McKillop Legal Blog

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Why your SMSF should have a corporate trustee

The Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) has strict rules as to who must act as a trustee of a self-managed superannuation fund (SMSF), but basically this means:

  • if you are individual trustees of a SMSF, all members must be trustees of the SMSF
  • If you have a corporate trustee of a SMSF, then all members must be directors of it.

The SIS Act also provides that those trusteeship rules will continue to be satisfied if a member’s attorney (under an enduring power of attorney) is appointed as trustee/director in place of the member. This can also assist if you will be overseas and unable to tend to the management of the SMSF for a prolonged period.

Where there is no enduring power of attorney, the member may need to be rolled out of the SMSF or an administrator may need to be appointed by the Court. One consequence of breaking these trusteeship rules can be the ATO removing the SMSF’s complying status and triggering tax at the top marginal tax rate.

There are several important reasons as to why your SMSF should have a corporate trustee. So how can having a company as trustee be of benefit?

Individual trustee dies or becomes incapacitated

When a member who is a SMSF trustee becomes incapacitated or dies, the trustee/s will need to change.

On the death or incapacity of a member, typically the deceased/incapacitated trustee will be removed and replaced with their ‘legal personal representative’ (LPR). An example of an LPR is an attorney appointed an enduring power of attorney or executor under a Will.

Another complication is that when a member/individual trustee dies and their death benefit commences to be paid from the SMSF, the trustee/s will need to change again (as the LPR cannot continue to act in place of the deceased member).

Every change of trustee will need to be reflected on all assets of the SMSF (including updating the title to any real property), causing delay and expense to the SMSF and family, at a time when the family would rather be focused on assisting the debilitated member of grieving their death.

Death or incapacity of a director of a corporate trustee

Where there is only one member remaining in the SMSF (due to death or rollout of a member), the remaining member will not have to find a second person to act as co-director of the trustee (single member SMSFs are required to have 2 trustees if the trustees are individuals). Title to the SMSF assets does not need to be changed, although ASIC’s register will.

Reduced ASIC fees

The expense of registering and maintaining a company is the most common deterrent to SMSFs using a corporate trustee however, unlike being a trustee of a family, discretionary or unit trust, where a company only acts as trustee of a SMSF, it is a ‘special purpose company’ (meaning it will receive the benefit of reduced ASIC annual return fees.

Other benefits

Having a company act as trustee can also offer some litigation exposure protection and may assist with borrowing under a Limited Recourse Borrowing Arrangement as some lenders require it

Overall, having a corporate trustee can be a more efficient, cost-effective and administratively simpler option for your SMSF and can be an integral part of your overall estate plan.

FURTHER INFORMATION

For further information on estate planning, corporate, superannuation or succession issues, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Abolition of Certificates of Title

From 11 October 2021, changes to the land titles system in NSW will apply as part of the transition away from paper-based processes.

The Real Property Amendment (Certificates of Title) Act 2021 makes 2 significant changes with effect from that date:

  1. the cancellation of Certificates of Title (CT) for real property and the control of the right to deal (CoRD) framework – the CoRD being the electronic equivalent of a CT; and
  2. all land dealings must be lodged electronically – referred to as ‘100% eConveyancing’.

Accordingly, on 11 October 2021, all existing CTs will be cancelled and new CTs will no longer be issued. From then on, existing CTs cannot be required to be produced to have a dealing or plan lodged for registration at NSW Land Registry Services (NSWLRS, formerly NSW Land & Property Information and the Land Titles Office).

What does this mean for you?

There are 3 main changes from the current practice for landowners:

  1. those who pay off their mortgage will not receive a CT as was traditionally the case.
  2. a purchaser of property without the need for a mortgage will not receive a CT.
  3. when a plan of subdivision is registered, and new parcels of land created, CTs (or CoRDs) will no longer be issued for those parcels.

In all instances, an “Information Notice” will issue, which will confirm the dealings registered and date of registration.

Abolition of Certificates of Title 

Landowners of unencumbered land (that is with no mortgage) who have a CT don’t have to do anything either before or after 11 October 2021. After this date however, the CT will no longer be a legal document (and thus will have no legal effect), although you may like to keep it for sentimental reasons (although the current CTs aren’t anywhere near as impressive looking as the old system ones).

