 2017. They include the following amendments:

1. Section 10(l)(a) dismissal without proceeding to conviction.
2. Section 10(l)(b) order discharging the defendant under a Conditional Release Order (CRO) referred to in s9(l)(b) without proceeding to conviction (CRO without conviction)
3. Section 10(l)(c) order discharging the defendant on condition that the defendant entered into an agreement to participate in an intervention program
4. Section 9(l)(a) Conditional Release Order proceeding to conviction (CRO with conviction)
5. Section 10A conviction with no other penalty
6. A fine (Fines Act 1996)
7. Section 8(1) Community Correction Order(CCO)
8. Section 7(1) Intensive Correction Order(ICO)
9. full-time imprisonment.

In addition, if a court finds a person guilty of a domestic violence offence, the court must impose on the person either: (a) a sentence of full-time detention, or (b) a supervised order under section 4A of the Sentencing Act. A "supervised order" is an order (being an intensive correction order, community correction order or conditional release order) that is subject to a supervision condition.However, a court is not required to impose full-time detention or a supervised order if the court is satisfied a different sentencing option is more appropriate in the circumstances of the case and records its reasons for reaching that view.

The court must consider the safety of the victim of the offence before imposing a community correction order or conditional release order on a person guilty of a domestic violence offence. A court cannot make an order for an ICO unless it is satisfied that the victim of the domestic violence offence, and any person with whom the offender is likely to reside, will be adequately protected by conditions of the ICO or for some other reason.

If a court finds a person guilty of a domestic violence offence, the court must not impose a home detention condition if the court reasonably believes that the offender will reside with the victim of the domestic violence offence.

New Orders: CRO, CCO and ICO

These Orders have standard conditions that must be imposed. For CRO's and CCO's the standard conditions are that the offender must not commit any offence and must appear before court during the term of the order if called upon to do so. The standard conditions of an ICO are that the offender must not commit any offence and must submit to the supervision of a community corrections Officer. This is substantially similar to the previous model that most people are aware of.

Intensive Corrections Orders

A court that has sentenced an offender to imprisonment for one or more offences may make an ICO directing that the sentence(s) be served by way of ICO, in the community. There is no non-parole period, and the Order is not available if the offender is under the age of 18 years. The Court will require an assessment report on suitability for such an order.

Before a Court will consider an ICO, it will consider the safety of the community as the foremost issue. There are a number of considerations and restrictions in place regarding ICO’s, and these orders are usually imposed in severe circumstances. For more information, please contact our office.

Community Correction Orders

Instead of imposing a sentence of imprisonment, a court may make a community correction order (CCO) in relation to an offender. The maximum term of a CCO is 3 years, and it commences on the date when the Order is made. The standard conditions on a CCO include not to commit any offence and to appear before the court if called on to do so during the term of the CCO. A Court may also impose additional conditions or vary/revoke any such additional conditions. Additional conditions include curfew, community service work (not exceeding 500 hours or hours prescribed by regulations) rehabilitation or treatment, abstention condition alcohol or drugs or both non-association place restriction and supervision by community corrections or juvenile justice.

Home detention and electronic monitoring or a curfew exceeding 12 hours in any 24-hour period cannot be imposed on a CCO. Community service work cannot be imposed without an assessment report confirming the offender is suitable.

Conditional Release Orders

Instead of imposing a sentence of imprisonment or a fine (or both), a court may make a conditional release order discharging the offender if (a) the court proceeds to conviction, or (b) the court does not proceed to conviction but makes an order under sl0(l)(b).

In deciding whether to make a CRO with a conviction, the court must have regard to:

1. character, antecedents, age, health and mental condition;
2. whether the offence is of a trivial nature;
3. extenuating circumstances in which the offence was committed;
4. any other matter proper to consider.

 

Additional notes:

• A court cannot impose a fine and a CRO on the same offender for the same offence.
• A CRO with conviction may be made as an alternative to imposing a fine.
• The maximum term of a CRO is 2 years and commences on the date it is made.
• The court must impose the standard conditions on a CRO. Those conditions are not commit any offence, and to appear before court if called upon to do so during the term of the CRO.
• The Court also has discretion to impose additional conditions, as discussed above.

