Updating ASIC records – Simple (Simon)**

Last week’s post touched on some of the issues in relation to disclosure of beneficial ownership of shares on ASIC records.

In situations where the beneficial ownership is incorrectly recorded there are three broad alternatives available, namely:

1. Leaving the ASIC records unchanged. From a compliance perspective while this approach is possible, it is not recommended.
2. Simply lodging an annual return or ASIC form 484 that updates the ASIC records from that date. In many cases this approach will be pragmatically appropriate and is certainly the easiest and most cost effective approach. There is a risk however that there may be adverse revenue consequences or challenges from a third party (for example a trustee in bankruptcy).
3. The final approach involves effectively rectifying ASIC records from the date the error first occurred and then arranging for the annual returns for every subsequent year to also be amended. Obviously, this approach can be a significant exercise and is generally only adopted where there are concerns from a tax, stamp duty or asset protection perspective.

** For the trainspotters, the title today is riffed from INXS’ first ever single, from 1980, watch here:

Some things don’t change – division 7A and contracts 101 **

Following on from last week’s post, today’s post considers another aspect of where company constitutions have the terms of a Division 7A loan or facility agreement embedded in them.

In most circumstances, it is generally the case that the Tax Office will accept that the terms of the facility agreement will regulate any debit loans made by the company from time to time.

One difficulty however that can arise in this regard is that from a simple contractual perspective, these loans will not be effectively created unless the recipient of the loan is in fact a party to the constitution.

Under the Corporations Act, the constitution is a contract between the company, the members and directors.

This means that if, for example, a loan is made to a non- member or director by the company, then the facility agreement contained within the constitution will not be able to be relied on.

As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, ‘Don’t change’ is a song by INXS from 1982.

View here:

Only one thing ? – constitutions + division 7A provisions **

A previous post has considered the various trust deed providers that have from time to time contained a clause which seems to automatically convert an unpaid present entitlement into a loan (see our post from 9 December 2010). This week I was reminded of a similar difficulty with some constitutions offered by similar providers.

In particular, while the Tax Office has for some years accepted the ability for a company's constitution to set out the terms by which any loan by the company is made for Division 7A purposes, care must always be taken to ensure that the provisions of this loan (or facility) agreement do in fact reflect the intent of the parties.

A number of these types of facility agreements require compliance with the Division 7A provisions, regardless of the financial status of the relevant company. For example, even where a distributable surplus does not exist (and therefore the tax rules would not otherwise apply), many of these constitutions can in fact require compliance with the Division 7A rules.

While perhaps not so memorable as the ‘read the deed’ mantra for trusts, similarly we have a mantra of ‘read the constitution (& Tax Act)’ when considering company related issues.

As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, ‘The One Thing’ is a song by INXS from 1982.

View here:

What you need** with super death benefit planning

Last week’s post considered the case of Katz v Grossman.

Earlier posts have considered the various types of superannuation death benefit nominations that can be made.

Clearly if the father in Katz v Grossman had utilised a binding death benefit nomination, then there would likely have not been any successful challenge to the ultimate payment of the superannuation entitlements

Some of the other planning strategies that can be utilised to regulate how superannuation benefits are distributed on death include:

1) incorporating automatic adjustment clauses under the terms of a will, to take into account benefits that are received directly from a superannuation fund;

2) mandating the succession of trusteeship of the superannuation fund; and

3) entrenching approval mechanisms for death benefit payments, for example, by prohibiting a payment until trustee receives consent from a trusted third party.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the INXS song ‘What you need’. View hear (sic):

  

The Original (Sin)** and super death benefits - the Katz decision

Superannuation entitlements are regularly one of the most significant assets in any estate planning exercise.

Critically however, superannuation benefits need to be regulated in a way that complements a wider estate planning exercise. Arguably, one of the leading cases in relation to superannuation death benefit planning remains, after more than 15 years, the decision in Katz v Grossman [2005] NSWSC 934.

The case involved Katz bringing an action against his sister Grossman (and her husband), claiming an interest in their father’s self managed superannuation fund (SMSF).

A summary of the facts is as follows:

1. originally, the father and mother were the individual trustees of the SMSF;
2. the mother died some years before the father, and subsequently Grossman was appointed as a co-trustee with the father (this was to ensure that the SMSF continued to comply with the relevant superannuation legislation);
3. when the father later died, Grossman appointed her husband as a co-trustee with her;
4. during his lifetime the father had made a non-binding nomination indicating that he wanted his superannuation entitlements divided equally between Katz and Grossman; and
5. Grossman and her husband ignored the nomination and paid the entirety of the superannuation entitlements for the benefit to herself.

The Court held that all the trustees of the SMSF had been validly appointed at the relevant times, and that as a result, the challenge by Katz was unsuccessful and Grossman was entitled to keep the superannuation entitlements.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from the INXS song ‘Original Sin’. View hear (sic):

Some things don’t change – division 7A and contracts 101 **

Following on from last week’s post, today’s post considers another aspect of where company constitutions have the terms of a Division 7A loan or facility agreement embedded in them.

In most circumstances, it is generally the case that the Tax Office will accept that the terms of the facility agreement will regulate any debit loans made by the company from time to time.

One difficulty however that can arise in this regard is that from a simple contractual perspective, these loans will not be effectively created unless the recipient of the loan is in fact a party to the constitution.

Under the Corporations Act, the constitution is a contract between the members and directors.

This means that if, for example, a loan is made to a non- member or director by the company, then the facility agreement contained within the constitution will not be able to be relied on.

** For the trainspotters, ‘Don’t change’ is a song by INXS from 1982, learn more here

Only one thing ? – constitutions + division 7A provisions **

A previous post has considered the various trust deed providers that have from time to time contained a clause which seems to automatically convert an unpaid present entitlement into a loan. This week I was reminded of a similar difficulty with some constitutions offered by similar providers.

In particular, while the Tax Office has for some years accepted the ability for a company's constitution to set out the terms by which any loan by the company is made for Division 7A purposes, care must always be taken to ensure that the provisions of this loan (or facility) agreement do in fact reflect the intent of the parties.

A number of these types of facility agreements require compliance with the Division 7A provisions, regardless of the financial status of the relevant company. For example, even where a distributable surplus does not exist (and therefore the tax rules would not otherwise apply), many of these constitutions can in fact require compliance with the Division 7A rules.

While perhaps not so memorable as the ‘read the deed’ mantra for trusts, similarly we have a mantra of ‘read the constitution (& Tax Act)’ when considering company related issues.

** For the trainspotters, ‘The One Thing’ is a song by INXS from 1982, learn more here