Issue 6 - July 2004

• Asset protection and the proposed amendments to the Bankruptcy Act
• WMD Employment Seminar
• 4th Anniversary of GST
• NSW driving legislation update
• State revenue legislation update & vendor stamp duty issues
• Superannuation death benefits not necessarily part of estate
• 35th Anniversary

Proposed amendments will prevent bankrupts from shielding assets from creditors Asset protection and the proposed amendments to the Bankruptcy Act

The Attorney General recently released an exposure draft of the proposed amendments to the Bankruptcy Act which is said to target high income earners who use bankruptcy to avoid paying debts. The draft legislation aims at allowing bankruptcy trustees to recover assets held by third parties where those assets have been acquired using income generated by the bankrupt. The Attorney General's initiative arises out of concerns expressed in recent years about a number of high profile barristers who failed to pay their income tax obligations while related entities (including spouses) acquired assets using the barrister's income.

However the draft legislation is not limited to such cases. If passed, these provisions will extend to any bankrupt including those who have a modest income and who have attempted to protect themselves and their family (legitimately and in accordance with the current law) from the uncertainties and risks of everyday business by using what until now has been seen as legitimate and proper asset protection strategies.

The draft legislation also gives the Bankruptcy Trustee enhanced powers to apply to set aside transfers of property under family law financial agreements where those transfers put that property beyond the reach of creditors.

According to the explanatory memorandum the objects of the new provisions will be: 
 to improve the ability of bankruptcy trustees to recover assets from bankrupts who do not own these assets personally but who have funded the acquisition of assets by third parties whilst retaining the use or benefit of those assets;
 provide a more effective means of collecting income contributions from bankrupts who do not receive their income as a salary or wage; 
 prevent the misuse of financial agreements as a means of avoiding payment to creditors; and 
 address long standing issues concerning the interaction between family law and bankruptcy. 

The time period for recovery of these assets is set at 10 years prior to the bankruptcy.   However, the provisions will not apply where the transfer occurred less than 10 years prior to the bankruptcy provided that the third party provided market value consideration in return for the original transfer and the transferee was unaware of the bankrupt's purpose in making the transfer.

The proposed amendments to the bankruptcy legislation will have far reaching effects for legitimate tax payers who have endeavoured to shelter themselves from the riggers of carrying on business in today's litigation conscious world.

We will be focusing on the draft legislation (which may have retrospective application) so as to be in a position to advise our business clients on whether their existing asset protection strategies are going to be effective and what they will be able to do under the new regime.

If you would like more information in relation to the proposed amendments or to asset protection strategies generally, please contact Denis Bowles at denis@wmdlaw.com.au or Greg Dickson at greg@wmdlaw.com.au.

Employment Law for Employers  Seminar - 25 August 2004 WMD Employment Seminar

The next event in the WMD Seminar Series will be a free one-hour breakfast seminar on "Employment Law for Employers" to be held at our office on 25 August 2004, from 7.45am for an 8am start.

The Seminar will be aimed at business owners and senior management and the topics to be covered will include:
 Choosing your employees
 
 Employment Contracts 
 Managing Problem Employees
 Industrial Action
 
 Industrial Relations Commission Procedure
 
 Employment Issues in the Transmission of Business
 
 Employee or Contractor - the determining factors 
 Third Party Contracts
 
 Employment Policies and Compliance with legislative requirements

To assist us with catering, please reserve your place by emailing the seminar convener, Dean Groundwater at dean@wmdlaw.com.au.

GST refunds - time is running out 4th Anniversary of GST

The GST was introduced in Australia on 1 July 2000 and the system is now officially 4 years old. This 4 year time period is important because, as a general rule, the Federal Commissioner of Taxation cannot seek payment of underpaid GST or overclaimed input tax credits and taxpayers cannot seek refunds of underclaimed credits or overpaid GST after this 4 year period has expired.

Taxpayers are not entitled to refunds, whether for underclaimed input tax credits or an overpayment of GST, unless the Commissioner is notified within 4 years of the end of the GST tax period to which that refund relates. For example, in relation to overpaid GST or underclaimed input tax credits for July 2000, the Commissioner must be notified before 31 July 2004 of the intended application for refund. It is unlikely that an extension of time will be granted by the Commissioner.

GST that has not been paid for 4 years ceases to be payable to the Australian Taxation Office provided the Commissioner has not issued a notice to the taxpayer requiring payment and the failure to pay GST was not due to fraud or tax evasion. This is likely to be welcome news to those who may have made mistakes in the initial months of GST and the first few Business Activity Statements which resulted in an underpayment of GST.

For more information on GST and related issues, please contact Rebecca Flynn at rebecca@wmdlaw.com.au or Craig Pryor at craig@wmdlaw.com.au.

RTA appeals, drink driving, and habitual offenders NSW driving legislation update

RTA appeals

The Road Transport (General) Amendment (Driver Licence Appeals) Regulation 2004 removed the right for a person whose licence was varied, suspended or cancelled by the RTA to appeal to the Local Court against that decision. An appeal can no longer be made in relation to the suspension of a drivers licence for the accumulation of points. Many RTA decisions remain appealable but in most cases time limits apply so you should seek advice promptly once notification of an RTA decision is received.

Drink driving  

Statistics at the turn of the century showed that most people facing imprisonment for drink-driving only, that is not associated with theft or drug use, tended to be males 30 years of age and over with comparatively stable lives. Around 18% of offenders convicted of drink driving had committed prior drink-driving offences within the previous 5 years. Among the high-range drink drivers, 40% re-offended within 5 years.

