Last week’s post touched on the Family Court decision from the end of 2011 concerning the way in which a family trust was treated as part of a matrimonial settlement.
One other aspect of the case that is worth mentioning involved the conclusion by the Court about the, purported, use of a corporate beneficiary.
In particular a ‘bucket company’ was set up some years after the initial establishment of the trust. The evidence that seemed to be accepted by the Court was that the company was established for ‘tax minimisation or reduction purposes’.
Unfortunately, to the extent that a disgruntled third party (including the Tax Office) may wish to challenge the distributions, the company was not in fact a beneficiary of the trust.
While the ‘wrongful’ distributions (in the words of the Court) were not explored further in the context of this family law case, the comments highlight the theme of many earlier posts – that is in almost every area where structures are used (whether they be trusts, companies or super funds) it is critical that someone takes responsibility for reading the establishment documents before any step is taken.
Until next week.
Tuesday, March 20, 2012
Monday, March 12, 2012
Another family law case on trusts
Posts made in October 2011 focused on a high profile family law case involving a family trust (Keach).
In that case, the assets of a family trust were essentially protected on a property settlement.
Towards the end of last year, the case Harris v Harris (for a full copy of the decision follow this link - http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FamCAFC/2011/245.html) provided further context to the general attitude of the Family Court in relation to traditional trust structures.
The outcomes of both cases can be contrasted with the outcomes in cases involving arrangements that the Court believes are unconscionably designed to hide assets (for example, the case of the Kennon v Spry, also featured in the posts during the latter half of 2011).
In brief terms, the Harris case involved a trust established by the husband’s father.
At the relevant time, the appointor of the trust was the husband’s mother and the controllers of the trustee company were the husband’s mother, a son from a previous relationship and a friend.
The main asset of the trust was a business which it was accepted was run on a day-to-day basis by the husband and wife.
The main beneficiaries of the trust were the husband’s parents and their children (i.e. the husband and his siblings).
Distributions from the trust had been amongst the entire family group (including the wife), although the distributions to the wife ceased on separation with the husband.
In summary, the Court held:
1. The trust and its assets were not an asset of the marriage.
2. At most, the trust should be considered a significant financial resource for the husband.
3. If a party to the marriage is not directly the appointor or in control of the trustee, then they do not have direct control.
4. In order for there to be indirect control by a beneficiary, there must effectively be a situation where someone who has direct control is the mere puppet of the beneficiary.
5. In order to demonstrate indirect control (e.g. through a ‘puppet’ scenario), there must be clear evidence to support the argument and merely reviewing a history of trust distributions of itself will not be sufficient.
Until next week.
In that case, the assets of a family trust were essentially protected on a property settlement.
Towards the end of last year, the case Harris v Harris (for a full copy of the decision follow this link - http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FamCAFC/2011/245.html) provided further context to the general attitude of the Family Court in relation to traditional trust structures.
The outcomes of both cases can be contrasted with the outcomes in cases involving arrangements that the Court believes are unconscionably designed to hide assets (for example, the case of the Kennon v Spry, also featured in the posts during the latter half of 2011).
In brief terms, the Harris case involved a trust established by the husband’s father.
At the relevant time, the appointor of the trust was the husband’s mother and the controllers of the trustee company were the husband’s mother, a son from a previous relationship and a friend.
The main asset of the trust was a business which it was accepted was run on a day-to-day basis by the husband and wife.
The main beneficiaries of the trust were the husband’s parents and their children (i.e. the husband and his siblings).
Distributions from the trust had been amongst the entire family group (including the wife), although the distributions to the wife ceased on separation with the husband.
In summary, the Court held:
1. The trust and its assets were not an asset of the marriage.
2. At most, the trust should be considered a significant financial resource for the husband.
3. If a party to the marriage is not directly the appointor or in control of the trustee, then they do not have direct control.
4. In order for there to be indirect control by a beneficiary, there must effectively be a situation where someone who has direct control is the mere puppet of the beneficiary.
5. In order to demonstrate indirect control (e.g. through a ‘puppet’ scenario), there must be clear evidence to support the argument and merely reviewing a history of trust distributions of itself will not be sufficient.
Until next week.
Monday, March 5, 2012
Anti avoidance rules to be amended from 1 March 2012
Towards the end of last week the Federal Government announced that changes would be made to the general anti avoidance tax provisions under part IVA.
