Tuesday, August 22, 2017

Document witnessing - measure twice; cut once

The rules in relation to witnessing wills (see the following post - Signing estate planning documents) and power of attorney documents are mandated by legislation.

This said, the rules for witnessing power of attorney documents are frustrating given each state has its own regime (see further comments in our earlier post - Witnessing powers of attorney). At one end of spectrum NSW essentially mandates that lawyers must witness whereas in WA there are dozens of categories of eligible witnesses including virtually all professions.

With other legal documents the rules are less certain and unfortunately will often depend on the application of internal rules by third parties.

Generally with most deeds they may be witnessed by one or more witnesses, not being a party to the instrument. While generally not strictly the position at law, the witness should ideally also not be related to anyone in the deed (for example, spouses should not witness each other signatures).

Practically, if documents are provided to (for example) a bank, the bank will generally require an independent 3rd party witness, regardless of the legal position.

Indeed, often financiers will refuse to accept any document where a witness has the same surname as the person whose signature is being witnessed.

Furthermore, often the bank’s position on refusing the validity of the witnessing does not come up until very inconvenient moments; often triggering significant time delays and unnecessary costs.

Image courtesy of Shutterstock

Tuesday, August 15, 2017

The most important tax tip for family law matters you will learn this week

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/XZx3PozjtTg

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

If you go back many years to the introduction of the Division 7A regime in the late 1990s, early 2000s, one of the anti-avoidance provisions that they brought in was ultimately set out in subdivision EA of the Tax Act.

These rules said regardless of any other provisions, if a distribution was made out of a trust and it was left as an unpaid present entitlement (UPE) to a company and there was then a debit loan made by the trust, that debit loan has to comply with the Division 7A rules.

In this type of situation, some advisers try to argue that if the funds are lent out for income generating purposes and the interest on the debt is deductible, then the loan is not caught by Division 7A. The reality however is that the loan is a significant tax problem.

In this particular case study scenario, there were two key problems. Firstly, there was an EA problem because the trust had made debit loans when there were UPEs to a corporate beneficiary. In addition to the EA loans, there had been purported distributions by the trust to the wife over many years.

However, the wife was not a beneficiary.

So not only was there the big EA problem, there also had been a whole raft of distributions over many years that were completely invalid on the face of the trust instrument.

Ultimately, the parties entered into a settlement where the husband took over control of the trust, the wife got paid out all of her loan accounts, and was entitled to keep all of the historical distributions.

Now the interesting aspect is that the wife and her family lawyers asked for a tax indemnity in relation to both the failure to comply over the years in relation to EA and the inability to read the deed and thus the invalid distributions to the wife.

Then, three months after the wife had been paid out, the husband by chance gets a tax audit. The wife didn’t have to worry about the outcome of the tax audit because she was fully indemnified.

Tuesday, August 8, 2017

How long can deceased estates run?

A recent post looked at the requirement that following the death of a member, an SMSF must ensure that it pays a member’s death ‘as soon as practical’ (see - How soon is now ** (or ‘as soon as practicable’)?)

Following last week’s post in relation to the liability of executor’s for a deceased’s tax debts, one related issue is worth considering – namely - how long can a deceased estate remain in ‘administration mode', following someone’s death?

Assuming there are no complications with the deceased estate due to, for example, a challenge against a will, it is generally the case that the Tax Office accepts a maximum period of three years for an estate to be administered.

The administration of the estate, from the Tax Office’s perspective involves the ultimate distribution of assets to beneficiaries if there is no formal testamentary trust under a will, or the distribution of assets to a testamentary trust if the deceased has incorporated that into their will.

This effectively means that for the purposes of the excepted trust income rules (these are the rules that allow children to be treated as adults for tax purposes), all wills contain a form of testamentary trust.

Where the will provides for the assets to pass directly to beneficiaries, the length of time the ‘testamentary trust’ lasts for tax purposes will be equal to the maximum period of time it takes to administer the estate. In contrast, where a traditional testamentary trust is established, the standard vesting date rules for trusts apply (broadly up to 80 years from the date of death).

It is important to note that while the Tax Office allows a maximum of three years, often they will in fact expect that the deceased estate is administered within 12 months from the date of death, and therefore may deny access to the excepted trust income provisions despite the fact that the estate has not been fully administered.

The Tax Office has confirmed its broad position in this regard via taxation ruling IT2622. As usual, if you would like a copy of the ruling please contact me.

The above post is based on an article originally published in the Weekly Tax Bulletin.

Image courtesy of Shutterstock

Tuesday, August 1, 2017

At last some tax clarity for legal personal representatives of deceased estates(?)

Practical Compliance Guideline 2017/D12 (PCG 2017/D12) contains guidance from the ATO in relation to the liability of an executor or legal personal representative (LPR) of a deceased estate for the deceased’s tax debts.


Historically, the leading decision in this area has been seen as the case of Barkworth Olives Management Ltd v DFCT [2010] QCA 80 (Barkworth).

Broadly Barkworth acknowledged that, subject to some limitations (such as the application of s 99A ITAA 1936), the trustee of a trust has a right of indemnity for trust tax debts and under s 254 ITAA 1936 is generally not personally liable for those debts.

In the context of a deceased estate, this means the LPR will generally not be personally liable for the deceased’s tax debts.

Personal liability will however arise (to a maximum of the original assets in the estate) where the assets of the estate have been fully distributed, or distributed to an extent that means there are still unsatisfied tax debts outstanding.

In contrast, if a tax debt arises during the course of the administration of the deceased estate, the LPR can automatically be personally liable, regardless of the assets in the estate.

Importantly, beneficiaries of deceased estates can never be liable for the tax debts of the deceased, unless there has been fraud or evasion.

Historically, where an LPR was concerned that there may be taxes that they might ultimately be personally liable for, best practice was to obtain clearance from the ATO that there were no outstanding tax liabilities. However, the ATO no longer issues letters of clearance.

Therefore, if there are genuine concerns that the ATO may audit the estate, then the conservative approach is generally for the LPR to retain sufficient assets to cover any possible tax liability for either two or four years (depending the nature of assets in the estate and therefore the potential audit period) following the lodgement of the final tax return for the deceased.

Practically, in this type of situation it therefore means that the estate can only be fully administered and final lodgements made to the ATO after the two or four year period has lapsed. This is because until the final notice of assessment has been received by the LPR (listing no outstanding amounts owing by the estate), they are not relieved of personal liability.

This conclusion also relies on the assumption that there is no fraud or evasion involved, as if there is, the ATO is not restricted by time limits on the ability to issue amended assessments.

PCG 2017/D12 – Overview

PCG 2017/D12 is broadly consistent with the approach outlined above, although (as is often the case with this style of release from the ATO) there some important caveats.