Note that just because you have paid of your mortgage, it may still be registered no title – it must be formally discharged. If you want the CT, you ought to act quickly to have it discharged and the new CT issued prior to 11 October 2021 as you will not get one after that date.

Those who own unencumbered land, but have someone else holding or storing their CT, may wish to request to have it back. From 11 October 2021 there will no longer be a remedy under the Real Property Act 1900 to get a CT back from others, given it has no legal effect.

Lenders holding CTs

If you hold a CT in as informal security for an unregistered mortgage or charge over a property following an advance of money or provision of goods or services, you should take steps to protect your interests before 11 October 2021 as when CTs are cancelled, this method of securing payment will no longer be available or effective.

From 11 October 2021 lawyers and licensed conveyancers no longer need to ask for a copy of their CT when acting on a sale or when lodging a dealing for registration.

100% eConveyancing

The Registrar General has declared under the NSW Conveyancing Rules that all electronic dealings listed in the Schedule of eDealings are mandated to be lodged electronically.

All land dealings to be lodged with NSWLRS can only be done electronically by a subscriber (e.g. a lawyer, licensed conveyancer or bank) to an Electronic Lodgment Network.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Changing your name

A person may change their name for various reasons, such when they marry, to hide their identity or to adopt a more ‘acceptable’ or popular name.

You can change your name without formally registering a new name. At law, you can change your name through use and becoming known by your new name however, there are often instances which arise where you may be required to provide evidence of change of name. For such reasons, you can register your change of name.

The NSW Registry of Births, Deaths and Marriages (BDM) is responsible for registering all changes of name in New South Wales. Prior to 1996, NSW Land & Property Information Service (formerly the Land Titles Office, and now NSW Land Registry Services) used to register Deed Polls Instrument Evidencing Change of Name.

Any individual over the age of 18 who was born in NSW, or permanent Australian residents living in NSW for at least 3 years, may register a change of name at BDM (unless you are a ‘restricted person’, such as an inmate, parolee, subject to a supervision order or a a forensic/correctional patent etc).

If you are a parent or legal guardian of a child under 18 years who satisfies these criteria, you may apply to register a change of their name. Children over the age of 12 however must consent to a change of name.

In NSW, you can only change your name once in a 12-month period and 3 times in your lifetime.

Most names can be registered, but not all. BDM will not register a name that:

  • is offensive;
  • is too long (exceeding 50 characters);
  • includes numbers and symbols such as 1st, 2nd, 3rd, Jnr, Snr; or
  • could be confused with an official title or rank, such as colonel, premier, judge, saint, queen, prince.

In the case of marriage, if you wish to take your husband’s name, a formal change of name is not always required as a Marriage Certificate will usually suffice as evidence of the change however, in the case of re-marriage, if you continued to use your married name, unless you formally registered your married name with BDM, you must use your name as it appears on your birth certificate when you re-marry.

It is an offence to alter or use an additional or other name with the intention to act fraudulently or with an intention to deceive. Persons found to have done so may be subject to criminal proceedings.

Changing your name is relatively easy, provided you have the proper documentation.

FURTHER INFORMATION

For further information, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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QR Codes mandatory

From Monday, 12 July, all businesses will need to display their Service NSW QR code and take reasonable steps to ensure people entering their premises check-in using that QR code or digital sign-in sheet.

This applies to ALL workplaces of any nature and includes takeaway only venues.

For more information or to register your business as COVIDSafe and to get your QR Code, visit the NSW Government COVID-19 page for business and employment.

Family provision orders

Under the Succession Act 2006 (NSW), eligible persons may apply to the Supreme Court of New South Wales for a family provision order in relation to the estate or notional* estate of a deceased person to provide “for their maintenance, education or advancement in life”.

The first hurdle to overcome is being an “eligible person” and the second is whether the provision (if any) made for the applicant in the deceased’s Will** is adequate, and if not, what “family provision order” could be made to make it adequate. Unfortunately, this process is not as simple as we have explained it.