The announcement was made in the context of the government’s view that the provisions needed to ‘be effective in counteracting tax avoidance schemes that are carried out as part of broader commercial transactions’.
In particular the proposed amendments are said to be designed to ‘confirm that part IVA always intended to apply to commercial arrangements which have been implemented in a particular way to avoid tax. This also includes steps within broader commercial arrangements’.
The changes are said to be required because ‘in recent cases, some taxpayers have argued successfully that they did not get a 'tax benefit' because, without the scheme, they would not have entered into an arrangement that attracted tax. For example, they could have entered into another scheme that also avoided tax, deferred their arrangements indefinitely or done nothing at all. Such an outcome can potentially undermine the overall effectiveness of Part IVA and so the Government will act to ensure such arguments will no longer be successful.’
The government has said that to ensure that the changes do not interfere with what are otherwise genuine commercial activities it will consult extensively as to how to best implement the new rules.
Specialist advice is also likely to be sought before preparing the first draft of the new legislation and throughout the redrafting process.
A full copy of the media release is at the following link:
http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2012/010.htm&pageID=003&min=mva&Year=&DocType=
Until next week.
The announcement was made in the context of the government’s view that the provisions needed to ‘be effective in counteracting tax avoidance schemes that are carried out as part of broader commercial transactions’.
In particular the proposed amendments are said to be designed to ‘confirm that part IVA always intended to apply to commercial arrangements which have been implemented in a particular way to avoid tax. This also includes steps within broader commercial arrangements’.
The changes are said to be required because ‘in recent cases, some taxpayers have argued successfully that they did not get a 'tax benefit' because, without the scheme, they would not have entered into an arrangement that attracted tax. For example, they could have entered into another scheme that also avoided tax, deferred their arrangements indefinitely or done nothing at all. Such an outcome can potentially undermine the overall effectiveness of Part IVA and so the Government will act to ensure such arguments will no longer be successful.’
The government has said that to ensure that the changes do not interfere with what are otherwise genuine commercial activities it will consult extensively as to how to best implement the new rules.
Specialist advice is also likely to be sought before preparing the first draft of the new legislation and throughout the redrafting process.
A full copy of the media release is at the following link:
http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2012/010.htm&pageID=003&min=mva&Year=&DocType=
Until next week.
Monday, February 27, 2012
PPSA and company charges
The long awaited transition to the personal property security regime has continued to evolve since the official ‘live’ date of 30 January 2012.
While there are an ever increasing number of war stories, for anyone involved in advising companies, arguably one of the most tangible changes has been the abolition of ASIC forms in relation to registering company charges.
Today’s post focuses on some of the critical aspects of the new company charge regime.
On 30 January 2012, ASIC ceased to register company charges and ASIC forms 309, 311 and 312 are no longer relevant.
No forms - The difference between the PPS register and the ASIC register of company charges is that there are no physical forms that are lodged with the PPS register. All registrations, amendments and releases are done online using the PPS register (i.e. no forms are signed).
How do I find out if a company has charges against its assets? - ASIC searches will no longer show details of current registered charges. You will need to search the PPS register to reveal these details. As the PPS register search function has experienced a number of technical difficulties, you should always search a company by ACN, ABN and company name until these issues are resolved.
How do I register a security interest? - In order to register a security interest on the PPS register you need to register a financing statement.
How do I release a security interest? - As the ASIC form 312 is no longer relevant, parties will need to agree on a way to document the release in another fashion e.g. a deed of release.
Until next week.
While there are an ever increasing number of war stories, for anyone involved in advising companies, arguably one of the most tangible changes has been the abolition of ASIC forms in relation to registering company charges.
Today’s post focuses on some of the critical aspects of the new company charge regime.
On 30 January 2012, ASIC ceased to register company charges and ASIC forms 309, 311 and 312 are no longer relevant.
No forms - The difference between the PPS register and the ASIC register of company charges is that there are no physical forms that are lodged with the PPS register. All registrations, amendments and releases are done online using the PPS register (i.e. no forms are signed).
How do I find out if a company has charges against its assets? - ASIC searches will no longer show details of current registered charges. You will need to search the PPS register to reveal these details. As the PPS register search function has experienced a number of technical difficulties, you should always search a company by ACN, ABN and company name until these issues are resolved.
How do I register a security interest? - In order to register a security interest on the PPS register you need to register a financing statement.
