The much anticipated 2021-22 Federal Budget was released on 11 May. Among the millions pledged for critical services and tax cuts, the Budget also contains some important updates for prospective property purchasers.
The Budget Papers outline a Department of the Treasury payment of $622.2 million for 2021-22 to ‘increase home ownership… and enhance housing data’. This is part of a $782.1 million commitment over four years to support housing, including payments to support homelessness and maintaining housing data research and statistics.
HomeBuilder
Applicants for the HomeBuilder grant will be pleased to hear that under new budget measures, the construction commencement date requirement has been tripled, from 6 months to 18 months. The extension applies to existing applicants (who signed eligible contracts between 4 March 2020 and 31 March 2021) and means they have an additional 12 months from the date they signed to building contract to commence work. Not only is this a practical financial measure, but it also protects purchasers of land against possible delays in settlement without affecting their HomeBuilder grants. Those who applied for ‘off the plan’ OTP purchase grants would now have some breathing space if construction were delayed, and the registration date was pushed back.
First Home Super Saver Scheme
Although perhaps less well known, the First Home Super Saver Scheme (FHSSS) allows eligible applicants to withdraw voluntary contributions from the superannuation to put towards a property purchase. The scheme has now had its limit increased to $50,000, meaning that eligible applicants could withdraw up to $50,000 of voluntary super contributions to put towards buying a home. The property must be residential, and it must be your primary residence, not an investment property. Vacant land on which you plan to build falls within this criterion, but according to the ATO, motorhomes and houseboats are not eligible purchases. These measures will apply to any concessional or non-concessional (taxed or pre-tax) contributions made from 1 July 2017.
First Home Deposit Schemes
The First Home Deposit schemes have also seen some welcome reforms. The First Home Loan Deposit Scheme guarantees up to 15% of the deposit, meaning that eligible purchasers could make that critical 80% LVI ration for a mortgage with only 5% of the deposit amount. Places in this program are limited, so it was a welcome addition in the 2021-22 budget announcement that an additional 10,000 New Home Guarantees were added. The new Family Home Guarantee has also been established to support eligible single parents to enter or re-enter the housing market. With only a 2% deposit, the Government will guarantee the other 18% to give single parents a better chance to purchase property without having to accumulate savings worth 20% of their loan.
Stamp Duty Concessions
There is often confusion around the different schemes for first home buyers. It is important to be aware that many of the Federal Government initiatives apply only to new or newly built homes. This is to ensure the double benefit of supporting the construction industry as well as buyers. However, in most states and territories, buyers of their first home (not including investment properties) are eligible for a concession on the stamp duty. Stamp duty is simply a state government tax levied on property transfers for things deemed ‘dutiable property’. This includes houses, cars, and property. Crucially, stamp duty concessions usually apply no matter how old the property is, meaning that first-time buyers of established property can usually benefit from a tax-free purchase.
1. I have received some court documents and I think I’m being sued. What do I do?
You should contact a solicitor as soon as possible for advice on what the nature and effects of those documents are, and what the appropriate steps are to take. It’s important not to delay, because depending on what type of matter it is, the law may impose restrictions on the time you have to respond and judgment could be made against you in your absence without you having a chance to defend yourself.
2. I failed to respond to a claim and just found out there is a default judgment against me. Is there any way to reverse this?
This will depend on the circumstances, but there is sometimes a way to have the default judgment set aside so that you can defend the claim. You should contact a solicitor as soon as possible as time restrictions may apply, and there is a risk that the other party may take actions to enforce that judgment against you.
For more information on enforcing judgments, click here.
3. Someone owes me money but has failed to pay. How can I sue that person?
Whether you can successfully sue someone will depend on many factors, such as the terms of the agreement, the quality of the evidence, any defenses available to the debtor and many, many more considerations.
You should contact a solicitor with all the relevant documentation in order to obtain advice on your prospects of success. Your solicitor will advise you on the costs and risks involved, and the possible outcomes, benefits or detriments, and you should weigh up those factors when deciding whether to proceed.