For more information, please contact our office.

 

 

Blog authored by Tim Cullenward

Overview

Many would now be aware (either by print, news or social media) of a new road rule now in place in NSW, designed to improve the safety of emergency workers and people they are protecting. There is has been significant discussion about the implantation of this new rule, with many in favour of improved safety measures, with some expressing outrage over the dangers in having to dramatically reduce speed with very little warning.

Transport for NSW, with the support of emergency service agencies and other stakeholders, launched a community education campaign across NSW on 30 July 2018 to give the community time to understand the requirements of the rule. The campaign includes TV and radio advertising, social media promotion and digital signage on major roads.

According to the Transport for NSW, Centre for Road Safety, the rule was introduced to improve the safety of police and emergency workers, as well as the people they are protecting. Police, firefighters, paramedics, State Emergency Service and rescue volunteers perform difficult and dangerous work for the community and like everyone, they should feel safe and know that they are protected at work. The new rule provides certainty for motorists about how they should behave when emergency vehicles are stationary on the road and displaying blue or red flashing lights. The new rule also establishes a required standard for safe behaviour and further ensures emergency workers can do their work without worrying about being struck by a passing vehicle. The rule has been designed to provide maximum safety benefits to emergency workers while keeping it simple for the community to understand.

The NSW Government has stated it will monitor the safety and traffic impacts of the rule during a 12-month trial period in consultation with NSW Police, emergency service organisations and other stakeholders. This will allow an evaluation of the safety impacts and any other consequences of the new rule and enable consideration of reviews and outcomes from other jurisdictions implementing similar rules.

The NSW Government will monitor the safety and traffic impacts of the rule in the 12 months the trial is running, in consultation with key stakeholders, as part of an independent evaluation to determine the impact on the safety of emergency service workers and drivers.

The short version

1. The new rule can be found in the Road Rules 2014, Regulation 78-1 (Approaching or passing stationary emergency response vehicles).
2. The new rule requires motorists to slow down to 40km/h when passing a stationary emergency vehicle displaying blue or red flashing lights.
3. The rule also requires motorists to give way to any person on foot in the immediate area of the emergency vehicle. Motorists should not increase their speed until they are a safe distance past the vehicle.
4. The rule applies to vehicles travelling in both directions, unless the road is divided by a median strip.
5. Motorists who do not comply with the rule will face a $448 fine and three (3) demerit points.
6. A maximum court penalty of $2,200 will also apply. This is comparable with the current penalty when it is determined that a motorist has driven negligently in the presence of obstructions or hazards, including stopped emergency vehicles and personnel.

Key Elements from Transport for NSW, Centre for Road Safety:

• Motorists must not exceed 40km/h when passing a stationary emergency vehicle displaying flashing blue or red lights.
• Motorists must also give way to any person on foot near an emergency vehicle displaying flashing lights and not increase speed until a sufficient distance past the vehicle.
• The rule will not apply when an emergency vehicle displaying blue or red flashing lights is on the opposite side of a road separated by a median strip.
• 40km/h is considered a safe speed around vulnerable road users. This speed is consistent with speed limits in school zones, many work zones, and environments with vulnerable and unprotected road users, such as high pedestrian activity areas.
• The new rule will require that motorists do not increase their speed until a sufficient distance past the emergency vehicle so as not to cause a danger to any person near the vehicle (for example, a fire truck may be stationed by the roadside with flashing lights and firefighters may be managing a fire a short distance away from the vehicle. In this instance, motorists should not increase their speed until they are fully past the vehicle and the emergency workers. In contrast, motorists will be required to slow down to 40km/h for a shorter distance when passing a police vehicle that has pulled over another vehicle on the side of the road).
• It is the responsibility of all drivers to be aware of the individual circumstances of each roadside incident and to drive at a safe and appropriate speed under the speed limit.
• The rule applies to all roads, including motorways, highways and freeways.
• If there is a median strip between your vehicle and the stationary emergency vehicle you will not need to slow down.
• If the emergency vehicle is on the median strip, then the rule will apply to vehicles on both sides of the road.
• A median strip is an area or structure that separates vehicles travelling in opposite directions. A median strip can be covered in grass, it can include or be a wire rope or concrete barrier or be a continuous painted island filled with diagonal bars.
• A median strip does not include double white lines, a single white line or a broken white line on its own or in combination with a continuous white line. It also does not include wide centre lines or short painted islands typically found as part of intersection turning lanes.
• Motorists must slow down to 40km/h when passing the following emergency vehicles when stationary and displaying flashing blue or red lights:
  • NSW Police Force vehicles
  • Ambulance Service of NSW vehicles
  • Fire & Rescue NSW vehicles
  • State Emergency Service vehicles
  • Rural Fire Service vehicles
  • Volunteer Rescue Association vehicles
  • Traffic Emergency Response vehicles
• Motorists should always start slowing down in a controlled manner as soon as they first see blue or red flashing lights, taking into account the current road conditions including surrounding vehicles;
• If an emergency vehicle is attending an incident in an area of low visibility, due to the location or weather conditions, it will be because there are no other options to move to a safer location. Further care should be taken in these circumstances.

For more information, please contact our office.

(Blog post author: Andrew Graham)

It is important that Executors carefully consider the taxation implications before distributing assets of an estate.

An estate at law is a trust, where the executor (and also in most cases the trustee) is the trustee of the trust, and the beneficiaries stated in the Will are the beneficiaries of the trust. The terms of the trust are set out in the Will.

Ordinarily, a trustee will only be assessed to tax of the trust in cases where no beneficiary is presently entitled, namely under Section 99 or Section 99A (which contains penal provisions) of the Income Tax Assessment Act 1997 (“ITAA 1997”). The Commissioner of Taxation is happy to accept tax from the trustee under Section 99 of the ITAA 1997, where the trustee is treated as an individual tax payer. Under current income tax rates, no tax is payable on the first $18,200.00 of taxable income, tax at 19% is payable on incomes between $18,201.00 and $37,000.00, at 32.5% for incomes between $37,001.00 and $90,000.00; at 37% on incomes between $90,001.00 to $180,000.00 and 45% for incomes of $180,001.00 and over. (The Medicare levy, currently at 2%, is payable in addition to the above tax rates).

An estate may be continued for tax purposes for up to three (3) years after the date of death, being the financial year in which the deceased died and two (2) subsequent financial years. It is important that an executor consider whether it is preferable for the executor to pay tax on income of the trust estate (i.e. between the date of death and the end of the financial year of the date of death) or whether the individual beneficiaries should.

Ultimately this decision, and also when to make a final distribution of assets of the trust estate, will depend upon the estimated income of the estate and the likely tax rates of the beneficiaries.

In a case where some or all of the beneficiaries are not liable to tax (such as tax-exempt charities) or are subject to low rates of tax, then executors should carefully consider whether each beneficiary should be asked to pay tax, rather than the trustee. In particular where the estate is large and especially where significant assets of the estate are sold in the course of administration and which realise a taxable gain, executors should be particularly diligent.

It makes sense that if a tax-exempt charity receives its share of the deceased’s estate and is not liable for any tax on such share, no tax will be payable on the income relating to the share received.

However for a beneficiary to be liable for tax on the income relating to its share of the estate, the beneficiary must be “presently entitled”. The principles governing present entitlement in the context of deceased estates is set out in Taxation Ruling IT2622. This ruling says that for a beneficiary to be presently entitled to a share of the trust income, the estate must have been “fully administered”. This involves a question of fact. That is, that the assets of the estate have been called in and the deceased’s debts and liabilities have been paid.

Importantly it is the deceased’s debts and liabilities which have to be paid in order to reach full administration, not those of the estate.