How do I release a security interest? - As the ASIC form 312 is no longer relevant, parties will need to agree on a way to document the release in another fashion e.g. a deed of release.
Until next week.
Monday, February 20, 2012
Verasage ‘TED’
As part of the thought leadership event facilitated by the Verasage Group in early 2011, I had the opportunity to present a 'TED' style presentation on the evolution of Australia's first virtual law firm platform which was the precursor to foundation in 2014 of View Legal.
A link to the presentation – http://www.youtube.com/watch?v=JNnnbkfXY84&feature=youtube_gdata_player
Until next week.
A link to the presentation – http://www.youtube.com/watch?v=JNnnbkfXY84&feature=youtube_gdata_player
Until next week.
Tuesday, February 14, 2012
Superannuation and binding death benefit nominations (BDBN)
A couple of weeks ago there was a post in relation to superannuation nominations.
As mentioned in that post, where there is a valid BDBN, the trustee has no discretion to pay death benefits other than in accordance with the notice.
Based on recent client situations we have seen, a few critical points to remember in this area include the following:
1. If a member’s circumstances change and they have failed to update their BDBN, it will, subject in some situations to automatic lapsing (for example, every three years), continue to be binding on the trustee.
2. The trust deed for the superannuation fund must allow for a BDBN to be given to the trustee of the fund – even some recently set up deeds do not always have such a provision.
3. Unless specifically provided for in the deed, a BDBN will often need to be ‘refreshed’ every three years. An alternate approach is to update the trust deed for the fund to ‘hardwire’ the nomination into the deed, avoiding the requirement to regularly refresh the nomination.
Until next week.
As mentioned in that post, where there is a valid BDBN, the trustee has no discretion to pay death benefits other than in accordance with the notice.
Based on recent client situations we have seen, a few critical points to remember in this area include the following:
1. If a member’s circumstances change and they have failed to update their BDBN, it will, subject in some situations to automatic lapsing (for example, every three years), continue to be binding on the trustee.
2. The trust deed for the superannuation fund must allow for a BDBN to be given to the trustee of the fund – even some recently set up deeds do not always have such a provision.
3. Unless specifically provided for in the deed, a BDBN will often need to be ‘refreshed’ every three years. An alternate approach is to update the trust deed for the fund to ‘hardwire’ the nomination into the deed, avoiding the requirement to regularly refresh the nomination.
Until next week.
Monday, February 6, 2012
What exactly is a firm of the future ?
Many regular readers will be aware that for around ten years now we have charged on the basis of scoping work up front and providing a set price – that is no time billing.
A large part of the inspiration for abandoning time billing came from the landmark publication ‘Firm of the Future’ by Ron Baker and Paul Dunn. That book describes a journey from the traditional (and largely archaic) professional service firm model to being a knowledge firm. Understanding the value that knowledge workers create and having the skills to price without any reference to time is the foundation of the journey.
While subsequent publications by Baker (in particular ‘Pricing on Purpose’ and the more recent ‘Implementing Value Pricing’) provide significant guidance, we have found that the ability to listen and interact with likeminded advisers who are wanting to consider (or have started) the journey to a life without timesheets is invaluable.
Over the coming weeks there is a special opportunity to participate in Firm of the Future seminars across the eastern seaboard that will be led by internationally renowned pricing expert Ron Baker and facilitated by leading Australian consultant in this area John Chisholm. To learn more, click on the following link:
http://firmofthefutureforum.com.au/
Until next week.
A large part of the inspiration for abandoning time billing came from the landmark publication ‘Firm of the Future’ by Ron Baker and Paul Dunn. That book describes a journey from the traditional (and largely archaic) professional service firm model to being a knowledge firm. Understanding the value that knowledge workers create and having the skills to price without any reference to time is the foundation of the journey.
While subsequent publications by Baker (in particular ‘Pricing on Purpose’ and the more recent ‘Implementing Value Pricing’) provide significant guidance, we have found that the ability to listen and interact with likeminded advisers who are wanting to consider (or have started) the journey to a life without timesheets is invaluable.
Over the coming weeks there is a special opportunity to participate in Firm of the Future seminars across the eastern seaboard that will be led by internationally renowned pricing expert Ron Baker and facilitated by leading Australian consultant in this area John Chisholm. To learn more, click on the following link:
http://firmofthefutureforum.com.au/
Until next week.
Topics:
Firm of the Future,
Paul Dunn,
Pricing,
Ron Baker,
Time billing
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