Even if you are successful, payment is not automatic! People may continue to avoid paying you, so you may need to enforce that judgment through further court processes, or the person may simply not have any money to give you. Your solicitor can advise you on enforcement processes.
Your solicitor can also assist with your business structuring, and can draft terms and conditions and other engagement documentation for your business to reduce the risks involved with having debtors. Clear terms and conditions can provide you with more certainty and depending on your circumstances, you may have potential options for reducing risk such as requiring guarantees or security.
For more information on debtors, terms and conditions and structuring, click here.
4. My company has just been hit with an unexpected tax debt and it can’t be paid straight away. What can I do?
The ATO winds up many companies every year. You should take this debt very seriously. You may be able to enter into a payment plan or otherwise resolve it directly with the ATO, but there is no guarantee of this and the interest charges and penalties add up very quickly so time is of the essence.
You should contact your solicitor for advice and also put your solicitor in contact with the company’s accountant as soon as possible because in addition to the above, the ATO may issue a creditor’s statutory demand. A statutory demand has strict time restrictions and may allow the ATO to wind up your company if it cannot be complied with or set aside in court.
You may be at risk of personal liability through director penalty notices issued by the ATO which have time restrictions. You may potentially be liable for various things you did or did not do before your company was placed into liquidation if the ATO is successful in winding it up and a liquidator is appointed.
For more information on statutory demands, director penalty notices, and liquidations click here.
5. I went into business with a friend and we are both directors and shareholders of our company. Lately we have been having many disagreements and I’m thinking of breaking up with my business partner and going out on my own. What should I do?
You will have many things to consider in this scenario. If you have a properly drafted shareholders’ agreement, there will be mechanisms for dealing with this. If you do not have such an agreement in place, or you have one but it is poorly drafted, there will likely be more complications. Given the fact that there is a friendship involved as well as a business, the likelihood of a full-blown dispute arising is quite significant as emotions can run high in these situations.
These disputes tend to be messy and costly, especially if you begin taking action without proper advice and after tempers have already begun to flare. You should contact a solicitor for advice as soon as possible and provide a copy of any shareholders’ agreement and any other relevant documentation.
For more information on shareholder disputes, click here.
6. My company has been experiencing financial trouble and I’m concerned that it might need to go into liquidation. What should I do?
Company directors owe many duties for which they are personally liable, one of which is to avoid trading a company whilst it is insolvent. If you are concerned that your company may be insolvent, you should contact your solicitor for advice as soon as possible to reduce your personal risks and to increase the chances that the company may be salvageable through a scheme or administration of some type.
Your solicitor will advise you on your own personal liabilities and risks. Your solicitor may also recommend that you speak to an insolvency practitioner (an accountant who specialises in liquidations and other types of administrations) about how best to deal with the company as there are may be various options open, depending on the company’s circumstances.
For more information on insolvent trading, click here.
7. My company went into liquidation recently and the liquidator keeps demanding money from me for ‘voidable transactions’ and ‘breaches of director’s duties’. I don’t really understand what this is about. Do I need to pay?
There are many types of claims that liquidators may be able to make against directors, former directors and other officers of a company in liquidation. All these claims have different elements which the liquidator must prove in order to be successful, and there may be defenses available to you. One set of facts or a certain action or omission by you could potentially give rise to different types of claims against you. You should contact your solicitor for advice as to your prospects of successfully defending such claims. As liquidators are tasked with getting in funds for creditors and are generally commercially minded, your solicitor may be able to negotiate an outcome with the liquidator even if the liquidator has a reasonable claim against you.
For more information on voidable transactions and breaches of director’s duties, click here.
8. I have a large debt I know I can’t pay right away but I’m hoping I can make a deal with my creditor even though the creditor doesn’t have any formal system in place for that. What can I do to get the creditor off my back?