Limitation period

Claims for provision must be made within 12 months of the date of death of the deceased person (although in limited circumstanced, this time limit can be extended).

Process

After proceedings are commenced and the parties have put on the majority of their evidence, applications for family provision orders are generally referred to either a Court annexed mediation or to private mediation but if no agreement can be reached, the matter will be set down for hearing.

Eligibility

Those who are “eligible” to make a claim for a family provision order out of a deceased person’s estate include:

  • a spouse of the deceased at the time of the deceased’s death;
  • a former spouse of the deceased;
  • a person in a de facto relationship with the deceased at the time of death
  • children (including adopted children) of the deceased;
  • someone with whom the deceased was in a close personal relationship*** with at the time of their death;
  • those who have, at any time, been wholly or partly dependent upon the deceased and who either:
    • are a grandchild of the deceased; or
    • were, at any time, member of a household of which the deceased a member.

How do you know if you are to receive an inheritance?

Click here to read about how to get a copy of a deceased person’s will.

Adequacy

The Court won’t simply rewrite a deceased person’s Will based on claims of justice or unfairness such as unequally dividing an estate between siblings. The Court has a wide discretion in determining these matters and the nature of any order for provision that may be made.

The Court first considers if the gift (if any) was adequate and if not, what provision may be adequate.

The Court exercises is discretion to make an order and if so, on what terms, after considering the following factors:

  1. any family or other relationship between the applicant and the deceased, including the nature and duration of the relationship,
  2. the nature and extent of any obligations or responsibilities owed by the deceased to the applicant, to any other person in respect of whom an application has been made for a family provision order or to any beneficiary of the deceased’s estate,
  3. the nature and extent of the deceased’s estate (including any property that is, or could be, designated as notional estate* of the deceased person) and of any liabilities or charges to which the estate is subject, as in existence when the application is being considered,
  4. the financial resources (including earning capacity) and financial needs, both present and future, of the applicant, of any other person in respect of whom an application has been made for a family provision order or of any beneficiary of the deceased person’s estate (that is the competing needs/claims of others),
  5. if the applicant is cohabiting with another person–the financial circumstances of the other person,
  6. any physical, intellectual or mental disability of the applicant, any other person in respect of whom an application has been made for a family provision order or any beneficiary of the deceased’s estate that is in existence when the application is being considered or that may reasonably be anticipated,
  7. the age of the applicant when the application is being considered,
  8. any contribution (whether financial or otherwise) by the applicant to the acquisition, conservation and improvement of the estate of the deceased person or to the welfare of the deceased or the deceased’s family, whether made before or after the deceased’s death, for which adequate consideration (not including any pension or other benefit) was not received, by the applicant,
  9. any provision made for the applicant by the deceased, either during the deceased’s life or made from the deceased’s estate,
  10. any evidence of the testamentary intentions of the deceased, including evidence of statements made by the deceased,
  11. whether the applicant was being maintained, either wholly or partly, by the deceased before the deceased’s death and, if the Court considers it relevant, the extent to which and the basis on which the deceased did so,
  12. whether any other person is liable to support the applicant,
  13. the character and conduct of the applicant before and after the date of the deceased’s death,
  14. the conduct of any other person before and after the date of the deceased’s death,
  15. any relevant Aboriginal or Torres Strait Islander customary law,
  16. any other matter the Court considers relevant, including matters in existence at the time of the deceased’s death or at the time the application is being considered.

*Where assets that were previously assets of the deceased prior to death (such as assets gifted or transferred by the deceased to another person or entity prior to death to attempt to avoid an application for an order for provision, superannuation, property owned as joint tenants between the deceased and another person), be considered as an asset of the estate for the purposes of an application for a family provision order.

**Note that even in intestacy (where there is no Will), an application can be made for a family provision order.

*** A “close personal relationship” is a relationship other than a marriage or a de facto relationship between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care but not for reward or on behalf of another person or organization.

