Badenach v Calvert [2016] HCA 18

Posted by: Kylie Shaw

Jeffrey Doddridge had been recently diagnosed with a terminal illness and wished to amend his will so as to leave the entirety of his estate to the son of his long term partner, Mr Calvert.

In 2009, Mr Doddridge approached Murdock Clarke Solicitors, a firm who had prepared his previous wills, and asked to have a new will drawn up accordingly. Mr Doddridge owned two properties which he owned as tenants in common in equal shares with Mr Calvert.

Following Mr Doddridge's death in 2010, and with no provisions preventing otherwise, a claim was made by his estranged daughter seeking control of her father's interests in any property. The daughter's claim succeeded and she was awarded a significant amount of her father's estate.
As such, Mr Calvert filed a claim against both the solicitor, Robert Badenach, and the firm who had prepared the will.

Although initially succeeding in the Full Court of the Supreme Court of Tasmania, the claim ultimately failed and was dismissed by the High Court of Australia.
The Court had previously held that a beneficiary to a will may make a claim where his interests and the interests of the testator align completely, such that by working in the best interests of a client a solicitor could also be considered to be working in the best interests of the beneficiary. The Court held that as the duty of Mr Badenach was to advise Mr Doddridge in relation to all options available to him, even if said options worked against the interests of Mr Calvert, that the two interests did not align and no claim could be made.

The Court also found that although Mr Badenach should have enquired as to the existence of another family member,
it was impossible to say whether Mr Doddridge would have been able to provide enough evidence in order for him to fully advise on the likelihood of a claim. Further, the Court found that even if Mr Doddridge had been able to provide all the relevant information, it could not make an assumption as to how Mr Doddridge would react. As such the High Court found that although the solicitor may have breached his duty it was not possible to show that without that breach no damage would have been incurred by Mr Calvert.

This case highlights the importance of discussing options with your solicitor when making a Will, particularly when it comes to considering potential claims against your estate.

Superannuation and small business in the 2016 Federal Budget - what does it mean for you?

Posted by: Kylie Wilson

In the Budget last night Scott Morrison announced some big changes to superannuation and a tax cut for small business companies.  Some of the changes to superannuation were unexpected and are likely to cause a rush on an adjustment of planning strategies for some who are already in pension phase.

Superannuation key points

The key changes announced for superannuation include:

• A cap will apply to the transfer of superannuation balances into retirement phase from 1 July 2017. Those in pension phase now do not receive the benefit of any grandfathering provisions.  Therefore existing tax-free pension phase superannuation balances over $1.6 million will have to be transferred back to accumulation phase and will be subject to a concessional 15% tax rate.
• In a largely unexpected move, concessional contribution caps have been lowered to $25,000 (previously $30,000 for those under 50, and $35,000 for those 50 and over) to be introduced from 1 July 2017.
• Non-concessional contributions will have a lifetime cap of $500,000 from last night.  This is a lifetime cap as opposed to a previous annual cap of $180,000 or for those using the bring-forward rule, up to $540,000 in a three year period.
• The tax offset of up to $500 on concessional superannuation contributions for low income earners continues (although renamed).
• The ability for people under the age of 75 to make concessional contributions to superannuation has been significantly extended, and people aged under 75 will no longer have to satisfy the work test to be able to receive contributions from their spouse.
• From 1 July 2017, the 10% rule that has applied to claiming a tax deduction for personal superannuation contributions will be removed.
• From 1 July 2017, the Division 293 threshold will be reduced from $300,000 to $250,000 (a largely expected move).
• A rollover of unused concessional contribution caps will be made available from 1 July 2017, which will allow individuals to make additional concessional contributions for years where they have not previously reached their concessional contributions caps.  This will apply to people with superannuation balances of less than $500,000 and may be helpful for people who have had interrupted work patterns.  It should be noted, however, that amounts will carry forward on a rolling basis for a period of five consecutive years, and only unused amounts accrued from 1 July 2017 can be carried forward, which does restrict the effectiveness for many of those with interrupted work patterns; and
• From 1 July 2017, the Government will repeal anti-detriment payments.

So far the industry response has been mixed, with the most significant criticism revolving around the reduction of the concessional contributions cap to $25,000.

 

Small business key points

• From 1 July 2017, company tax relief will apply for small and medium sized businesses, with the company tax rate for businesses with an annual turnover under $10 million cut to 27.5%. 
• The Government has announced a plan to progressively reduce this tax rate to 25% by 2026/27.
• All small businesses with a turnover of less than $10 million will also be eligible for the instant tax write-off for equipment purchases of up to $20,000 made next financial year.
• To help fund the above, the Government has announced, in relation to multinationals, that the ATO will receive an extra $679 million to hire further staff to form part of a 1,000 person team to monitor multinationals, with any moneys that are planned for shifting off-shore to be taxed at a higher 40% tax rate.