Accordingly, even though liabilities incurred in the administration of the estate (such as legal and accounting fees) may not have been paid prior to the making of a distribution of the proceeds of the estate, the relevant beneficiary will still be considered to be presently entitled.

It is common for an executor to sell assets of an estate (such as real estate, investments and shares) and then to make an interim distribution of the proceeds of sale before the executor has even sought confirmation of the taxation liability either of the executor or of the beneficiaries. Capital gains and capital losses made by the estate are aggregated to determine whether the estate has made a net capital gain or a net capital loss. A net capital gain is included in the estate’s net income (Section 95 of the ITAA 1936). Where a resident beneficiary of a trust estate (who is not under a legal disability) is presently entitled to a share of the income of the trust estate, Section 97 of the ITAA 1936 operates to include in the assessable income of the beneficiary, his or her or its share of net income of the trust.

So long as the estate assets have been called in and the deceased’s debts and liabilities have been paid, it does not matter whether or not the estate has reached the point of full administration or is at the intermediate stage. This is because the beneficiaries are presently entitled to any amounts that are actually paid to them by the executor. If the estate has not been finalised it does not prevent the beneficiaries in this situation from being presently entitled to the income actually paid or to be paid to them or on their behalf. However had one or more debts or liabilities of the estate not had been paid prior to any distribution to a beneficiary of his/her/its share of the estate proceeds, the executor would be liable to be assessed on the income of the trust estate under Section 99 or Section 99A of the ITAA 1936.

It is not uncommon in large estates where a significant net capital gain could be derived from the calling in of the deceased’s assets. For example, where the net capital gain was $300,000.00, tax payable by the executor (under Section 99 of the ITAA 1936), the tax would be $108,097.00. If all the beneficiaries were tax exempt charities, no tax would be payable.

In the case where the net capital gain of the trust estate was $15,000.00 and comprised the only income of the estate, in most cases it would be preferable if the executor was assessed under Section 99 of the ITAA 1936 rather than each beneficiary were assessed under Section 97 ITAA 1936, because the net income is below the taxable threshold of $18,200.00 and no tax is payable.

The message for executors is to carefully consider the taxation implications of each estate, which will depend upon the size of the estate, the nature of the assets, the tax position of each of the beneficiaries and whether the debts and liabilities of the deceased have been paid prior to any distribution being made to any of the beneficiaries.

 

 

Your Will and Aged Care Accommodation

If you (or your spouse) are considering entering Residential Aged Care then you should undertake a review of your Will.

Many people leave all of their estate to their spouse, however this is not always the best decision.

For example only:

• If your spouse receives an aged pension and has entered into in Residential Aged Care and the Australian Government contributes to the Aged Care Daily Accommodation Payment for your spouse; and

• If you have children or other beneficiaries who would benefit from an inheritance;

Then in some cases it may be beneficial to leave some or all of your assets to your children or other beneficiaries rather than to your spouse.

The reason for this is that if your spouse inherits assets then:

• This may increase how much your spouse has to contribute to the costs of their Residential Aged Care.
• It might reduce the amount of Aged Pension that your spouse may be entitled to.

However circumstances can vary greatly.

NB how you currently hold your assets is important, as the gifting rules may come into play if you need to sever joint tenancies and this could adversely affect your and your spouse’s pension.

Likewise the value of your and your spouse’s assets and how close they are to the relevant asset test thresholds may also make a difference.

We therefore recommend you obtain legal and financial advice specific to your situation prior to altering your Will.

