Mum & Dad Lenders – Watch Out!

The recent increase in young buyers using funds from mum and dad was sharply in focus in recent NSW Court of Appeal decision which highlighted the importance of parents having a properly written agreement with their children, particularly in the case of marriage breakdowns.  In Chaudhary v Chaudhary [2017] NSWCA 222, a father signed a statutory declaration as part of a bank loan obtained by his son and daughter-in-law stating that the funds he advanced towards the purchase were a gift that would not be recalled.  The father later paid the stamp duty and advanced a further amount, meaning that he advanced over $1.2 million in total as part of the transaction.

Be aware of transfer duty for your beneficiaries when making a will

The NSW Supreme Court’s decision in Tay v Chief Commissioner of State Revenue [2017] NSWSC 338 (“Tay case”) is an example of how distribution of the deceased’s estate to beneficiaries may create unfortunate tax consequences for the beneficiaries.  Usually, a stamp duty exemption will apply to the distribution of an estate if it is done in accordance with the will of the deceased.  In the Tay case, the beneficiaries under the will agreed to a particular manner of distribution of an asset which led to duty of $28 million. 

Directors’ Days Are Numbered

Every director of an Australian company will be identified by a number in a Federal Government crack down on “illegal phoenix activity” – the name given to the practice of stripping and transfering assets from one company to another to avoid paying liabilities to creditors.

The purpose of the Director Identification Number (“DIN”), along with other measures, is to enable the Federal Government to identify directors and their relationships between various individuals and entities in order to deter and penalise phoenix activity.

Council avoids liability

In our December 2014 Law Report we discussed a recent High Court decision that found that builders of a strata-titled apartment complex did not owe a duty of care to the Owners Corporation or to purchasers in that strata scheme to avoid economic loss resulting from defective building works.  Now the Court of Appeal in New South Wales has found that a local Council, as a principal certifying authority, did not owe a duty to avoid economic loss to a purchaser of property in respect of which the Council had issued an occupation certificate.  The Court of Appeal found that the subsequent purchasers in this case were not “vulnerable” in that the purchasers could rely on statutory warranties under the Home Building Act and the purchasers could have protected themselves further by appropriate warranties in the sale contract in relation to latent defects.

NSW Government’s Housing Affordability Package

The NSW Government recently announced a number of measures in an attempt to improve housing affordability for first home buyers across the state.  At present, first home buyers receive a stamp duty exemption on new homes valued up to $550,000 and vacant land up to $350,000 and concessions for new properties valued between $550,000 and $650,000 and vacant land costing between $350,000 and $450,000. 

UPDATE!!! Withholding tax on property

Esplins Law Report in July 2016 contained an article by Stephen Rush regarding the new non-resident withholding tax regime.  The regime, in short, provided that whenever a purchaser buys property in Australia for a price of $2 million or more the purchaser must withhold 10% of the purchase price on settlement and immediately pay it to the Australian Taxation Office unless the vendor produces a clearance certificate.  The amount of $2 million was set in place by the Australian Government so that the majority of transactions would be excluded from the regime (i.e. everyday Australians buying property in Australia).  However, from 1 July 2017 the amount of $2 million will reduce to $750,000 which means that the majority transactions, especially in New South Wales, will be subject to the regime.  Additionally, the percentage to be withheld by a purchaser has increased from 10% to 12.5%.

Don’t underestimate your director’s duties

The Corporations Act 2001 (Cth) (“the Act”) imposes strict statutory and fiduciary duties on directors and officers of companies.  The majority of the director’s duties create civil obligations and when breached a civil penalty is imposed.  It is often overlooked that section 184 of the Act creates a criminal offence id a director recklessly or intentionally fails to exercise their directorial powers in good faith or for a proper purpose.  The maximum penalty for contravening section 184 of the Act is 5 years imprisonment or a fine of $360,000 or both.  Criminal proceedings against directors are not as uncommon as people believe, the ASIC’s six-monthly report covering July to December 2016 discloses that as at 1 January 2017 there are 9 criminal actions (and 22 civil actions) against directors and officers which are pending before the court.

Personal Property Security Act Amendments Reduce Administrative Burden

Under new Personal Property Security Act (PPSA) amendments hirers or bailors are only required to register a security interest if the initial period, or the equipment is held, for two years or more.

The Personal Property Securities Amendment (PPS Lease) Act 2017 came into effect on 20 May 2017 and is aimed at reducing technicalities associated with short-term and indefinite period loans.