Your solicitor can assist you in negotiating with the creditor. Although the creditor may choose not to cooperate, many will be willing to enter into a deed of settlement on terms agreed between the parties in order to resolve the matter. For instance, the creditor may agree to let you pay by instalments or may agree to accept a reduced sum as payment in full. You should contact your solicitor for assistance and advice.
9. I managed to get a judgment myself in a local court but I haven’t been able to get the debtor to pay and now I want to bankrupt him. How can I do this?
The most common way to do this is to serve the debtor with a bankruptcy notice. Your solicitor can assist you in lodging this. The amount of the debt must meet the threshold and it must not be over the limitation period in age. Once your application is accepted and the bankruptcy notice is created by the Australian Financial Security Authority, your solicitor can assist in arranging for it to be served on the debtor, as the service needs to be done correctly in order for you to rely on the bankruptcy notice later to bankrupt the debtor.
If the debtor fails to pay in the strict time period set out on that bankruptcy notice (usually 21 days), then your solicitor can assist you with an application to the court (known as a creditor’s petition). If successful this will result in the debtor being made bankrupt for failing to comply with the bankruptcy notice. The debtor may or may not object to the bankruptcy notice or the court proceedings and if there is an objection or defense your solicitor can further advise you on prospects and also on what happens after someone is made bankrupt.
For more information on bankruptcy notices and creditor’s petitions, click here.
10. I’m involved in a big dispute over a valuable business contract and I don’t know what to do. How can I handle this situation?
You should contact your solicitor for advice as such disputes can have devastating effects on your business. Your solicitor can assist you in understanding your business’s position, rights and liabilities and the prospects of any claims. Your solicitor can also assist in resolving the dispute, whether it be formally or informally, and can guide you through any court processes, settlement negotiations, mediations, deeds of settlement and other points throughout the life of the dispute. Your solicitor can also assist in negotiating and drafting new business contracts as a properly drafted agreement can increase certainty and help reduce the risks of disputes arising or worsening.
For more information on commercial disputes, click here.
Once an individual is made bankrupt, their bankruptcy can be annulled in one of two ways:
In the matter of Mehajer v Weston in his Capacity as Trustee of the Bankrupt Estate of Salim Mehajer [2019] FCA 1713 Justice Lee applied the principles governing an application for an annulment of bankruptcy under section 153B(1) of the Bankruptcy Act 1966 (Cth) (the Act).
On 20 March 2018, a sequestration order was made against Mr Mehajer’s estate.
On 17 April 2018, Mr Mehajer sought an annulment of the bankruptcy under section 153B(1) of the Act on three grounds:
In coming to his decision, Justice Lee considered the following principles:
The applicant who seeks an annulment of his bankruptcy “carries a heavy burden”; it is incumbent on an applicant “to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the full facts and the actual circumstances of the applicant”.
2. Sequestration order “ought not be made”.
In assessing whether a sequestration order “ought not be made”, the inquiry is a broad one and is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time it was made.
A sequestration order ought not be made if the Court would have bound not to make a sequestration order.
3. Discretionary Power
The Court retains a discretion as to whether to annul a bankruptcy; even if persuaded that the sequestration order ought not to have been made, the Court can, under appropriate circumstances, decline to annul the bankruptcy.
Using their discretion, the Court may consider:
(a) Delay by the bankrupt;
(b) Whether or not the applicant for annulment at the time of the hearing is solvent;
(c) Whether or not the applicant has made full disclosure of the financial affairs;
(d) Whether there was a failure by the bankrupt to oppose the creditor’s petition; and
(e) Whether there was a failure by the bankrupt to attend the hearing at which the sequestration order.
Justice Lee dismissed Mr Mehajer’s application to annul his bankruptcy.
Justice Lee noted that the Adjournment Contention was by far Mr Mehajer’s strongest point. That being said, this was balanced against the “fact that the true financial position of Mr Mehajer was… hopelessly insolvent at the time any such applicant for adjournment”.