In particular, the guidelines outline the circumstances where the LPR will be treated as having notice of a claim or potential claim by the ATO, which could result in personal liability should the assets of the estate be distributed without leaving sufficient funds to discharge the ATO claim.

The ATO adopts the view that the LPR will have a notice of the claim (or potential claim) where:
  • the deceased had amounts owing to the ATO at the date of their death (including any additions to those amounts such as interest); 
  • the deceased had an outstanding assessment from an income tax return which had been lodged but not yet assessed by the ATO; 
  • the ATO notifies the LPR within 6 months of the lodgement of the deceased’s last return that it intends to review the deceased person’s tax affairs; or 
  • further assets come into the hands of the LPR after what was thought to be completion of the estate’s administration (the ATO takes the view that the identification of further assets might suggest the deceased’s income was understated previously). 
In each of the above circumstances, the LPR should take a conservative approach and delay the distribution of some or all of the estate assets, until the estate’s potential tax exposure can be quantified.

‘Smaller and less complex estates’

Arguably the most significant caveat with PCG 2017/D12 is that it is expressly stated to only apply to ‘smaller and less complex estates’.

Assuming an estate satisfies the concept of being ‘smaller and less complex’, PCG 2017/D12 confirms the basis on which a wind up can proceed without concern that the LPR’s personal assets may be exposed to a claim by the ATO.

In particular, the following elements must all be present:
  • in the 4 years before their death the deceased did not carry on a business or receive distributions from a trust; 
  • the estate assets consist solely of shares or interests in widely held entities (such as public companies), superannuation death benefits, Australian real property, cash and personal assets; 
  • the total market value of the estate assets was less than $5 million; 
  • none of the circumstances outlined earlier in this article where the LPR is deemed to have notice of the claim (or potential claim) arise; 
  • the LPR acted reasonably in lodging the deceased person’s outstanding returns; and 
  • the ATO has not given the LPR notice that it intends to examine the deceased person’s tax affairs within 6 months from the date of lodgement of the last outstanding return. 


As a result of PCG 2017/D12 (and assuming the draft guidelines are issued in final form on broadly similar terms), it should be possible for smaller and simpler estates to be wound up in a shorter period of time, without the LPR creating personal exposure in relation to tax debts.

While the guidelines are a welcome initiative in a fast growing area for many adviser practices, they also highlight that where clarity is most needed – that is larger and more complex estates – significant risks remain for LPRs.

Any person currently an LPR, or considering accepting an LPR role, in situations outside the scope of PCG 2017/D12 should continue to proceed with caution in relation to tax debts.

The above post is based on an article originally published in the Weekly Tax Bulletin.

Image courtesy of Shutterstock

Tuesday, July 25, 2017

Another way to convert water into wine - trust to company rollovers

The vast majority of rollovers available under the Tax Act relate to transactions between companies.

There is however a series of transactions that effectively allows one form of structure to be converted into another.

Following last week’s post, I was reminded of one of the very few rollovers that allows the iteration from one legal structure to another. In particular, the tax rollover available for a discretionary trust that allows a trust to transfer all of its assets into a company, so long as the shares in the company are owned by that same discretionary trust. This form of rollover is available under Subdivision 122A of the 1997 Tax Act.

Obviously, there are stamp duty considerations in many states still that often need to be taken into account, however the rollover can be a very useful one in a wide range of circumstances to ensure no tax is triggered.

We have particularly seen it used proactively as part of a succession plan – it is often seen as easier to facilitate the transfer of shares in a company, as opposed to managing the control of a discretionary trust.

For those interested, our book ‘The Seven Foundations of Business Succession’ explores each of the key company and trust rollover concessions used in estate and succession planning see - http://viewlegal.com.au/product/the-seven-foundations-of-business-succession/

Image courtesy of Shutterstock

Tuesday, July 18, 2017

Converting water into wine (or family trusts into fixed trusts)

Recent posts have considered various aspects of fixed trusts, see - Unit trusts and fixed trusts.

For a myriad of structuring issues, one issue that appears to be raised more regularly is whether it is possible to convert a family discretionary trust into a fixed trust.

This issue was considered by the Tax Office in Private Ruling Authorisation Number: 1012991136582. As usual, if you would like a copy of the ruling please let me know.

Broadly the factual matrix was as follows -
  1. a 'standard' family trust held an asset; 
  2. the trust had a widely crafted power of variation; 
  3. the trustee resolved to make a capital distribution of the balance in the unrealised capital profits account to certain beneficiaries, with this amount left unpaid (ie meaning it was a debt owed by the trust to the beneficiaries); 
  4. by agreement there was then a conversion of the debts (and some other outstanding loans) to equity such that each of the relevant beneficiaries had a certain percentage of ‘equity’ in the trust; 
  5. relying on the power to vary, the trustee then amended the terms of the trust deed to convert it into a fixed unit trust. 
After analysing the provisions of its Tax Determination in relation to resettlements (namely TD2012/21, see our previous post that explores this - ATO releases draft determination on trust resettlements) the Tax Office confirms that so long as the amendments are within the powers of the trust deed, the continuity of the trust will be maintained for trust law purposes.

This is because the ultimate beneficiaries of the trust after the proposed amendments would be the individuals who were the objects of the trust before the variation. The fact that the extent of the interests of the beneficiaries in the trust change as a result of the variation was seen as irrelevant.

Therefore, the amendments to the terms of the trust did not trigger capital gains tax (CGT) event E1 or CGT event E2, being the 'resettlement' CGT events.

CGT event E1 happens if a trust is created over a CGT asset by declaration or settlement.

CGT event E2 happens if a CGT asset is transferred to an existing trust.

The Tax Office further confirmed that CGT event E5 was not triggered by the conversion of a family trust to a fixed trust.

CGT event E5 happens if a beneficiary becomes absolutely entitled to a CGT asset of a trust as against the trustee despite any legal disability of the beneficiary.

CGT event E5 does not however happen if the trust is a unit trust and thus this exemption was held to apply here.

The Tax Office also confirmed that there are no other CGT events that happened when the family trust was converted into a unit trust. This is because the amendments were within the trustee's powers contained in the trust instrument. This means that the continuity of the trust was maintained for trust law purposes.

The above post is based on an article originally published in the Weekly Tax Bulletin.

Turning comments into wine and books

All those who interact with the post this week with any comments or likes on LinkedIn will go into the draw to win a bottle of View wine (which we are excited to confirm is now drinkable) or a paperback copy of our workbook ‘40 Forms of Trusts’.

Image courtesy of Shutterstock

Tuesday, July 11, 2017

Fixed trusts – what exactly are they?

