Future glimmers of hope amongst uncertainty

Posted by: Dale Ellerman

I attended an interesting legal industry lunch last week that had speakers addressing Australia's economic prospects in a world of uncertainty. The take away message for me was that there is an elevated risk of another shock from Europe but that it is unlikely to be as bad as the GFC. The mining boom will fall away as Chinese development moves away from public expenditure on infrastructure to consumer driven spending (not as reliant on coal/steel which is far and away our most valuable export). When the dollar falls the expectation is that our  manufacturing, education, tourism and agriculture will pick up to fill the gap.

Overall, a few 'bumps' but the future has glimmers of hope.

Well Drafted Default and Termination Provisions in Leases

Posted by: Denis Stephenson

Prove to be very beneficial

It is now quite clear since the case of Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 that:

1. The ordinary principals of contract including that of termination for repudiation or fundamental breach applies to leases;
2. The presence of an express proviso for the entry in a lease does not exclude other common law rights available to the lessor for termination or damages.

 

A contract may be determined for any breach of a fundamental or essential term. A lease (as well as granting an estate in land) is a contract.  A breach of an essential term may also constitute a repudiation of the lease, also entitling termination. The recent CMA case again illustrated the importance of specifying essential or fundamental terms of the lease.

In the CMA case, the lease specifically stated that the tenant had an obligation to:

1. Keep the premises in good repair and condition; and
2. Promptly repair any damage to the premises for which it was responsible, and
3. and that the tenant's obligations with respect to repair were essential terms of the lease.

 

The tenant was in breach of the obligations to repair.

The Tasmanian Conveyancing and Law Property Act (Act) has a provision similar to our Property Law Act section 124 (1) providing that "a right of entry or forfeiture under any provision or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the breach complained of...requiring the lessee to remedy the breach...and the lessee fails, within a reasonable time thereafter, to remedy the breach...

In the CMA case the landlord sent a letter to the tenant (not a specific notice under the Act but saying it was a notice) requiring the tenant to remedy the breach within a reasonable time and pointing out that the breach was a breach of an essential term of the lease and advising that if the tenant failed to comply, the landlord would at its election either forfeit the lease or accept the tenant's repudiation of the lease.
After 18 days after the date of the letter, the landlord re-entered the premises and locked the tenant out. It affixed a notice to the premises stating that the landlord had accepted the tenant's repudiation by failing to comply and terminated the lease.
The tenant commenced proceedings against the landlord seeking a declaration that the landlord re-entry was unlawful and ineffective to terminate the lease. The court held that the landlord had validly terminated the lease and denied the tenant relief against forfeiture.
The court found if the landlord terminates and re-enters under an express term of the lease it must comply with giving a notice to remedy in accordance with the Act (our section 124 (1) of the Property Law Act). However it found that if the landlord terminates and re-enters pursuant to its common law right it may do so without serving a notice.
The court followed the authority of the High Court in Progressive Mailing House Pty Ltd v Tabali Pty Ltd.
In summary, in the CMA case the landlord by having specified in the lease the obligation to keep the premises in good repair and to promptly repair was an essential condition was able to validly terminate the lease notwithstanding that the landlord had not given a notice to remedy under the provisions of the Act and notwithstanding that in the particular circumstances the court found that the tenant's actions did not constitute repudiation.
For more information please contact Denis Stephenson on 07 3234 3107 or email.

Superannuation Contributions from 1 July 2012

Posted by: Tony Allen

Superannuation contributions - excess contributions tax alert!

Did you know that the tax deductible superannuation contributions cap of $50,000, including salary sacrifice amounts, if you are 50 or older will stop on 30 June 2012?
From 1 July 2012, the cap will be limited to $25,000 regardless of your age and any excess over $25,000 will be taxed at an additional rate of 31.5%. With 15% tax already paid on the tax deductible contribution, the additional 31.5% tax on the excess brings the total tax liability to 46.5%.  Excess concessional contributions are also counted against your non-tax deductible superannuation contributions cap.
Tax deductible superannuation contributions (also known as concessional contributions) include any contributions made by your employer such as 9% superannuation guarantee contributions and salary sacrifice contributions and personal tax deductible superannuation contributions.

What should you do?

