Issue 3 - April 2004

• Mini-Budget Announcement - 6 April 2004
• Duty of Care for Occupiers
• Creditor's Statutory Demands
• Building Sustainability Index
• Sweeping Changes to Family Law from 29 March 2004
• A right to privacy

Vendors will now pay duty when they sell property at the rate of 2.25%  Mini Budget Announcement - 6 April 2004

On 6 April 2004, the Treasurer of New South Wales, Mr Michael Egan announced a Mini-Budget which will introduce the most significant changes in revenue law since the introduction of the GST.

Stamp Duty Changes
There are 3 important changes in stamp duty:

1.    Extension of First Home Plus

First home buyers will be exempted from duty on purchases up to $500,000, with a sliding scale for the calculation of duty on purchases between $500,000 and $600,000. Previously, the upper limit for the exemption of duty was $200,000, with a sliding scale in effect between $200,000 and $300,000. First home buyers of vacant land will be exempted from duty on purchases to $300,000, with a sliding scale for the calculation of duty between $300,000 and $400,000.

The benefit of this exemption will apply to any first home buyer who has entered into a contract after midnight on Saturday 3 April 2004.

2.    Introduction of Vendor Duty

Vendors will now be liable for duty at the rate of 2.25% on the value of any investment property they sell (other than farms). However, vendors will be exempted from the payment of duty if the sale price does not exceed 12% of the original purchase price. Assuming that a vendor sells an investment property for $500,000 (and that this sale price exceeds the original purchase price by the relevant margin), then the vendor will be liable to pay duty of $11,250 to the State Government. In addition, the purchaser of the property will have to pay duty of $17,990 to the State Government.

3.    Premium Property Tax

The duty payable on the purchase of a premium property will increase from 5.5% to 7% for that part of the price which exceeds $3,000,000. For example, once the new legislation comes into force, the duty which will be payable on a purchase of $6,000,000 will increase from $315,490 to $360,490. If the property is commercial property or is an investment property (and the sale price exceeds the original purchase price by the relevant margin), then the vendor will be also liable to pay duty of $135,000 to the State Government.

Land Tax Changes
Currently, a land owner is only required to pay land tax on the unimproved value of any land which is owned (other than the land owner's principal place of residence) where the total land value is greater than $317,000. The current exemption for the land owner's principal place of residence does not apply where the unimproved land value is more than $1,970,000. The current rate of land tax is 1.7% of the value of the unimproved land owned above the $317,000 threshold, payable each year. Under this system, a land owner could own several strata title investment properties and not be liable for land tax provided the total unimproved value of the strata lots did not exceed $317,000.

Under the new regime, all land owners will be liable to pay land tax on the total unimproved value of any land owned, other than their principal place of residence, regardless of the value of that land.

The land tax to be paid will be based on a sliding scale ranging from 0.4% to 1.4% depending on the total value of the land owned. For example, a property investor who owns 4 residential strata units with an unimproved land value of $250,000 will be liable for land tax of $1,000 each year.

All owners of investment properties will also need to lodge returns with the Office of State Revenue in relation to their land ownership.

Consequences

According the announcement, the legislation to enact these changes will be released in May with the changes to apply from June or July.

The consequences of the Mini-Budget reforms announced by Mr Egan will raise many important considerations for vendors and purchasers. There is also the issue to be considered regarding what appears to be the double-taxing of profits by the imposition of vendor duty in addition to capital gains tax.

In addition, the announcement poses many questions which will need to be addressed by the legislation, including:

•  What will be the effective date for the imposition of vendor stamp duty? What will be the effect on vendors who have entered into options for the sale of land?

•  How will the exemption from vendor duty for builders operate?

•  Will vendor duty be imposed on the sale of the former principal place of residence in a deceased estate?

•  Will there be an exemption from vendor duty on transfers under the Family Law Act or the Property Relationships Act?

We will be monitoring the progress of these new reforms and we will review the draft legislation as soon as it becomes available. If you have any questions in relation to the Mini-Budget announcement, please telephone Rebecca Flynn or email rebecca@wmdlaw.com.au. Alternatively, you can obtain a copy of Mr Egan's announcement by clicking on the following link Mini-Budget Speech

Court emphasises need for people to take care in situations of obvious risk  Duty of Care for Occupiers

Many occupiers of premises are uncertain about their duty to those coming on to their premises. The recent High Court case Hoyts v. Burns shows the Court's current trend to place greater emphasis on the need for people to take more care of themselves in situations of obvious risk.

Facts
The claim arose when Mrs Burns took a group of 5 adults and 8 young disabled children to the Hoyts Cinema in Sydney. After they were seated and the movie started the young disabled child for whom she was primarily responsible started to scream and became agitated. She left her seat to retrieve him and bring him back to the seat. He was screaming and kicking as she tried to sit down.

The seat retracted automatically when Mrs Burns stood up. When Mrs Burns went to sit down again she fell heavily on a metal bar protruding from the base of the seat. She was not a regular cinema-goer and no warning signs existed in or outside the cinema that the seats retracted automatically. The Trial Judge (the Judge who first heard the claim) ruled that the cause of Mrs Burns' injury was her miscalculation as to the position of the seat. The Court of Appeal overturned that decision on the basis that there had been a failing by Hoyts to warn cinema-goers that the seats retracted automatically. This was in spite of the fact that evidence was given that:

•  Mrs Burns had to pull her seat down to sit on it when she first sat down in the cinema so that she knew that it retracted; and

•  That she was clearly distracted by the screaming and kicking of the child she was trying to return to the seat. A warning sign in those circumstances would have been of little use.