A recent post explored some threshold issues around the distinctions between unit trusts and fixed trusts (see - Unit trusts and fixed trusts).

Whether a unit trust is in fact a fixed trust is an area that has been the subject of significant uncertainty.

In 2016, the Tax Office did release Practice Compliance Guidelines on its view of what is a fixed trust. Unfortunately, the release by the Tax Office is problematic for at least three reasons, namely:
  1. it only considered the meaning of ‘fixed trust’ for the purpose of the trust loss provisions under the Tax Act; 
  2. the drafting approach of the Tax Office is non-definitive; in other words the Tax Office confirms it will retain the discretion to deem a trust not to be fixed despite what it sets out in the guidelines; 
  3. furthermore, the guidelines are not themselves binding on the Tax Office. 
Subject to the above comments, broadly it seems to be accepted that the following factors will be relevant to supporting that a trust is a fixed trust: 
  1.  the trustee cannot create different rights or different classes of units; 
  2. all units on issue must have the same rights to receive income and capital of the trust; 
  3. units must be allotted for market value; 
  4. all income and capital of the trust must be distributed in proportion to the unitholdings, i.e. there is no discretion held by the trustee; 
  5. partly paid units cannot be issued; 
  6. the trust deed requires all unitholders to agree on the redemption of units and any redemption must be at market value; 
  7. all valuations of the trust fund, and in turn the determination of unit values, must be conducted by a valuer in accordance with ‘applicable Australian accounting principles’; 
  8. the trustee cannot make gifts;
  9. the unanimous consent of all unitholders is required to vary the trust deed and the variation power should prohibit amendments to any of the above provisions.
The above post is based on an article originally published in the Weekly Tax Bulletin.

Image courtesy of Shutterstock

Tuesday, July 4, 2017

Tyre pumping, timesheets and The Force

Last week’s shout out to #oldlaw (or #BigLaw as the case may be) and #burningtimesheets caused a significant amount of discussion.

Some will recall our long held view (no pun intended) that if you are not part of the solution, you are part of the problem* – particularly in relation to sustainable business models for professional service firms.

Creating a #timeless solution was a key foundation for the launch of View 3 years ago this week.

The #starwars inspired 90 second video we created to explain our vision can be viewed (again no pun intended) here – https://youtu.be/g965Sz8n9uc

Best wishes for the new financial year ahead, particularly if you have suddenly been asked to be somewhere between 5% and 23.6% (depending on your firms definition of current CPI rates**) more valuable to your customers …

* For trainspotters this is the Eldridge Cleaver (of Black Panther Party fame) quote

** For trainspotters the actual CPI in Australia over the last year is somewhere around 1%-2%

Tuesday, June 27, 2017

Unit trusts and fixed trusts

One area that seems to be receiving an increasing amount of interest from the Tax Office in recent times concerns the distinction between a unit trust and a fixed trust.

Often, the differences between these two types of trusts can be quite subtle and the interpretation of the trust deed can be critical in this regard.

As has been mentioned in numerous previous posts, the starting point in any trust related matter is to read the trust deed.

Where a trust deed is reviewed and the instrument does not reflect the intention of the parties, it is generally possible to convert what would otherwise be a unit trust into a fixed trust for tax purposes (and vice versa) without any adverse tax or stamp duty consequences.

Obviously, care does always need to be taken in this regard, and due to the potentially significant tax differences between the ownership structures, particularly in relation to issues such as trust losses, capital gains tax events and valuation requirements. It is therefore generally recommended that the trustee obtains specific written advice before implementing any intended change.

Image courtesy of Shutterstock

Tuesday, June 20, 2017

Taxpayer 2 v Commissioner 1 – the continuing story of streaming franking credits via trusts

For those that do not otherwise have access to the Weekly Tax Bulletin, a further recent article is extracted below.

The recent case of Thomas & Anor v FCT [2017] FCAFC 57 (as usual, if you would like a copy of the decision please contact me), contains some particularly interesting comments in relation to the distribution of franking credits by the trustee of a discretionary trust, including the ability to stream franking credits as a separate class of income.

It follows the well-publicised decision of the Queensland Supreme Court in Thomas Nominees Pty Ltd ACN 010 049 788 v Thomas & Anor [2010] QSC 417. That decision held that franking credits could form part of the income of a trust estate for trust law purposes and be streamed to particular beneficiaries.

There then followed the Commissioner's subsequent (successful) application in Thomas v FCT [2015] FCA 968 (see the following post - http://blog.viewlegal.com.au/2015/09/at-last-some-clarity-with-streaming-of.html), which concluded that franking credits were not net income of the trust and therefore could not be "streamed" independently from the net income.

Facts and original decision

In brief, the trustee of Thomas Investment Trust purported to distribute the trust's income in several consecutive financial years as follows:
  • Around 90% of the franking credits and foreign income and 1% of the remaining net income to an individual beneficiary. 
  • The balance of the net income to a corporate beneficiary. 
In the original decision, the taxpayer successfully obtained a declaration from the Supreme Court of Queensland in relation to the proper construction of the trust resolutions distributing the income in the manner summarised above.

In particular, the taxpayer commenced proceedings seeking directions under s 96 of the Trusts Act 1973 (Qld) as to the manner in which the trust deed and trust distribution resolutions should be interpreted.

The Commissioner was notified of the application but informed the taxpayer's solicitor that it did not consider it appropriate for the Commissioner to be a party to the proceedings.

The Court granted the orders requested by the taxpayer, largely on the terms requested, which included that the proper construction of the trust deed and resolutions resulted in the majority of the franking credits passing to an individual, notwithstanding that the balance of the net income went to the corporate beneficiary.

Commissioner's appeal

Following the decision above, the Commissioner challenged the effect of the distributions and in essence, argued that the franking credits could not be distributed to a beneficiary independently of the franked dividend to which those franking credits related.

The judgment issued by the Federal Court rejected the earlier conclusion of the Queensland Supreme Court and provided significant guidance in relation to the streaming of franked dividends and franking credits.

In particular, it confirmed that Div 207 recognises and permits a trustee to stream some or all of a franked dividend to one or more beneficiaries to the exclusion of others, subject to the requisite powers under the trust deed.

However, the Court held that, while franking credits will generally have a clear commercial value to a beneficiary (as a result of the beneficiary's ability to claim a tax offset from the credit), a franking credit is not "income" for trust law purposes.

Consequently, although franking credits constitute statutory income for the purposes of the gross-up provisions, they are a notional, statutory creation in this regard and do not constitute "ordinary income" under trust law principles.