If you are 50 or older, and your concessional contributions in the 2011/12 financial year will be more than $25,000, you should:

1. Contact your employer(s) to review the total amount being contributed to superannuation so that you won’t exceed the tax deductible contributions cap.
2. Make sure amounts claimed as personal tax deductible superannuation contributions from 1 July 2012 do not exceed the cap when combined with all other tax deductible contributions to superannuation.

Don’t forget:  it is the total of your tax deductible superannuation contributions (concessional contributions) made to all superannuation funds which is counted against your concessional contribution cap. If you are a member of more than one superannuation fund, make sure the total of your tax deductible contributions made to all funds are counted.  This also includes payments made by your employer or claimed by you as a tax deduction for superannuation insurance premiums.

How can we help?

If you need to reduce your tax deductible superannuation contributions we can assist by calculating the impact on your taxable income and your projected retirement benefits. We can also review your tax planning strategies, your retirement planning goals and assess other retirement funding options. 

There are circumstances when contributing amounts in excess of the $25,000 cap, and incurring excess contributions tax, may not have a material impact on your overall financial situation. Reducing your tax deductible superannuation contributions in these circumstances may not be necessary. We can help you to assess the impact of excess contributions tax and to determine the appropriate course of action given your individual circumstance.

If you have any concerns, or wish to obtain advice in these areas, please do not hesitate to contact Tony Allen on 07 3234 3112 or email.

Demystifying Estate and Succession Planning

Posted by: Kylie Wilson

What are Estate and Succession Planning?

An estate plan is essentially a plan about a person’s ‘estate’ (property and assets). A succession plan is an estate plan, which includes plans for succession (our ‘successors’ are those who ‘succeed’ to our estate). Both types of plan can be an extension of the business plan.
Proper succession planning will give the next generation the opportunity to succeed to a viable and financially successful family farm or business. Without it, the family farm and family unity often do not survive the succession. This is usually the result of three major factors: the financial overburdening of the farm; advice unrealistic expectations of family members; and a lack of appropriate expert advice.
Part of the reason for poor estate and succession planning is poor communication. Older generation members tend not to discuss their plans with other family members. Younger generation members are often left guessing what the future may hold. Many stay on the farm in the mistaken belief that there will be a sound economic future, when in fact the farm cannot cope economically with all that is asked of it.

Why isn't enough to make a Will?

A Will covers only the event of death and does not come into operation until death. On its own, it provides for no plan until death. An estate and succession plan needs to have immediate operation.

Factors to be Taken into Account

Economic Viability

Economic viability is really a matter of affordability. It starts with the question, ‘Can I afford to do all the things I would like to do?’ It will be very important for parents to prioritise what they see as their opportunities and obligations. They will want, for example, to provide for the security of their own future lives, to provide an economic opportunity for the son or daughter on the land, and then to make provision out of their estates for the family. Sometimes not all of these can be achieved to the extent that they would like, and they need to be able to prioritise them. Generally the highest priority is the parents’ own financial security.

Asset Protection

Our society is becoming increasingly litigious. If the business is carried on in the same name as the assets are held, then all of the assets will be ‘at risk’ if there is a liability action.

Use of Structures

To cope with all the likely factors and events, it may be necessary to create different structures, such as companies, discretionary trusts and self-managed superannuation funds. However, the use of these structures does complicate the estate plan. Where these structures are purely tax-driven and succession is overlooked, greater difficulties can occur, leaving fertile ground for dispute in the next generation. Many advisers overlook the fact that the assets of a discretionary (“family”) trust or Superannuation Fund cannot always be left by a Will.

Tax

The plan should include structures which minimise the effect of income tax, capital gains tax and stamp duty, not only on a year by year basis, but also on a ‘transactional’ basis when children are brought into ownership of part or all of the farming entities. Tax minimisation taking the steps which the legislation itself encourages or legitimately allows to minimise the effect of taxation. Planning for tax minimisation should be kept in perspective with the whole range of factors and events which must be planned for.

How to Get Started

There can be no blueprint for succession or estate plans. Each person’s estate and succession plan will be different, depending on a range of factors, such as the size and viability of the present farming operation; the number of family members and their needs, hopes and desires; and a range of philosophical decisions.
Getting started is sometimes the most difficult part of succession and estate planning. It all starts with establishing priorities and finding the right professional advisers who have appropriate experience.
The cost of proper succession and estate planning can be substantial. However, while the cost of ‘getting it right’ may be substantial, it is certainly much less than the cost of ‘getting it wrong’.