In these circumstances, he confirmed that Mr Mehajer failed to sustain an argument that the sequestration order ought not to have been made on the basis that he was solvent or because the proceeding ought to have been adjourned.
This decision is useful in reiterating what factors the Court will consider when deciding whether to order an annulment under section 153B(1) the Act.
It demonstrates that the Court’s power to annul a bankruptcy is subject to a high level of discretion.
If you have any questions or concerns please contact Chamberlains and talk to one of our insolvency lawyers today.
Interested in learning more about Insolvency & Reconstruction?
Click on our recent articles to find out more:
Statutory Demands and Insolvency
Chamberlains’ Response to Proposed Exposure Draft of Bankruptcy Regulations 2021
“Is my restraint of trade enforceable?” is a commonly asked question in the employment law space.
The answer is – it all depends on the “reasonableness” (and the drafting of course!).
What is a restraint of trade?
Most employment contracts include a restraint of trade clause which is envisaged to protect the employer’s business interest and good will. Generally, the restraint will apply once an employee departs from their employment and may include restraining the employee from:
When are restraints of trade enforceable?
The general position is that restraint clauses are void unless the employer can justify that the restraint is reasonably necessary to protect the employer’s legitimate business interests. If the restraint goes beyond protecting the employer’s legitimate business interests, it will be unenforceable.
What is reasonable?
In determining whether a restraint is reasonable, a Court will consider the circumstances surrounding the restraint, including, but not limited to:
What do the Courts have to say?
In determining whether a restraint is valid and enforceable, the Court will first have regard to the legislation, which varies from state to state. The Court will then consider the competing interests of the:
In NSW, the Restraints of Trade Act 1976 (NSW) captures the common law restraint of trade doctrine rendering the imposition of any restriction on a person’s freedom to trade or seek employment unenforceable, unless it can be demonstrated that the restraint is reasonable having regard to the parties’ and the public interest. On account of the Restraints of Trade Act 1976 (NSW), the Courts in NSW can determine what would be reasonable in the circumstances and read down the clause accordingly.
In other jurisdictions which do not have an applicable statutory regime, without a well drafted restraints provision which takes advantage of cascading interpretation clauses, an unreasonable restraint clause will simply be struck out.
Case examples
In Andrews Advertising Pty Ltd v Andrews [2014] NSWSC 318 the Court held that a six-month restraint clause which prohibited an employee from working with other advertising agencies and engaging with clients of the employer Australia wide was valid. Despite the restraint preventing the employee from working in their chosen occupation for a period of six-months, the Court found that “nothing less than that would adequately protect the company’s legitimate interest in protecting its connection with a major client.”
On the other hand, in Commsupport Pty Ltd v Mirow [2018] QDC 134, the Court held that a restraint clause which prevented an employee from acting for or contacting any client of the employer who was a client of the employer in the six-months prior to the employee departing was unenforceable. The Court found that because the restraint was not limited to those clients of the employer with whom the employee had a client relationship with or influence over, the restraint had been drawn too broadly. Ultimately, the Court struck out the restraint stating that “the legitimacy of the interest gives way to the restraint being seen as one merely against competition.”
Key takeaways
To ensure adequate protection of business goodwill, employers should:
Contact Chamberlains Law Firm for any questions and concerns regarding Workplace Law.
The Royal Commission into Institutional Reposes to Child Sexual Abuse made shocking findings of abuse of children in Australia who suffered ongoing physical and sexual abuse at the hands of various institutions such as schools, churches and orphanages.
The victims of the abuse suffered at the hands of institutions who were responsible for their care, leaving victims traumatised and with long lasting effects on their lives.
What to do if you have been abused?
For many victims it can be extremely difficult to talk about the abuse you have experienced, however there are a number of support services available to help you through the process.
The police can assist you and talk you through your options and can also direct you to support services. Reporting your abuse can be stressful and you may wish to also consult your GP to help give you the physical and or mental support you need.
