Issue 32 - September 2006

•  The use of Testamentary Trusts in estate planning
•  The far reaching effects of the Retail Leases Act
•  GST implications on refurbishing an existing premises
•  Double jeopardy no more?
•  The effect of divorce on friendships

Consider a Testamentary Trust in your will to protect your beneficiaries The use of Testamentary Trusts in estate planning

In recent years, the use of testamentary discretionary trusts has become much more popular. Such trusts work in much the same way as a discretionary trust set up during the life of the person establishing it but it can have different tax effects. The discretionary testamentary trust structure has some of the following benefits:

It may be used to keep assets in the hands of trustees rather than the beneficiary personally so that the assets cannot be attacked by creditors or in a family law property settlement or by those who might take advantage of a naïve or unsophisticated beneficiary.

It may be used to keep assets in the name of the trustee rather than the beneficiary personally so that the beneficiary will not be subject to means testing or assets testing by Centrelink.

It can be used to manage the affairs of minor beneficiaries by distributing trust income (and sometimes capital) to pay for maintenance and education until the children reach their majority, when they can decide for themselves how the funds are to be used.

It can be used to distribute income to minor children of a beneficiary to generate tax savings on that part of the income distribution.

It can be used as a source of funds for borrowing by the beneficiary until such time as the tax position of that person is such that other tax advantages can be used. At that time, the beneficiary could repay borrowed trust funds and begin using the trust to distribute income or hold assets in the ways set out above.
It is very important to tailor such testamentary trusts carefully to meet the particular needs of each family. These trusts are not suitable for use in all estate planning situations, however, they are very useful to protect beneficiaries and provide income tax and Centrelink benefits in many cases.

If you require assistance concerning any aspect of testamentary trusts, please contact Greg Dickson or email greg@wmdlaw.com.au, Louise Stone or email louise@wmdlaw.com.au or Jayne Humphreys or email jayne@wmdlaw.com.au.

A lease was created despite the disclaimer The far reaching effects of the Retail Leases Act

A recent case in the Retail Leases Division of the Administrative Decisions Tribunal highlights the importance of the arrangements between the lessor and the lessee being properly documented in a retail leasing transaction.

In Helou & Ors v Bong Bong Pty Ltd & Anor, the Tribunal found that a new lease for the minimum 5 year term was created by a letter of offer which clearly stated that "Acceptance of this offer by the lessor will not in any circumstances create a legally enforceable lease between the parties." This is a usual type of disclaimer found in may lease proposals but in this case it did not prevent the lessee insisting upon a new 5 year lease.

In the case, the contrary argument raised by the lessor was that the lessee was merely holding over pursuant to the previous lease. The lessee was able to defeat this argument as the lessee had been paying the increased amount of rent set out in the lease proposal and not merely the rent which would have been payable had the lessee being holding over under the previous lease.

It is important to note that section 8 of the Retail Leases Act 1994, upon which the case turned, provides that a "retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first)." It would appear then, that if either of these conditions is satisfied, a lessee may be entitled to insist upon a new lease despite the inclusion of the usual disclaimer in the lease offer.

If you require any further information in relation a retail lease transaction, please telephone Rebecca Flynn or email rebecca@wmdlaw.com.au.

A "refurbishment" can constitute a "new" residential premises for GST purposes GST implications on refurbishing an existing premises

If the sale of new residential premises while registered for GST (in the course of carrying on an enterprise) constitutes a taxable supply which attracts GST and the sale of "secondhand" residential premises (for predominantly residential purposes) is categorised as an input taxed supply which does not attract GST, you may be inclined to conclude that the refurbishment of existing premises and the subsequent sale of those premises would also constitute an input taxed supply.

However, the Full Federal Court held, in Marana Holdings v Federal Commissioner of Taxation, that the refurbishment and sale of apartments within a secondhand building previously used as a motel constituted the supply of new residential premises. The Court gave consideration to the previous use of the building as a motel and differentiated this use as a "non-residential use" placing it outside the scope of being "secondhand" residential premises.

As a motel is characterised by short term residential stays, the differentiation is an interesting one. Not only does this decision affect the activities of developers who refurbish existing buildings for on-sale as residential apartments, it also has an interesting bearing on owners/investors and operators of apartments within hotels and serviced apartments and the implication of GST on these types of arrangements given that a motel is differentiated as a non-residential use.

The ATO is now moving quickly to enact legislation with retrospective application to characterize the lease of apartments to hotel operators and serviced apartment arrangements as input taxed supplies.

If you wish to discuss any matter regarding Taxation and Revenue Law, please telephone Jodhi Coady or Rebecca Flynn or email jodhi@wmdlaw.com.au or rebecca@wmdlaw.com.au.

DNA evidence allows retrial after acquittal Double jeopardy no more?

The 800-year-old legal principle of "double jeopardy" - the prohibition on retrying people after they have been acquitted is about to be abolished in cases involving DNA evidence or where there have been tainted acquittals.

Three years ago, the Australian Law Reform Commission made similar proposals for preserving forensic exhibits and allowing access by the convicted. The Federal Attorney-General, Philip Ruddock, put his proposal in this regard to the premiers' conference on 14 July 2006 and it appears that New South Wales will implement new laws on double jeopardy this week.

Until now, the Crown was required to make all forensic exhibits available until the completion of the appeals process, after which they would be returned. The samples would then often be discarded, mislaid or contaminated.

The legislation, prompted by advances in DNA technology, will also be changed to make it mandatory for Crown law offices to preserve forensic exhibits, particularly biological samples, in serious cases even after the appeals process has been exhausted. Similar legislation is likely to be adopted by other States and Territories.

If you want further information regarding any criminal matter, please telephone Kevin Dwyer or Craig Pryor or email kevin@wmdlaw.com.au or craig@wmdlaw.com.au.

A friend in need The effect of divorce on friendships

As you go through divorce, some of your friends may seem to vanish just when you need them most. For better or worse, old dynamics, including friendships, change with divorce. Some of your "couple" friends you used to enjoy together may no longer feel comfortable being with either of you on your own because they may not want to "get in the middle". Others may feel threatened by your decision to divorce because they may be in a troubled marriage themselves - or perhaps one of them may feel wary of your new single status and think you have designs on their partner. Then there are friends who choose to provide support solely to your ex-spouse - a common but painful situation.

The good news is that as you settle into your new life, you will have a golden opportunity to edit and reinvent your friendships. You'll be relieved of those that were negative, draining, dull or just too much work. New friends will take their place, adding fullness and dimension to your life, while relationships with the friends who stand by you through this difficult time will be strengthened by the experience.

Here are some "friendly" tips to help you through this painful side effect of divorce:
Get out of the house. Even if it means walking down a busy street or going shopping, get yourself out of isolation and back into the world;

Try a new hobby or interest. It's an easy, natural way to meet likeminded people and make new friends;

Volunteering is also a wonderful outlet. When you give of yourself to others, you remind yourself that your own pain is temporary and that there are others in need. You become less self-absorbed and more attractive to the right potential friends;

Let it all out. If you are really struggling with lost friendships speak to a therapist, counsellor or other professional who can provide objective support.
The above article was taken from Divorce Magazine and the article was written by Jane Nahirny. If you want any advice concerning divorce or family and de facto law, please telephone Greg Dickson or email greg@wmdlaw.com.au.

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