How Not to Save Money!

Posted by: Tony Allen A business colleague recently mentioned to one of our Directors that he self acted in a conveyance of a property he purchased at auction. Problems continued to  'float to the surface' 90 days after settlement when he received a $1,600.00 fine from the Brisbane City Council for not providing Pool Safety Certification in compliance with new pool safety legislation.    "In the past my lawyers have made these transactions look so easy I thought I would handle the conveyance myself to save some money.  The transaction was a nightmare from start to finish and even three months later continues to cost me money.  I will never self-act in these transactions again."   The sooner you involve legal advisors to protect your interests the better off you will be. We can assist in designing customised legal support to assist you reach your goals and to ensure your interests are fully protected. Please contact Tony Allen to discuss further on 07 3234 3112 or send us an email.

Clouds Looming for Solar Subsidies

Posted by: Scott Thompson

From 1st July 2012 the Federal Government's Renewable Energy Subsidy significantly reduces for those considering installing photovoltaic systems and inverters (PVS).  This has led to a frenzy of activity in the solar industry as comsumers and installers rush to beat this deadline.  The online media and commercial TV ads have multiplied and frequent advertising material is being left in letterboxes all over Queensland.

Some solar supply companies are heavily promoting the 44 cents a kilowatt Feed in Tariff (FIT) and use that rate to demonstrate attractive return on investment (ROI) calculations.  The FIT is an incentive and solar bonus to encourage the installation of PVS.  What many suppliers are failing to advise their clients is that there is no guarantee the FIT will remain, especially with the newly elected LNP looking to reduce expenditure whereever it can.

Currently, any excess power generated by an installed PVS, is fed back into the grid and the owner of the PVS is paid as per the FIT.  This means the owner receives more than double the price per kilowatt for any surplus electricity fed back into the grid, when compared to what they pay for the power consumed.

To enable this to occur the owner of the property enters into a Network Connection Agreement with Energex which is an agreement whereby Energex permits the customer to generate electricity and to feed it back into the grid.  The State Government Electricity Act provides that when this occurs the customer is entitled to  44 cents a kilowatt for any excess power fed into the grid.  However, this rate can be altered by regulation or indeed by a further review at certain trigger points as outlined in the legislation.  It can of course, as any legislation can be, subject to review by the Government at any time and if the FIT component is not appropriate for whatever reason it can be revoked.

For example, the removal of the FIT could possibly occur on the 1st July 2012.  This is the date the Federal Carbon Tax comes into effect.  By removing the (State Government) FIT as a solar bonus and incentive and replacing it with the flow on effect of the (Federal Government) Carbon Tax which, by default, could also act as an incentive to encourage home owners to install PVS on their property.    Therefore, by default, or by design, a PVS incentive would continue to exist at no cost to the LNP State Government.

This is purely speculation on our behalf, but helps illustrate the many variables in this industry.  The issue for consumers is to ensure they are fully informed of these possibilities before they purchase and install a PVS on their properties.

If you have any concerns, or wish to obtain advice in these areas, please do not hesitate to contact Scott Thompson on 07 3234 3100 or email.

2012/2013 Federal Budget - Be Wary of your contributions to Superannuation

Posted by: Kylie Wilson 

As a consequence of the Government's 2012/2013 Federal Budget announcement, the Concessional Contribution Cap for superannuation for all individuals regardless of their age or account balances in superannuation will be $25,000 from 1 July 2012 until 1 July 2014.

The Government had previously announced a measure that would have provided a $50,000 Concessional Cap for individuals over 50 with superannuation account balances under $500,000 from 1 July 2012.  This has now been deferred until 1 July 2014.

Therefore the higher caps for Concessional Contributions for individuals over 50 will no longer apply, regardless of the individual's account balance in Super, from 1 July 2012.  Care will need to be taken to ensure that Excess Contributions Tax is not incurred by breaching the $25,000 cap after 1 July 2012.

In a further, although not unexpected measure, the Government has doubled the contributions tax on concessional contributions for indivduals with adjustable incomes of $300,000 or more.

If you need assistance with your SMSF or asset protection and succession planning, contact our senior specialist, Kylie Wilson on 07 3234 3102 or email.