As a result, the Court held the operation of Div 207 makes it clear that franking credits can only "attach" to the franked dividend and cannot be streamed as a separate class of income, notwithstanding any other provision that may indicate to the contrary within the trust instrument and found in favour of the Commissioner.

Taxpayer's subsequent appeal

The taxpayer's appeal Thomas & Anor v FCT [2017] FCAFC 57 essentially hinged on the nature of the original decision issued by Applegarth J in Thomas Nominees Pty Ltd ACN 010 049 788 v Thomas & Anor [2010] QSC 417.

The taxpayer argued that the nature of the orders issued by Applegarth J regulated the rights of the beneficiaries and the trustee and had conclusively determined each beneficiary's share of the trust's net income.

In particular, the Full Federal Court noted:

"The application before his Honour [(ie Applegarth J)] required the Court to make sense of what may, perhaps not unfairly, be described as confused resolutions. The resolutions purported to do something and an ultimate intention could fairly be discerned however ineptly the two resolutions may have been drawn.

However the rights of the beneficiaries flowing as against the Commissioner from Div 207 of the 1997 Act depended wholly upon the effect of the rights created as between the trustee and the beneficiary by whatever the resolutions may have achieved.

The rights to be created by the trustee as against the Commissioner were a matter wholly within the control of the trustee and it was in the jurisdiction of the Supreme Court to make declarations concerning the proper construction of what the trustee had done pursuant to a domestic trust."

The Court went on to say:

"The Commissioner was not obliged to participate in that proceeding, and may not be bound by the construction of Div 207, but the Commissioner is bound by a declaration concerning the effect of the resolutions if the declaration conclusively determines that a beneficiary has a share of the trust's net income for a year of income that is covered by s 97(1)(a) of the 1936 Act."

Consequently, the Court found in favour of the taxpayer for the income years in which the original orders had been granted (2005-2008) and, "reluctantly", also for the 2009 resolutions, which had not been expressly considered by Applegarth J.

Although the taxpayer was successful, the Court appeared unimpressed by the reasoning of Applegarth J in his original decision on a number of occasions.

For instance, Pagone J commented:

"Applegarth J's declaration in 1(b)(iii) is, perhaps surprisingly, that the resolutions which the trustee had made in the years ended 30 June 2005 to 30 June 2008 had conferred upon each of the beneficiaries a vested and indefeasible interest in the distributable income consistent with the intended flow of franking credits."

More bluntly, Pagone J said:

"It is difficult to embrace the conclusions of Applegarth J ... The franking credit distribution resolution is explicable only by a fundamental confusion in the mind of the person drafting the resolution … Applegarth J, however, was persuaded …"

Perram J also noted:

"Like Pagone J, I am, with respect, sceptical about the construction of the resolutions adopted by Applegarth J, but that scepticism simply does not matter whilst the declaration remains on foot. It is what it is. That it might be attended by reasoning which may be erroneous is irrelevant whilst it exists."

It seems clear from the decision that the taxpayer has enjoyed an extremely fortunate outcome, essentially leveraging the interplay of a number of technicalities to engineer an unlikely win.

Indeed, it can also arguably be assumed that, with the aid of hindsight, the Commissioner would be regretting his decision not to be included as a party to the original application to the Queensland Supreme Court.

Position in relation to streaming franking credits

While the case is at face value a victory for the taxpayer, it far from authority for the conclusion that franking credits can be streamed as a separate class of income from the dividends giving rise to those credits.

Indeed, in the absence of construction orders like those granted here by Applegarth J in the Queensland Supreme Court, the correct interpretation of Div 207 is that outlined by Greenwood J in Thomas v FCT [2015] FCA 968.

That is that while franking credits constitute statutory income for the purposes of the gross-up provisions, they are a notional, statutory creation in this regard and do not constitute "ordinary income" under trust law principles.

Pagone J makes this abundantly clear by stating that the trust resolutions here, and in turn Applegarth J's analysis:

"…proceeded upon the same misunderstanding of the proper operation of Div 207; that is, upon the misunderstanding that franking credits could be distributed separately."


Ultimately, as explained in our previous post (see - http://blog.viewlegal.com.au/2015/09/at-last-some-clarity-with-streaming-of.html), there are a number of lessons that can be taken from these decisions.

Certainly, as a starting point, there is the need for the Government to prioritise the long awaited re-write of the legislation governing the taxation of trusts in order to simplify what continues to be an unnecessarily complex area of the taxation law.

As set out previously, the other key lessons include the following:
  • As regularly highlighted in this Bulletin, it is critical to "read the deed" before purporting to exercise trust powers, particularly in relation to trust distributions. 
  • While reading the trust deed (including all valid variations) is necessary, it will not be sufficient by itself. There are a myriad of related issues that need to be considered that may impact on the intended distribution, aside from whatever powers are set out in the trust instrument. Examples include renunciations and disclaimers by beneficiaries, purported changes that are not permitted under the relevant trust instrument and the effective narrowing (for tax purposes) of permissible beneficiaries due to the impact of family trust and interposed entity elections. 
  • The wording of the distribution minute or resolution will be critical for determining the consequences of the distribution. Terms like "income" and "net income" will be defined differently depending on the trust instrument (even deeds that have been sourced from the same provider) and failing to understand those distinctions can result in inadvertent adverse outcomes for the trustee and beneficiaries. 
  • Distribution resolutions must also be crafted with reference to the trust instrument, trust law principles, the ITAA 1936 and the ITAA 1997. For example, with increasing regularity, we are seeing trust deeds that require distributions take place before they are otherwise needed under the ITAA. 
  • Trustees should act with significant care when dealing with "notional" amounts such as franking credits, to ensure the intended tax and commercial objectives are achieved. 
  • Trustees have a duty to ensure they are aware of their rights and responsibilities under the trust deed and the limitations under the ITAA 1936 and the ITAA 1997. A failure to discharge this duty can mean a trustee is personally liable. 
Finally, many of the themes in this post were featured in our recent Estate Planning Roadshow.

Download the brochure to purchase a full recording of the event here - https://viewlegal.com.au/product/recorded-webinar-package/

Tuesday, June 13, 2017

How soon is now ** (or ‘as soon as practicable’)?

Last week’s post considered the phrase ‘as soon as practicable’ in light of the 2017 superannuation changes (see - Estate planning and the 2017 super reforms – the six post death strategies you must be aware of).

Regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) requires death benefits to be cashed ‘as soon as practicable’ following the death of a member.

Unfortunately, ‘as soon as practicable’ is not defined in the Regulations and has not been otherwise defined.

Generally in our experience the Tax Office has historically expected death benefits to be paid within 6 months of a person's death, or earlier if possible.