The High Court Decision
The High Court upheld the appeal in favour of Hoyts. The Court was not satisfied that a warning sign would automatically mean that persons returning to their seat would factor that into their thinking process. The Court also concluded that Mrs Burns was clearly distracted and any warning sign would not be likely to have had an effect.

The case is a welcome indication of judicial attitude for occupiers but occupiers should continue to consider the need for warnings where:

•  there is a particular risk to be warned against; and/or

•  there is a hidden feature not evident to most contracts; and/or

•  the consequences of failing to warn might be very serious; and/or

•  a warning might have altered the conduct of an injured person.

If you need advice in relation to liability concerns for your premises, please telephone Greg Dickson or email greg@wmdlaw.com.au. 

Timelines and procedures for statutory demands are strictly enforced  Creditors Statutory Demands

A creditor's statutory demand is a document that a creditor can serve on a debtor company formally demanding the payment of one or more debts that are presently due and payable. The demand must be accompanied by an affidavit setting out the particulars of the debt (or debts) owed and the total debt must exceed $2,000.

Serving a creditor's statutory demand can be a fast and effective way to get a company to pay its debts because the failure to comply with the creditor's statutory demand has very serious consequences for the company. If the company either refuses to pay the amount demanded, does not come to an arrangement suitable to the creditor in relation to the debt (or debts) or does not apply to the Supreme Court to have the demand set aside within a 21-day period, then the creditor may apply to the Supreme Court to begin winding up proceedings against the company for its insolvency.

The timelines and procedures set down in the Corporations Act in respect of creditor's statutory demands are strictly followed and procedural errors such as misspelling of names or addresses or the miscalculation of the amount being demanded may invalidate the demand.

There are several grounds in the Corporations Act for setting aside a demand, including the existence of a genuine dispute regarding the existence or amount of the debt owed, the existence of an off-setting claim or a defect in the demand or affidavit accompanying the demand which will cause substantial injustice if the demand is not set aside.

This is an extremely complex area of law. Legal advice should be promptly obtained before making any decisions in relation to the service or receipt of a creditor's statutory demand. If you would like to discuss this topic or seek our advice please contact Craig Pryor on craig@wmdlaw.com.au. 

 
New requirements for residential developments from 1 July 2004
Building Sustainability Index

The Building Sustainability Index ("BASIX") is an interactive assessment tool recently introduced by the Department of Infrastructure, Planning and Natural Resources. BASIX will apply to certain residential development proposals from 1 July 2004 and to all types of residential development proposals from 1 October 2004 in all Sydney local councils.

BASIX promotes sustainable residential development and aims to ensure that new homes meet the NSW Government's water and energy efficiency targets.

Once BASIX has come into force, proposals for new residential development must be submitted with a BASIX Certificate, which will be issued once the proposed development has satisfied the BASIX assessment requirements. The assessment will be completed by architects, design professionals or owner builders using the BASIX tool on the internet.

The Department is proposing to have the BASIX tool and regulatory framework available for public comment in May with training to commence in June. For any further information in relation to BASIX, please telephone Rebecca Flynn or email rebecca@wmdlaw.com.au .

Greater obligations on parties to try to resolve Family Law disputes  Sweeping Changes to Family Law from 29 March 2004

The Family Court has implemented sweeping changes to the procedures and the forms in all Family Court proceedings from 29 March 2004 onwards. The purpose of the changes is to reduce the number of forms that are presently being used and to place greater obligations on parties to try to resolve their disputes prior to the commencement of legal action. Changes have also been foreshadowed to the way in which expert evidence can be introduced. In many cases it is likely that the Court will try to persuade or compel the parties to agree upon the use of one expert for issues in dispute rather than to each engage an expert and to have competing evidence offered by those experts in the course of the hearing.

If you or a family member or friend are contemplating family law action, you will need to consider the effect that the changes to the law will have on your position. For further information about these changes and for advice generally on family and de facto law issues, please contact Greg Dickson at greg@wmdlaw.com.au.

Businesses should implement a Privacy Policy  A right to privacy

A recent decision of the Queensland District Court has flagged the likely emergence of an established right at common law to sue for the tort of invasion of privacy.

Australia has a number of laws concerning privacy but these are statutes enacted under Commonwealth or State Legislation. It seems likely that this recent decision (which expands upon a High Court case in 2001) will give rise to more breach of privacy suits in the future even if the District Court Decision does not stand on appeal. The Court in that case adopted a suggestion from the High Court case that a useful test of what is private and what sorts of activity might be prohibited is any activity which may involve an intrusion into a person's privacy that is " highly offensive to a reasonable person of ordinary sensibilities ".

What Type of Activity could be caught
Companies and individuals involved in direct marketing, private investigation and debt collection all potentially could offend the test of an invasion of privacy. Employers who use monitoring devices such as cameras or who conduct drug and alcohol tests to supervise their employees could also find themselves involved in an argument that they had breached this right to privacy.

Practical Steps
Businesses should review their activities and those of their employees to make sure that they are not likely to offend this emerging principle. If a company policy about privacy (both employees' privacy and privacy of the clients with whom the business deals) is not in place, one should be developed and implemented as quickly as possible. We can assist you with the development of a suitable privacy policy and a review of your present business practices to make sure that you are not likely to be on the receiving end of a privacy claim. For further information, email Greg Dickson at greg@wmdlaw.com.au.

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