FURTHER INFORMATION

For further information in relation to Wills, Probate, Intestacy, Estate Planning or even International Wills, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Consumer protection extension

In previous articles we explained the consumer guarantees under the Australian Consumer Law (ACL) in relation to goods and how the ACL applies to services, such as being of acceptable quality, fitness for purpose, matching description etc however, from 01 July 2021, the monetary threshold increases from $40,000 to $100,000 (an increase of 150%).

Presently, the ACL covers ‘consumers’ as being any person or business who acquires goods or services that

  • cost $40,000 or less; or
  • costing more than $40,000 but being ordinarily acquired for domestic, household or personal use or consumption; or
  • if the goods are a vehicle or trailer.

From 01 July 2021, the Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 expands the ambit of these non-excludable consumer rights to any goods or services acquired for an amount of up to $100,000, regardless of their intended use.

Businesses ought to ensure that their terms and conditions, packaging and advertising covers this expanded definition and ensure that the consumer guarantees are provided for the greater value items and that the mandatory wording is included in relation to the consumer guarantees.

Additionally, staff ought to be made aware of the changes and their effect, arrangements made to identify these expanded ‘consumer’ sales and budgets ought to be adjusted to allow for more claims for refund, replacement or compensation.

FURTHER INFORMATION

For further information in contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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McKillop Legal is a COVIDsafe venue

McKillop Legal is a COVIDsafe venue and remains open for business during the lockdown.

  • You must check in using our QR registration code
  • Masks must be worn in our premises
  • You must use hand-sanitiser on entry
  • If you are unwell, have been to a hotspot or are in isolation, please don’t attend
  • We can meet via Zoom, Teams, Skype or telephone

New eligibility rules for .au domain names

On 12 April 2021, the .au Domain Administration Rules: Licensing (Rules) took effect, consolidating in excess of 30 policies and guidelines which previously applied to all “.au” domain names.

The Rules apply to all registrants who create, transfer or renew a domain name with a “.au” country code Top Level Domain (ccTLD) and the registrars who administer those domain names. The new Rules affect .au namespaces created, transferred or renewed after 12 April 2021.

This includes the following open namespaces:

  • “.com.au” and “.net.au” for commercial entities;
  • “.asn.au” for incorporated associations, political parties, trade unions, sporting and special interest clubs;
  • “.org.au” for charities and non-profit organisations; and
  • “.id.au” for individuals who are Australian citizens or residents.

.au Domain Administration Limited (auDA) is the administrator and policy body for the .au ccTLD.

Existing domain name licences expiring after 12 April 2021 continue to be governed by the legacy licensing rules applicable at the time of registration or last renewal until the current licence period ends.

Accordingly, if you had already registered a domain name before 12 April 2021, then the Rules will not apply to that domain name until your current licence period expires and you renew that domain name, or you transfer it.

Any proposed registrant applying for any “.au” domain name licence must:

  1. have an “Australian presence“; and
  2. satisfy any eligibility and allocation criteria

Australian presence

To prove an Australian presence, a registrant can show either that they are:

  • in Australia (such as an Australian citizen or permanent resident, entity with an ABN, incorporated association, partnership, a company registered in Australia under the Corporations Act) etc; or
  • the owner of, or applicant for, an Australian registered trade mark.

Eligibility and allocation criteria

An intended registrant with an Australian presence must also satisfy any eligibility and allocation criteria for the relevant namespace.

Those name spaces are open to registrants who are a “commercial entity” (including Commonwealth entities, statutory bodies, incorporated limited partnerships, trading co-operatives and the government) who apply for a domain name which is:

  • a match or acronym to the registrant’s name;
  • a match to the registrant’s Australian registered trade mark; or
  • a match or synonym to the registrant’s goods, services or premises or an event they sponsor or activity they facilitate, teach or train

For Australian present registrants, a match is defined to mean a domain name that is identical to one, some or all of the words or numbers used in the applicant’s legal name, business name or Australian trade mark. While words or numbers may be omitted, they must be in the same order and must not include any additional words or numbers.

Previously, for foreign entities, a domain name could be “closely and substantially connected“ to the registrant’s trade mark however, the Rules now require an “exact match“ to the words which are the subject of the trade mark registration (excluding trivial items such as punctuation and articles such as “a”, “the”, “of” or “&” etc).