Importantly, if you are the victim of intuitional abuse we strongly recommend that you seek advice from an experienced lawyer about your options for making a claim.
Making a claim
We understand that the ongoing impacts of institutional abuse can affect all facets of your life and can have lasting effects. While no amount of money can repair the trauma of abuse, it can assist with day-to-day living costs and ongoing medical or psychological assistance to help you the road to long term recovery.
Most of the time compensation usually involves money, but can also be an apology or admission of guilt which may help providing closure to victims in a way money just cannot.
When you meet with your lawyer for the first time to discuss your matter, we will listen without judgement and ask questions about the impact on your whole life. Often if you have been a victim of institutional abuse the trauma you have experienced can affect your employment, relationships, mental and physical health, all which is relevant to your claim.
If you decide to proceed with making a claim your lawyer will discuss any time limits and what evidence is required to support your claim. This may include taking a statement from you and possibly your family members and friends, obtaining clinical notes from any treating doctors, as well as medical reports, school records, details of your employment and information from the police. Your lawyer will be able to assess your case and discuss your options for making a claim for compensation.
How can Chamberlains assist me?
Being the victim of institutional abuse is a traumatic experience not many people will ever be able to understand. It can make you feel traumatised, baffled and powerless. We will support you throughout the claims process and fight for you to obtain the compensation you deserve.
We are committed to achieving justice for all victims and offer a free initial consultation and a no win no fee policy.
If you or a loved one has been the victim of sexual or physical abuse at the hands of an institution in Australia please contact Chamberlains Law Firm for a confidential discussion to see how our injury compensation team can help. We’re with you.
What is the loss carry-back?
In 2020, Treasurer Josh Frydenberg said that COVID-19 had turned “fundamentally sound businesses into loss-making businesses” and they should not have to wait to return to profitability to use those losses. In order to keep their workers, the tax system was temporarily changed to allow businesses to balance losses immediately instead of waiting until the following year.
Before measures were introduced in 2020 to allow loss carry-back, companies were only able to carry forward losses. This allowed companies who made a loss in the present year to balance the loss against profits in future years to reduce tax.
The loss carry-back was a measure in response to COVID-19 to allow companies to carry back losses over the coming years to offset previously taxed profits. Eligible corporate entities with less than $5 billion turnover in a relevant loss year can carry back losses made in the 2019–20, 2020–21 and 2021–22 income years to a prior year’s income tax liability in the 2018–19, 2019–20 and 2020–21 income years.
How does the loss carry-back help me?
The loss carry-back allows companies with a turnover of less than $5 billion to offset taxed profits. This threshold means that most Australian businesses will be able to access the scheme. Companies can do this through electing for the refund when lodging future returns. The measures help to keep businesses that are generally profitable but have been impacted by COVID-19 in the short to medium term.
Importantly there is no cap on the amount of offset that can be claimed except that it cannot be higher than the amount of tax paid in relation to previous years.
What is new in the 2021-2022 federal Budget?
The loss carry-back measure was due to expire on 30June 2022 but will now continue for another 12 months until 30 June 2023. This extends the period that businesses can gain earlier access to the tax value of losses, without having to wait until the company turns a profit again.
In the 2021-22 Budget, the Federal Government announced that changes would be made to the employee share scheme (ESS) rules, an overview of which is accessible here.
The ESS is used as a tax planning tool for various businesses and involves employees having receiving shares in the company, either as an option or share subscription. The taxing point varies by how the scheme is designed. In accordance with the Budget, amendments will be made to remove the ‘ceasing employment’ point which normally triggers tax on deferred taxation ESS schemes.
The Government also announced an intention to reduce certain aspects of red tape surrounding the ESS to encouraging domestic companies to recruit and retain high-quality employees by issuing them equity. In doing so, Australian employers will be better placed for global competition in accordance with recommendations from the Global Business and Talent Attraction Taskforce. In particular, the regulatory requirements will change as follows:
There is no firm date for these measures to commence and we expect draft legislation to be introduced shortly.