In recent years, we have seen the crackdown on drink driving accompanied by an increase in the penalties applicable. A custodial sentence of up to 2 years and fines up to $5,500 may now be imposed for serious drink driving offences (i.e. a high range offender with a major offence in the previous 5 years - see below). There are also now many diversionary programs available to offenders. The court may refer offenders for treatment as part of a sentence or offenders may voluntarily undertake programs, which may aid in the reduction of the period of licence disqualification and/or the fine imposed. 

Habitual traffic offenders  

The Road Transport (General) Act 1999 declares an offender an "habitual traffic offender" on conviction where the person has, in the period of 5 years before the conviction, also been convicted of at least 2 other driving offences committed on different occasions. The declaration as an habitual traffic offender means an automatic 5 years cumulative disqualification unless the court decides that would be too harsh, in which case the period of disqualification can be reduced to two years but cannot be reduced further.

At the time of the third conviction or subsequently, the motorist may apply to the court for the declaration to be quashed on the grounds that it would be disproportionate and unjust having regard to the motorist's overall driving record and any special circumstances.

If you require any advice in relation to driving offences, or any criminal law matter, please telephone Kevin Dwyer or email kevin@wmdlaw.com.au.

Further amendments now in force State revenue legislation update & vendor stamp duty issues

Further amendments to revenue legislation now in force

On 6 July 2004, the State Revenue Legislation Further Amendment Bill 2004 was assented to by the Governor. This Act will apply with effect from 1 June 2004. The Act gives effect to urgent vendor duty changes, clarifies the eligibility criteria for the First Home Plus duty concession, clarifies the operation of the new premium property duty and amends the land tax exemption for land subject to a conservation agreement. However, it appears that some of the initial concerns regarding the Amendment Act have not been fully addressed.

If you require any advice in relation to the combined effect of the revenue amendments, please telephone Rebecca Flynn or email rebecca@wmdlaw.com.au.

Vendor stamp duty issues

Many of you will be aware that vendor stamp duty is now payable on property transactions entered into after the 1 June 2004. There are a number of transactions which are exempt from the duty and the sale of the principal place of residence is one of those exemptions. What is the situation if the residence has been vacant for some time for example during the vendor's absence overseas? What is the situation if it is the executor of the will of a deceased proprietor who is selling? Does an exemption still apply in a divorce where the sale is made by the former spouse?

To be eligible for the exemption when a vendor is absent from the residence, the vendor will need to establish that he or she used the property as the principal place of residence for at least 2 years within a period of 6 years before the sale.

Where an executor is selling, the exemption applies provided the land was used and occupied by the deceased as the principal place of residence immediately before death and provided the sale is made within 12 months of the later of the grant of probate and 1 June 2004.

In relation to couples who separate, if the commissioner is satisfied that the person who uses and occupies the land as his or her principal place of residence is the former spouse of the vendor, the exemption applies in the same way as it would apply if the former spouse was the vendor.

Each situation needs careful consideration to determine if the particular transaction falls within the criteria for exemption.

If you require any advice in relation to vendor stamp duty, or any property matter, please telephone Peter McKeon or email peter@wmdlaw.com.au.

Common misconception about death benefits Superannuation death benefits not necessarily part of estate

Superannuation is becoming an increasingly significant part of many peoples assets and financial resources. Often a superannuation policy will have a death benefit attached to it. There is a common misconception that, if you have a will, the superannuation death benefit will be paid to your beneficiaries in accordance with the terms of that will. This is not necessarily the case.

Superannuation is held by a trustee during the life of the policy holder. On the death of the policy holder, if there is a death benefit, it will be paid in accordance with a binding death nomination (if the funds rules permit it and if the binding death benefit nomination has been properly prepared) or, if no binding death benefit nomination has been made, at the discretion of the trustee.

Recent changes to legislation concerning superannuation funds permit a notice to be given to the trustee which compels the trustee to pay the death benefit to particular beneficiaries. The rules concerning compliance are strict and failure to comply will result in the notice being invalid. The notices last for only 3 years unless the fund stipulates that they are valid for a lesser time. The categories of persons to whom the benefit can be paid are also restricted. The benefit under such a nomination may be paid to the legal personal representative of the deceased (usually the executor) or a dependant of the deceased.

If no nomination is made or if the nomination is not valid, the trustee of the fund has to exercise his or her discretion to act fairly and reasonably to decide who should receive the benefits or whether they should be paid into the estate of the deceased.

If a person is unhappy with the decision of the trustee they may have the right to approach the Superannuation Complaints Tribunal to review that decision and to alter it. Strict time limits apply in relation to approaching the tribunal and it is important that prompt legal advice be sought if it is likely that any dispute about a superannuation death benefit may arise.

For more information concerning superannuation death benefits and the Superannuation Complaints Tribunal please contact Greg Dickson at greg@wmdlaw.com.au or Dean Groundwater at dean@wmdlaw.com.au.

WMD celebrates anniversary  35th Anniversary

In July 2004, we celebrated our 35th Anniversary of continuous legal practice.

It was on 1 July 1969 that the founding partner, Bob Warren set up practice in Engadine. From that beginning as a sole practitioner, our firm has developed into a strong and stable firm offering expert advice to our clients in many areas of law. We are also advise numerous solicitors from other practices on a consultancy basis and we accept referrals of clients from those practices on the larger and more complex matters.

Happily, the strong community ties which were developed by Bob in the early years of our practice, have helped us to grow and we are fortunate that we have been able to maintain and develop this close and valued association with the Sutherland Shire community and with a constantly increasing client base across Sydney and New South Wales. We are grateful for the support our valued clients have shown us throughout the firm's continued development. We don't lose sight of the fact that it is an honour to be entrusted to look after the affairs of our clients and this principle will continue to guide our firm in the future as it has over the last 35 years.

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