 

 

Over 65 and Thinking of Downsizing? Potential new superannuation benefits

From 1 July 2018, if you meet the eligibility requirements, you may be able to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

To be eligible to make a downsizer contribution of up to $300,000 into your super:

• You will need to be 65 or older at the time of the contribution
• Your house sale contract must have exchanged on or after 1 July 2018
• You must make your downsizer contribution within 90 days of selling your home (unless the ATO grants you an extension on this time limit)
• You can only make a contribution from the sale of one home (ie you cannot previously have used the downsizer contribution scheme). However you can make multiple contributions from the sale of that one home – but all contributions must be made within 90 days of the sale completing and cannot exceed the cap of $300,000 per person
• You or your spouse must have owned your home for 10 years or more before selling it
• Your home must be in Australia and you must apply the main residence exemption for CGT to the sale of the home (unless you acquired the home prior to 20 September 1985)
• You must submit the downsizer contribution form to your super fund either before or at the same time as making your contribution
• The contribution cannot be greater than the total proceeds from the sale of your home

If you choose to make a downsizer contribution then:

• If you have a spouse, then each of you may be able to make your own contribution of up to $300,000
• A downsizer contribution will not count towards your concessional contributions cap
• A downsizer contribution can be made even if your superannuation balance is greater than $1.6 million
• However a downsizer contribution will count towards your transfer balance cap of $1.6 million (nb the transfer balance cap applies when you move your super savings into the retirement phase)

You should carefully consider whether a downsizer contribution is suitable for you, as they are not tax deductible and will be taken into account for determining eligibility for the age pension.

If you sell your home, are eligible and choose to make a downsizer contribution, there is no requirement for you to purchase another home, however purchasing a new home is also permitted.

 

 

Family Dispute Resolution   (Blog by Kathleen Clark)

You’ve been to see your family law solicitor about a parenting matter and hear the dreaded words, “you need to attend mediation”. What does that even mean?

The Family Law Act provides that before making an application for a parenting order, a person must make a genuine effort to resolve their dispute by family dispute resolution(see section 60I(1)). It does not mean relationship or marriage counseling. Like any industry, family law has its own jargon – “family dispute resolution” is regularly interchanged with phrases such as “mediation” and “litigation intervention conference”.

Genuine effort

“Genuine effort” means that you need to participate in the mediation process in good faith. Behaviours that are NOT in good faith include:

• Failure to make proposals in the first place
• Unnecessary postponement of meetings
• Refusing to agree on trivial matters
• Shifting position just as agreement seems in sight
• Adopting a rigid non-negotiable position
• Failure to make counter proposals
• Unilateral conduct which harms the mediation process
• Refusal to sign a written agreement in respect of the mediation process or otherwise
• Failure to do what a reasonable person would do in the circumstances

(see Tom Altobelli, A brave new world: pre-action procedures in family law, Australian Family

Lawyer, Vol 17 (2) at 34-35).

What if it fails?

If the process fails, and it may do so for a myriad of reasons, the mediator (also known as family dispute resolution practitioner) will issue each participant with a section 60I certificate.This is then filed with a court application for parenting orders.There are different types of certificates, and you should check with your lawyer about what type you have been issued, and whether there are any potential cost implications.

The Process

Each mediation provider has their own process.Broadly speaking:

• There is an intake phase.This provides each person participating in the mediation a chance to meet with the mediator, explain how the parenting relationship has worked, current issues and their concerns.Some providers at this stage require each participant to undergo some courses, counselling or other training to ensure they are ready to mediate.
• There is the mediation phase.What this looks like for each mediation is determined on a case by case basis.Some mediations are conducted by telephone, some in separate rooms (called shuttle mediation) and some face to face.Broadly speaking there is opportunity at the commencement of the mediation for each person to say what has brought them to mediation, and what they are hoping to achieve.The mediator will then facilitate discussion between the participants and help them explore options for resolution.It is not the mediator’s role to decide about certain facts or decide who is right.The mediator controls the process that allows the attendees to try and resolve their dispute.

Parenting Plan or Orders

If agreement is reached, you may receive a parenting plan.A parenting plan is a written document, signed and dated by the attendees.It may deal with a variety of matters such as:

• Who the children will live with
• How the children will spend time with each parent
• Communication between attendees/attendees and each child
• How the plan will be updated

Attendees may wish for the parenting to plan to become a Court order and will need to talk to a solicitor about this process.

Preparation

Mediation is not just another hoop to jump through to get to Court.It is an opportunity for you to make the decision about how to parent your children.If you cannot agree or compromise with the other person involved, then you may end up handing over your power to make decisions about how to parent your children to lawyers and judges.Whilst sometimes this is necessary, it is far better if it can be avoided.