The 2021-22 Federal budget (Budget) announcement reaffirmed the long-awaited introduction of the Corporate Collective Investments Vehicle (CCIV) regime. It seeks to introduce an Australian structure that is in alignment with the international standards for foreign investment. In practice, the CCIV would focus on the process of domestic fund managers offering investment portfolios and opportunities through a company-type structure, but with a transparent tax treatment. By reducing operating costs and compliance requirements, the intended impact of the regime is said to increase the nation’s cross-border financial services trade and improve the competitiveness and efficiency of the financial sector and to facilitate institutional foreign investment.
In 2010 the Commonwealth Government announced a review of tax arrangements applying to the CCIV regime. A report outlining the findings of the review was released in 2015, with a view to revise and develop further legislation addressing the deficiencies of the regime in the coming years and through expansion of the Budget. Over the past few years, various rounds of draft legislature have been released with calls to industry professionals and community members to make submissions as to improvements.
In the 2021-22 Budget released on 11 May 2021, it was announced that the commencement date of the CCIV has been postponed to 1 July 2022, as opposed to the earlier date of 1 July 2018 reported in the 2016-17 Budget. Draft legislation is yet to be released.
The 2021-2022 federal budget contained a raft of key budget measures designed to provide relief to businesses still struggling in light of the COVID-19 pandemic. In conjunction with changes designed to simplify Australia’s insolvency laws, Treasurer Josh Frydenberg announced increased powers for the Administrative Appeals Tribunal (AAT) in relation to small business taxation decisions.
The Government announced it will be extending the power of the AAT by allowing them to pause or modify any ATO debt recovery action relating to disputed debts, that are being reviewed by the Small Business Taxation Division (SBTD) of the AAT. This measure will provide an avenue for small businesses to ensure they are not required to start paying the disputed debt until the matter has been determined by the AAT.
Under the new powers, when a small business files an application in the SBTD, they will be able to apply for a pause or modification of the ATO’s action until that dispute has been decided by the AAT. This applies to small businesses that have an aggregated turnover of less than $10 million, who have been affected by a small business taxation decision.
Currently small business owners are only able to pause or modify an action by going through the courts. Using the court system can be a costly process, with the uncertainty that they may not be granted the desired pause or modification. Often, business owners will have to wait as long as 60 days for a decision, while occurring significant expenses.
The SBTD of the AAT will now be able to pause orders such as garnishee notices, which allow a creditor to seek payment of debt from a third party like their bank, or the recovery of general interest charges and penalties.
These changes come after the Australian Small Business and Family Enterprise Ombudsman put forward a recommendation in 2019 calling for these legislative amendments. It also follows the ATO’s decision to turn its small business independent review service into a permanent offering.
Australia will now become closer to the UK and US tax systems, where debt collection by government agencies is unavailable until all legal avenues of appeal have been exhausted.
These new powers will be available in respect to proceedings commenced on, or after, the date of Royal Assent of the legislation.
In line with the Board of Taxations’ recommendations in the 2019 report to Government “Reforming individual tax residency rules — a model for modernisation“, the Federal Government confirmed in the 2021 Budget announcement last night that it will be replacing the individual tax residency rules with a simplified and modernised framework.
The new model will provide a two-step approach:
Individuals will satisfy the primary test and be deemed an Australian tax resident where they have been physically present in Australia for 183 days or more in an income year. Those individuals that do not satisfy the primary test will be subject to the secondary test.
The secondary test examines a combination of an individual’s physical presence in Australia along with a four prong objective factors test, which assesses an individual’s connection which Australia by considering their:
This modernised framework is a welcomed move away from the current tax residency rules which have been mostly unchanged for 100 years. This new and simple model for Australian tax residency will provide greater certainty and minimise compliance costs for Australians moving overseas, mobile workers and employees overseas.