While perhaps not directly relevant, part of the reason for this approach is likely to be because under section 17A(4) of the Superannuation Industry (Supervision) Act 1993 (Cth), any replacement trustee (or replacement director of a corporate trustee) must resign within 6 months of the death benefits commencing to be paid. In other words, 6 months is legislated in a manner that is arguably analogous to the concept of ‘as soon as practicable’.

This said, if there are objectively reasonable circumstances preventing payment for more than 6 months, this is unlikely to cause a breach of the rules, so long as the payment occurs as soon as practicable once the relevant circumstances have been resolved.

Some examples of where a payment after 6 months may still meet the ‘as soon as practicable’ test include -
  1. it may be that probate of a member's estate is seen as required before paying a death benefit, and generally probate will take longer than 6 months; 
  2. if there is a risk that an estate may be challenged or the potential recipients of a death benefit challenging the trustee's decision, confirming that the risk has passed will generally take longer than 6 months; 
  3. similarly, if there is an actual challenge to a deceased estate this may warrant delaying paying of a death benefit; 
  4.  if there is uncertainty about the validity of any purported binding death benefit nomination this may take longer than 6 months to resolve; 
  5. the nature of the assets in a fund may make distributions within 6 months impossible, for example illiquid assets such as real estate or investments in platforms that have large penalties for early withdrawal; 
  6. it may also be that the values of assets that are will form part of the cashing take an extended period to value; 
  7. surrounding circumstances, such as poor health of a surviving fund member may also justify a payment commencing later than 6 months. 
Interestingly, the 2017 superannuation reform legislation permits a reversionary beneficiary 12 months to decide if they wish to cash their benefit before it is automatically credited to their transfer balance. This allowance may (again by analogy) support the argument that a death benefits payment within 12 months will meet the ‘as soon as practicable’ test, even without other explanatory reasons.

** for the trainspotters – check out iconic 1980s new wave band The Smiths perform ‘How soon is now?’ here - https://www.youtube.com/watch?v=hnpILIIo9ek

Finally, many of the themes in this post were featured in our recent Estate Planning Roadshow.

Download the brochure to purchase a full recording of the event here - https://viewlegal.com.au/product/recorded-webinar-package/

Tuesday, June 6, 2017

Estate planning and the 2017 super reforms – the six post death strategies you must be aware of

Last week’s post considered 11 of the key strategies that need to be taken into account from an estate planning perspective in light of the 2017 superannuation changes (see - Estate planning and the 2017 super reforms – the 11 things you must be aware of).

Each of the issues flagged were primarily focused on pre-death estate planning strategies.

There are however a number of post-death issues in light of the 2017 superannuation changes that should be considered from an estate planning perspective, namely:
  1. Death benefit pensions can now be rolled over to a new fund (under the previous rules, this was very difficult). 
  2. Reversionary beneficiaries will now have up to 12 months from the death of the member to determine whether or not they wish to cash a benefit before it is credited to their entitlements and if the amount will result in the beneficiary exceeding their $1.6 million transfer balance cap, the excess amount must be paid as a lump sum benefit. 
  3. Where there is no reversionary pension, the pre-existing requirement that benefits be paid ‘as soon as practicable’ remains in place. Whether this phrase can be read in the context of the new amendments to mean (say) within 12 months remains open to debate. Next week’s post will consider in more detail the appropriate interpretation of this phrase. 
  4. Where no specific strategies have been implemented and a member passes away, it may be possible to establish a post-death superannuation proceeds trust. Generally, a post-death superannuation proceeds trust can allow infant beneficiaries to gain access to adult tax rates on income received. 
  5. This said, there are a number of technical requirements that must be met and the range of circumstances where the structure is available and appropriate is relatively narrow and should generally be seen as an alternative of last resort (previous posts have explained the various issues in this regard further, see - Why superannuation proceeds trusts should only be an avenue of last resort and Superannuation proceeds trusts: Tricks and traps). 
  6. When dealing with an SMSF, control of the fund continues to be critical and prior to implementing any of the approaches above, steps should be taken to ensure the SMSF is compliant with the SIS Act and trust deed (in particular, by ensuring any required changes to the trustees or directors of the corporate trustee are processed within the required timeframes). 
The above post is based on the article we recently had published in the Weekly Tax Bulletin.

Finally, many of the themes in this post were featured in our recent Estate Planning Roadshow.

Download the brochure to purchase a full recording of the event here - https://viewlegal.com.au/product/recorded-webinar-package/

Image courtesy of Shutterstock

Tuesday, May 30, 2017

Estate planning and the 2017 super reforms – the 11 things you must be aware of

The 2017 superannuation reforms are widely acknowledged as being the most fundamental changes to the superannuation landscape in over a decade.

While the reforms will have a significant impact across a range of areas, the consequences from an estate planning perspective are at risk of being overlooked.

In no particular order, the fundamental issues that must now be considered when managing superannuation entitlements from an estate planning perspective are as follows:
  1. Where an individual has a reversionary pension for an amount currently in excess of the $1.6 million balance transfer cap (which will be indexed for CPI), steps will need to be taken to manage how the amount which gets rolled back to their accumulation account is dealt with upon their death – for instance, via a binding death benefit nomination.
  2. While the exact factual matrix will always be critical, as a general comment, entitlements above the $1.6 million limit should be paid to tax death benefits dependants, ideally via a superannuation proceeds trust as part of a testamentary trust under a will (previous posts have explored various aspects of superannuation proceeds trusts, see Superannuation proceeds trusts, View Legal and superannuation proceeds trusts and Superannuation proceeds trusts: Tricks and traps).
  3. The utility of a superannuation proceeds trust is significantly undermined where there are no death benefit dependants for tax purposes. Where a person has superannuation entitlements and no tax dependants, the consequences of the ‘fast death tax’ remain critical to consider. The so-called ‘fast death tax’ arises where funds that could otherwise be withdrawn tax free by the member during their lifetime remain in the fund at the date of death of the member and are then subject to tax on the distribution from the fund. 
  4. The ability to make anti-detriment payments ends on 30 June 2017. Anti-detriment payments were beneficial in many situations, although had limited applications for self-managed superannuation funds. 
  5. Any estate planning strategy will continue to be ultimately dependent on the trust deed for the relevant fund and a detailed review of the deed should be undertaken before any succession strategies are implemented. 
  6. The conservative approach is that all trust deeds should be reviewed in light of the 2017 changes, with particular focus on the client’s estate planning objectives. Our experience to date is that in most cases, a deed update will be appropriate. 
  7. Regardless of whether a trust deed is updated, reviewing related estate planning documents to ensure that they align with the client’s objectives is critical. In particular, all death benefit nominations and reversionary pensions must be reviewed (for instance, in the context of the $1.6 million transfer balance cap mentioned above). To the extent that there are binding nominations in place, the structure of those nominations may need to be updated (again, previous posts have explored a number of relevant aspects in that regard, see Superannuation and binding death benefit nominations (BDBN), Death benefit nominations – read the deed and Double entrenching binding nominations).
  8. Similarly, the ability to make decisions, including potentially renewing or changing nominations in the event of a member’s incapacity, must be addressed by a comprehensive, superannuation compliant, enduring power of attorney. An appropriately crafted document in this regard will also provide a pathway to potentially avoid ‘fast death tax’ being triggered. 
  9. The utility of reversionary pensions will be significantly undermined if the consequence of the reversionary pension is that the recipient exceeds their transfer balance cap. 
  10. That said, in the right factual scenario, a child pension may provide planning opportunities as a child is entitled to access each of their parents transfer balance cap – in other words, if the two parents pass away, the children of the relationship can get access to up to $3.2 million. Unless a child has a permanent and significant disability however, any balance in a pension account on the child reaching the age of 25 must be commuted and paid to them as a lump sum. From an asset protection perspective, this has significant adverse consequences that need to be considered. 
  11. A carefully crafted testamentary trust will, which can provide tax benefits that are broadly similar to those that could be obtained by a child allocated pension, may be preferable to ensure that access to capital only takes place at appropriate junctures and not automatically at the age of 25. 
Next week’s post will consider some of the specific post-death consequences of the new rules.