Renting or leasing domain names

Under the Rules, registrants are not allowed to rent or lease their domain names to a third party.

This excludes companies who license domain names held by related bodies corporate (provided they still meet the Australian presence requirement).

What to do for renewal?

If the requirements of the Rules and not satisfied, the licence for that domain name may be suspended or cancelled by the registrar or auDA.

If that domain name registered before 12 April 2021, you can use the time before renewal to assess whether it will comply with the Rules at renewal time and if it doesn’t, you can adopt an appropriate strategy as required.

This may include:

  • Shore up your Australian presence (this is especially so for our clients that are based overseas) by having an entity registered in Australian or obtaining trade mark in Australia.
  • Apply for your business name to be registered an Australian trade mark (this has the added benefit of you owning your name so others can’t use it – remember simply registering a business name gives no ownership in the name at all)
  • Registering a new domain name that does exactly match your name or trade mark.
  • If there is a domain name that does match your name and it is already registered by someone else, you can consider lodging a complaint to the registrar or through the .au Dispute Resolution Policy. Note that they may have a legitimate right to the same domain name as you.
  • Check who the domain name is registered to – is it in your name or your business/company’s name?
  • Consider if your IP/domain name licensing arrangements are such that you rent or lease a domain name to or from a company who is not a related body corporate connected to Australia – if not it may need to be transferred.

FURTHER INFORMATION

For further information regarding the new eligibility rules for .au domain names or in relation to any commercial law issue, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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Could you be a shadow director?

Shadow directors

The term ‘director’ is defined in s.9 of the Corporations Act 2001 (Cth) (Act) to mean:

(a)          a person who:

(i)            is appointed to the position of a director; or

(ii)           is appointed to the position of an alternate director and is acting in that capacity;

regardless of the name that is given to their position; and

(b)          unless the contrary intention appears, a person who is not validly appointed as a director if:

(i)            they act in the position of a director; or

(ii)           the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.

That is, (a) refers to directors notified to ASIC and (b) covers those who are de facto directors or shadow directors.

Consequently, a person who has not been validly appointed as a director of a company (and whose details are not therefore recorded in ASIC’s registers) may nonetheless be deemed a director of that company if they have influence to the extent that the directors of the company are accustomed to acting in accordance with the person’s instructions or wishes or if they act as if they are a director.

Indicators of being a shadow director

Examples of being a de facto or shadow director can include:

  • having independent authority to negotiate and manage executive matters on behalf of the company (like negotiation of important contracts or the managing employment)
  • promotion of the person to the public as having power to bind the company.
  • having unfettered control of the company’s bank accounts
  • being involved in setting up the company

Subparagraph (b)(ii) does not generally apply to advice given by the person in the proper performance of functions attaching to the person’s professional capacity (such as an external accountant, lawyer or professional adviser), but can include employees and spouses of directors (who may own assets as part of a risk minimization/asset protection strategy implemented by their director spouse).

Those that sit on so called “advisory boards” should pay particular attention to the way in which they carry out their roles and the way in which the company follows (or questions or considers) their recommendations or suggestions.

Consequences

A shadow director will be required to comply with director duties under the Act and can become liable for things like insolvent trading under section 588G.

If you are determined to be a shadow director, penalties can include:

  • a fine of up to $200,000, imprisonment for up to 5 years, or both;
  • personal liability for any loss or damage incurred; and
  • permanent or temporary orders prohibiting you from taking part in the management of a company.

How to help prevent being a shadow director

Steps that can be taken to help minimize the risk of being deemed a director of a company or the consequences of it include:

  • documenting the authorities of key personnel, including limits on authorities, autonomy and decision making (including in employment contracts, workplace policies etc)
  • putting in place robust internal procedures for decision making and approvals
  • ensuring ASIC registers are accurate and up to date
  • limiting advice provided to that which is within your professional qualifications
  • advisors, key staff and ‘advisory boards’ presenting any advice as a recommendation for a company’s consideration, rather than being a direction or instruction to the company or its board
  • otherwise, properly documenting communications
  • consider appropriate insurances

FURTHER INFORMATION

For further information in relation to any business related or company matters, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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