Given its importance, you should seek legal advice as part of your preparation for mediation.Things to discuss with your lawyer include:

• What does the Family Law Act say about parenting matters?
• What types of proposals would be reasonable in your particular circumstances?
• What are some negotiating tips and strategies that you can employ?
• What kind of topics should you be ready to discuss at the mediation, and what points will you raise?

If you would like legal advice, please contact either Tim Cullenward or Kathleen Clark today on (02) 6882 3133.

Blog posted by Amanda Quin. Blog Author Kathleen Clark.

 

 

The New South Wales government has recently announced driver licence disqualification reforms that will come into effect in October 2017

Put simply, the penalties for when you have your license disqualified are changing, to ensure better community protection and a reduction of repeat offending and unauthorised driving.

These proposed changes can be summarised as follows:

Police will have greater powers to impose on-the-spot vehicle sanctions to keep repeat offenders and dangerous drivers off our roads.

Certain disqualified drivers who have complied with their disqualification period for at least two years will be able to apply to the Local Court to have their disqualification lifted early.

No disqualified driver ever convicted of driving offences involving death or grievous bodily harm will be eligible to have their disqualification periods lifted early.

Penalties for unauthorised driving will be more proportionate to other NSW driving offences.

There is a number of rationales for these changes. For instance, a disqualification period of 5 to 10 years does not necessarily deter unauthorised driving, and such lengthy periods without a licence may have a devastating impact on people in regional and remote rural areas, especially those without access to public transport, or whose employment requires a license.

It is hoped these reforms will reduce reoffending, by allowing people to return to lawful and regulated driving, while simultaneously providing stronger powers for police to protect the community from dangerous drivers. The reforms are expected to allow police to confiscate registration plates or cars owned by repeat offenders on the spot, where drivers have continued to drive whilst unauthorised. These reforms will enable police to impose a three month vehicle sanction where a disqualified driver is caught exceeding the speed limit by more than 30 km/h. Police will also be able to impose vehicle sanctions on the spot of six months to repeat offenders who have two or more existing convictions for certain driving offences within the previous five years. For instance, people who have been convicted for driving whilst unlicensed or disqualified, apply for a licence without mentioning the disqualification, or stating the name incorrectly on a driving application, may be subject to these harsher penalties. At present these amendments will only apply to a disqualified driver is also the registered operator of the vehicle.

A number of benefits come with these reforms. For instance, certain disqualified drivers may apply to the local Court to have their disqualification lifted early if they have complied with their disqualification period from a minimum of 2 to 4 years depending on the individual circumstances. However, if a person subject to a disqualification has ever been convicted of driving offences involving death or grievous bodily harm, then they will not be eligible to lift their disqualification period. That all aside, the local Court will still need to consider community safety in determining whether to lift a disqualification period. If you have had your disqualification period lifted, you will still need to apply to the roads and Maritime services to complete the standard road safety knowledge test to get your license back.

The maximum penalties for unauthorised driving offences will also be revised, and more information on that issue will be available shortly. Minimum and automatic disqualification periods the plight unauthorised driving offences. For example if you are convicted of driving while your license is disqualified, cancelled or suspended, you will automatically be disqualified for six months under these new reforms. Whilst the court may vary that suspension. Depending on your circumstances, will be no less than the minimum disqualification period of three months. Those automatic disqualification and minimum periods will increase for each second and subsequent offence.

One of the biggest reforms is the abolition of the habitual traffic offender scheme. At present if you are convicted of three relevant serious driving offences within a five year period, you automatically declared a habitual traffic offender Accordingly you are banned from holding a driving licence for five years. That ban applies in addition to any other penalty received for the offence and runs consecutively, meaning you may be off the road for extremely lengthy periods.

If you have received a disqualification notice, or you have been subject to a sanction by police, for further information you should make an appointment with our office.

Blog author: Tim Cullenward