The above post is based on the article we recently had published in the Weekly Tax Bulletin. Finally, many of the themes in this post were featured in our recent Estate Planning Roadshow.

Download the brochure to purchase a full recording of the event here - https://viewlegal.com.au/product/recorded-webinar-package/

Image courtesy of Shutterstock

Tuesday, May 23, 2017

Seven dwarves, pizzas for the homeless and pre-chopped broccoli florets** – taking the detail to a whole new level

Following last week’s post, where I mentioned that, particularly in New South Wales, it is often the case that trustees are expressly prohibited from being beneficiaries of discretionary trusts there were a number of questions relayed to me. Thank you also for the suggestions as to what hair product Van Halen would have likely demanded at the height of their fame in the mid 1980s (see – Brown M&Ms, invasion by aliens and when trust beneficiaries aren’t beneficiaries).

The key reason the ‘trustee can’t be a beneficiary’ prohibition is so prevalent in New South Wales is that under the stamp duty laws there, in order for a trustee to be permitted to be appointed (particularly where there is a change of trustee of a pre-existing trust), that trustee must not be a potential beneficiary of the trust.

Obviously, there are a range of asset protection related issues in this regard as well. At the centre of these issues is the fact that a trustee is directly liable for misadventures of the trust. As a general rule, the maximum value of a trustee company from time to time should never be more than a nominal amount – ie $2. A trustee company receiving distributions as a corporate beneficiary will breach this rule immediately.

Importantly however, many trust deed providers that offer deeds nationally, will incorporate the prohibition on a trustee being a potential beneficiary, even for trusts that do not otherwise have any connection with New South Wales.

This prohibition will often be weaved into a trust instrument in a less than obvious manner. Unless there is a pedantic approach to reviewing the terms of a trust deed the prohibition will be missed.

In summary – yet another example of the importance of the mantra ‘read the deed’.

As mentioned last week, our upcoming webinar ‘Trust Horror Stories’ will have many case study examples highlighting key issues to be aware of with managing trusts.

Find out more here - https://viewlegal.com.au/product/webinar-trust-horror-stories/

Watch the promo video below.

** for the trainspotters, the author of the theme song of ‘Trainspotting’, being ‘Lust for Life’ (see - https://www.youtube.com/watch?v=jQvUBf5l7Vw) Iggy Pop allegedly had a contract rider requiring seven dwarves, pizzas to give to the homeless, and pre-chopped broccoli florets (to make them easier to throw away). Again there is a prize for anyone who can share a more unique list of riders.

Tuesday, May 16, 2017

Brown M&Ms, invasion by aliens and when trust beneficiaries aren’t beneficiaries

In preparing for the upcoming View webinar ‘Trust Horror Stories’ (see details below) we had a timely reminder of the mantra to ‘read the deed’.

The read the deed mantra is analogous to the famous contract rider of rock band Van Halen requiring M&Ms in their dressing room; with all the brown ones removed.

Originally thought to be the very definition of an outlandish group of prima donnas, the truth was all about the detail – if Van Halen ever saw brown M&Ms on arrival at a venue they were on notice that the venue operator did not sweat the detail.

On more than one occasion they used the existence of a brown M&M as cause for cancelling a gig; or perhaps more bluntly, telling the venue to go ‘Jump’**.

Contract lawyers have long been renowned for a similar technique when crafting ‘force majeure’ provisions and randomly including events such as inability to complete a contract due to invasion by aliens or abduction by unicorns to flush out those who are not checking every line.

In the trust deed example we had this week, a trustee company had been distributing income from a trust to itself as a corporate beneficiary (ie to cap the tax rate at 30%).

Aside from the asset protection issues that can arise from using a corporate trustee as a corporate beneficiary, the other main issue to consider was whether the company could in fact be a beneficiary of the trust – in other words did the deed include the trustee as a beneficiary.

As is quite often the case with trusts established in New South Wales (in particular), in this instance, the trustee was in fact expressly excluded as a potential beneficiary of the trust. See the following post for a more detailed analysis of this aspect of many trust deeds –

Read the deed - another reminder re invalid distributions.

The invalid distribution, which unfortunately had been made over a number of years, meant that a range of quite complex issues arose in relation to the trust, with a multitude of tax, trust law and accounting issues needing to be addressed. The solutions available for each issue were, at best, problematic.

As mentioned, our upcoming webinar ‘Trust Horror Stories’ will have many case study examples highlighting key issues to be aware of with managing trusts.

Find out more here - https://viewlegal.com.au/product/webinar-trust-horror-stories/

Watch the promo video below.

** for the trainspotters, one of Van Halen’s most popular songs is ‘Jump’ – see - https://www.youtube.com/watch?v=k8LdRJqjjRM and there is a prize for anyone who can confirm the list of contract riders for hair product.

Tuesday, May 9, 2017

Murphy’s Lew

As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/SSpp06IM5j4

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –
The case study here is a relatively famous case, or at least a case about a relatively famous person, being Solomon Lew, the high profile retailer.

The factual scenario involved a relatively standard family trust.

The initial catalyst for the difficulties was the so-called ‘entity taxation regime'. Under these rules, the idea was to effectively tax trusts as if they were companies.

Mr Lew received some strategic tax advice.

The strategic advice was to do this.

The first step was that the trust entered into an arrangement where an asset revaluation was done.

This basically uplifted the carrying value of all of the assets of the trust to market value and created a big gap, a dollar gap between the carrying cost and the actual market value. That ‘notional gain' was distributed as a capital distribution, down to relevantly one of the sons and one of the daughters of Mr and Mrs Lew, and their respective spouses.

Fast forward about 5 or 6 years, the relationships of both of the kids with their respective spouses ended at about the same point in time.

The former spouses and their lawyers looked at the documentation and argued based on the accounts, the amounts were at call loans made to the trust.

The Lews’ argued that the amounts were in fact gifted back into the trust.

If it was a loan, then that would have to be immediately repaid down into each couple’s hands and then those would immediately form part of the matrimonial pool.

Unfortunately, what the ‘correct' answer was is unknown because the matter settled out of court. In some respects however, it doesn’t even matter what the answer was.

The key point is that no one actually thought about the documentation with a lot of clarity.
The title of this post is a play on Murphy’s Law, which is an adage or epigram that is generally quoted as 'anything that can go wrong, will go wrong'.

Murphy’s Law is profiled together with over 100 other adages in my recently released business book 'Laws for Life'.

A link to your (free!) copy of this book is below -


Password: laws4life

Please delete any pre-populated password.

Separately, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.

Tuesday, May 2, 2017

Thank you + some context - #NowInfinity + #View

As has been circulated in a number of forums, we are very excited to confirm View’s strategic partnership with NowInfinity.

Thank you for the positive feedback received already.

View has been on a mission to revolutionise access to quality legal advice in a range of highly specialised areas - namely estate planning, structuring, tax, trusts, asset protection, superannuation and succession planning.

Amongst an array of innovations our platform was one of the first to provide 100% upfront fixed pricing with a service guarantee. We have passionately strived to develop products that provide collaborative pathways with other professionals, in the process creating over 90 online and automated legal solutions.

Leveraging technology has been the enabler in us creating a seamless ecosystem in these specialisations.

Indeed, it has allowed us to create an ‘and’, not ‘or’ platform. That is, we have been able to continue to deliver bespoke tailored solutions for high net worth individuals and business owners, while simultaneously using the knowledge we have gained to build a disruptive solution for the majority of the market.

The centrepiece of our success to date has been the support of the adviser network across the country, given that our entire model is founded on advisers facilitating each solution, only involving View where it is clear that we can add value on a wholesale or business to business basis.

Similarly, NowInfinity has been on a mission to profoundly change the way businesses are functioning, workflows are implemented and documents are created, stored, updated and managed across the entire financial services and related industries.

Founded at around the same time as View, NowInfinity already has an impressive track record of launching numerous cutting-edge products.

The opportunity to combine the two businesses and deliver holistic and integrated estate planning solutions we believe is compelling on a range of levels, particularly as it offers accountants, financial advisers and other lawyers a truly differentiated facilitated model.

More context about the combined platform will be provided in our upcoming half and full day Estate Planning Roadshow being held in Sydney, Melbourne, Adelaide and Perth (the Brisbane event was last week).

Download the brochure here.

Watch the promo video below.

Finally, for those who had not otherwise seen the press release confirming details of the combined group, under the heading ‘Powerhouse disruptors join forces: NowInfinity and View Legal’ it is set out in full below.

Two powerhouse disruptors – cloud-based document and entity management platform NowInfinity, headed up by fintech entrepreneur Amreeta Abbott, and groundbreaking law firm View Legal, headed up by innovator and recognised expert in estate planning and tax law, Matthew Burgess, have joined forces, merging the digital business units of each firm and forming a strategic partnership on legal services.

“The partnership and merger provide accountants and bookkeepers, financial advisers, SMSF specialists and adminstrators and legal firms with a whole new level of solutions,” said NowInfinity CEO, Amreeta Abbott. “It enhances the NowInfinity platform, enabling members to efficiently create, collaborate and manage specific governance and life events for their clients.”

Ms Abbott said View Legal is a well-recognised legal firm that truly understands what matters to end clients. “View Legal’s team of lawyers, their processes and their non-traditional approach will also make legal advice more accessible to NowInfinity members and inspire them with the confidence to offer cradle-to-grave advice.”

Over the past four years, NowInfinity has delivered huge cost efficiencies via data automation and systems integration. “This has been magnified by the recent release of the NowInfinity Entity Management Suite, which provides corporate compliance, including ASIC lodgements; trust management and SMSF Compliance.”

Similarly, View Legal has created a disruptive and innovative way to offer legal services, with a particular focus on tax and estate planning by, amongst other things, introducing a fixed pricing model, actively collaborating with other professionals and creating an array of online and automated solutions.

Ms Abbott said that together, NowInfinity and View Legal will continue to innovate with the objective of delivering technology and services that underpin the rapid and required change within the accounting, financial advice and legal industries.

“First cab off the rank will be a new estate planning solution designed to eliminate the traditional barriers that have previously limited end-to-end client advice between accountants, financial advisers and lawyers,” she said.

Director of View Legal, Matthew Burgess said, “Leveraging technology to allow advisers to facilitate client solutions is the centrepiece of the View platform. Our partnership and merger with NowInfinity, the leading provider in this space, is exceptionally exciting and exemplifies the true meaning of synergy.”

About NowInfinity
NowInfinity is a technology company with a progressive and dynamic cloud based documentation and entity management platform solution with features enabling rapid company formation with ASIC, compliance tools and legal document templates for entity establishment and management. The solution is used by accounting, bookkeeping, financial advice, SMSF specialist, super administration and legal firms. It provides users with legal templates, entity registers, corporate compliance administration and fee management, SMSF compliance, trust management, document collaboration and data integrity via its integrations with but not limited to, ASIC, XERO, Microsoft Dynamics, salesforce.com, Class and electronic signatures – DocuSign.

About View Legal
View Legal is built around the disruptive mantra of being a law firm that friends would choose. To achieve this vision, View Legal has fundamentally and radically revolutionised access to quality legal advice, in the highly specialised areas of structuring, tax, trusts, asset protection, business sales, estate and succession planning.
Using technology as an enabler, View Legal has taken each of the tenets of the traditional delivery model – and turned them on their heads, with guaranteed up front fixed pricing replacing timesheets, entirely virtual office space replacing fancy city premises and active collaboration with advisers nationwide replacing the incumbent silo mentality.

Monday, April 24, 2017

They're 18, they’re beautiful and they're no longer ‘yours’

One regularly asked question in estate planning is ‘do my kids need estate planning documents?’.

The one word answer is – absolutely.

The more detailed answer to provide some context is as follows:
  1. Assuming a person otherwise has mental capacity, they are entitled to implement estate planning documents on reaching the age of majority (i.e. 18 years). 
  2. The main exception to this rule is that a married person may implement estate planning documents, even if they have not reached the age of majority. 
  3. If a person has reached the age of majority, but does not have estate planning documents in place, an array of complications can arise. 
  4. If the person dies, then their estate will be administered in accordance with the intestacy rules (previous posts have looked at various aspects of these rules, for example see How do the intestacy rules work? and What happens to assets in the estate if a person dies without a will?.
  5. Invariably, the intestacy rules trigger a ‘triple whammy’ – significantly more costs, significant time delays and often a distribution that does not reflect the wishes of the deceased. 
  6. Where a young adult loses capacity, the adverse consequences for the family can in some cases be even more traumatic than a person dying intestate. 
  7. In particular, without an enduring power of attorney, it is essentially a government department that has the default right to make the decisions on behalf of the incapacitated person. 
  8. While there is a statutory process that allows interested parties (for example, parents of the young adult) to have themselves appointed, this again invariably causes a ‘triple whammy’ of increased costs, increased delays and the risk that the preferred people are not in fact appointed. 
Unfortunately, we have seen a myriad of horror stories involving young adults without any estate planning arrangements in place, for example:
  1. A 21-year-old who died with over $1 million in assets. These assets were as a result of being a member of multiple superannuation funds that she had joined working in a range of casual positions during university. Each fund had automatic insurance, regardless of the member balance, that totalled over $1 million. 50% of these entitlements went to the lady’s estranged father whom she had not even spoken to for over 15 years. 
  2. A 19-year-old man who had been gifted over $300,000 by his parents to help acquire his own unit. On his death the unit passed to a lady who claimed to be his de facto, but whom the parents had never in fact met. 
  3. An 18-year-old man who was left stranded in an incapacitated state in Spain following an accident at the ‘running of the bulls’. As his parents were not appointed as his enduring attorney, they had no legal authority recognised by the Spanish authorities. 
As a separate comment - the popularity of recent posts leveraging pop references has been used again, with a song, the most popular version arguably recorded by Beatle’s drummer Ringo Starr ‘You’re sixteen, you’re beautiful and you’re mine’ - see https://www.youtube.com/watch?v=8ainB6qnWBI

Finally, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.

Image courtesy of Shutterstock

Tuesday, April 18, 2017

Don't believe the hype - trusts do protect assets

Previous posts have considered the true impact of arguably the highest profile decision in relation to trusts and asset protection, being the decision in Richstar (that is - Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509). The most recent post is available here - Richstar – Another Reminder

More recently the decision in Fordyce v Ryan & Anor; Fordyce v Quinn & Anor [2016] QSC 307 has again reinforced that the reasoning in Richstar, at least as it relates to the ability to attack assets held via a discretionary trust, is at best questionable.

In particular, the case confirms succinctly as follows -

'It is difficult to accept as a principle of reasoning that a beneficiary’s legal or de facto control of the trustee of a discretionary trust alters the character of the interest of the beneficiary so that it will constitute property of the bankrupt if the beneficiary becomes a bankrupt.

To the extent that Richstar might be thought to support such a principle, it has not been followed or applied subsequently and it has been criticised academically.'

As set out in previous posts, there are numerous decisions now that reached a similar conclusion.

A selection of the subsequent cases is summarised below. If you would like access to the full copies of any of the decisions mentioned in this post, please email me:
  1. Tibben & Tibben [2013] FamCAFC 145 - The only ‘entitlement’ of the beneficiaries under the Deed of Settlement was a right to consideration and due administration of the trust: Gartside v Inland Revenue Commissioners; 
  2. Deputy Commissioner of Taxation v Ekelmans [2013] VSC 346 - The applicant relied on the decision in Richstar to contend that the cumulative effect of the role and entitlement of Leopold Ekelmans under the trust instruments amounted to a contingent interest in all of the assets of the trust, making those assets amenable to a freezing order as if the assets of Leopold Ekelmans. The Court found that the applicant could not in this matter rely on Richstar; 
  3. Hja Holdings Pty Ltd and Ors & Act Revenue Office (Administrative Review) [2011] ACAT 91 – notwithstanding that beneficiaries under a ... discretionary trust have some rights, such as the right to have the trust duly and properly administered, generally a beneficiary of a discretionary trust, who is at arm's length from the trustee, only has an expectancy or a mere possibility of a distribution. This is not an equitable interest which constitutes "property" as defined; 
  4. Donovan v Sheahan as Trustee of the Bankrupt Estate of Donovan [2013] FCA 437 - a beneficiary of a non-exhaustive discretionary trust has no assignable right to demand payment of the trust fund to them (and nor have all of the beneficiaries acting collectively) and that the essential right of the individual beneficiary of a non-exhaustive discretionary trust is to compel the due administration of the trust; 
  5. Simmons and Anor & Simmons [2008] FamCA 1088 – the court and parties referred to Richstar on a number of occasions and confirmed that a beneficiary has nothing more than an expectancy. 
As a separate comment - the popularity of last week's post leveraging a 1980s pop reference has been used again, perhaps with a slightly more obscure song, Public Enemy's 'Don't believe the hype' is linked here - https://www.vevo.com/watch/public-enemy/dont-believe-the-hype/USDJM0400011

Finally, many of the themes in this post will be featured in our upcoming half and full day Estate Planning Roadshow being held in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Download the brochure here.

Watch the promo video below.

Image courtesy of Shutterstock

Tuesday, April 11, 2017

Money for nothing... Succession planning grants for Queensland farming families

The Queensland Government has recently announced the introduction of a new farm management grant which provides financial assistance to Queensland farming families wishing to review or update their succession planning arrangements.

On the basis that every family should in theory ensure they have comprehensive estate and succession planning in place the grant could be viewed through the lense of the iconic 1980's song - that is - money for nothing.

This said, the grant is however only available to Queensland primary producers (and their families) and can only be used to fund professional fees incurred in relation to the family’s estate planning arrangements and related succession planning issues.

The grant will cover 50% of the professional fees incurred by the family, up to a maximum of $2,500 per year. In other words, the total spend in any year will need to be at least $5,000 to maximise the contribution from the Government.

The availability of the grant will hopefully encourage more Queensland farming families to get their succession plans in order.

Ideally it may also encourage other State Governments to adopt similar incentives.

If you or your clients would like more information in relation to the farm management grant, please contact us.

In this regard, we are excited to be presenting our half and full day Estate Planning Roadshow in Brisbane, Sydney, Melbourne, Adelaide and Perth that will explore a range of planning opportunities in this space.

Download the brochure here.

Watch the promo video below.

Image courtesy of Shutterstock