Could this federal court ruling put your family home at risk?

If your work sees you involved in the world of high-stakes business or puts you at risk of bankruptcy, you may be concerned with how you can best protect your assets. Particularly an asset as important as the family home. One method of protecting assets is to make sure that they are not held in the name of the at-risk person, rather someone trusted, such as a spouse. But a recent judgment heard by the Full Court of the Federal Court will have a profound impact on the way accountants approach spousal assets.

The judgment held that a $4.5 million property acquired in the name of one spouse was in fact owned by both, equally. Below we discuss the ruling, its repercussions, and our advice on how you can best protect yourself and your family.

 

The ruling.

Mr. and Ms. Bosanac purchased a home in Dalkeith, Australia in 2006. They paid a $250,000 deposit with funds from a joint loan account in both their names and borrowed the remainder. Although both contributed to the purchase price equally, the property was transferred to Ms. Bosanac as the sole registered proprietor. Both Mr. Bosanac and Ms. Bosanac lived in the property up until they separated in 2015, after which Ms. Bosanac inhabited the property alone.

The property was used as collateral to acquire other investment assets. Pertinently, Mr. Bosanac used borrowed money secured by the mortgage to conduct share trading.

As a means to recover an outstanding debt owed by Mr. Bosanac to the Australian Taxation Office, The Commissioner of Taxation sought a declaration from the court that Ms. Bosanac, as the sole registered proprietor of the family home, held 50% of the beneficial interest on trust for her husband. The matter primarily centered around the question of whether Mr. Bosanac had an equitable interest in the residential property for $4.5million which had been registered solely in the name of Ms. Bosanac.

Ultimately, the Federal Court judgement held that the property was jointly owned, enabling the Commissioner of Taxation to make a claim on the family home for Mr. Bosanac’s unpaid taxes.

 

Repercussions.

With the Commissioner of Taxation being successful in the second-highest court in Australia, this decision has significant repercussions in accounting. It overturns current asset protection methods used by accountants where an asset is held in a spouse’s name to protect against litigation and other claims against the at-risk spouse.

The case sets a new precedent for such matters. Based on the ruling, effectively this is the new law and the Commissioner of Taxation can be expected to enforce it in future cases. Clients in a similar position should immediately seek advice from their accountant on changes required to be made to their asset protection structures.

 

How you can protect your most important assets.

As accountants, we cannot give asset protection advice. Our expert legal team is on hand to help you ensure your assets are protected. But there are a few takeaways from this new Federal Court judgement for accounting. If your line of work puts your assets, including your family’s home, at risk, here are some things you may like to take into consideration.

  1. The property title should be solely in the name of the not-at-risk person.
  2. The bank account that loan repayments are taken from should also be solely in the name of the not-at-risk person.
  3. The at-risk person should not contribute directly to the loan.

Every situation is different, and there is no one size fits all approach to taxation planning and asset protection. Talk to our professional, approachable, and proactive Geelong Accountants to make sure you are best positioned to make the most out of taxation legislation, including investment-based tax-minimisation measures. If you want extra protection for your assets, seek advice from Hrkac Group Legal Services in Geelong, we have the experience to help you resolve any problems quickly, inexpensively, and with minimal stress.

Make an appointment today via contact us, or phone 03 5224 2366.

Liability limited by a scheme approved under Professional Standards Legislation.

Business is running smoothly, and you and your business partner have an amazing working relationship. You’re dealing with day-to-day tasks, forecasting results, and anticipating challenges to your business. It is probably the last thing on your mind to plan for what you would do if something were to suddenly happen to your business partner.

If you don’t have legal documentation in place to determine what would happen in the tragic event that your business partner was to die or become permanently incapacitated, there could be significant negative impacts to your business and to your personal relationship with your business partner and/or their family.

With enough foresight and the necessary legal agreements in place, some anguish and disruptions to your business can be circumvented.

 

What are the possible damaging outcomes for my business?

Unfortunately, without legally documented agreements in place, the death or incapacitation of a business partner can have disastrous consequences for your business.

  • You may not have insurance in place and be unable to pay their share of the business to their estate.
  • You may be unable to find a replacement for their role and responsibilities, resulting in the closure of your business.
  • Insurance may not be adequate to cover your partner’s share of the value of the business, their share of any debt that the business is carrying, capital gains tax, GST as well as many other unforeseen costs.
  • Life insurance that you intended to use to pay for their share of the business, may instead be paid to other beneficiaries.
  • Their family members may have different expectations to you about their ongoing role in the business.

 

How can I protect my business and all parties involved?

In the unimaginable circumstance that your business partner dies or is permanently incapacitated, best practice is to have in place legal partnership agreements and formal succession planning drawn up by a legal professional.

You should address the following throughout the process:

  • Have a legal partnership agreement drawn up which formalises the rights and obligations of two or more people who are going into business together as partners.
  • Methodical succession planning and clear processes to follow are well-documented and drawn up by a legal professional.
  • All parties involved will require an up-to-date Will and estate plan that outlines plans for their business interests.
  • Ensure sufficient insurance is taken out and legal documentation is drawn up outlining how that insurance is to be managed.
  • Arrangements are made to pay out an estate or family members expediently.
  • The process for valuing the business is clearly outlined and documented.
  • Taxation, such as capital gains tax & GST is taken into consideration.

 

How we can help.

It is important to have a legal professional draw up these items for you:

  • A legal business partnership agreement
  • A formal succession plan for your business
  • A legal Will or estate plan

Our legal professionals can help you draw up a business partnership agreement to ensure that each partner knows their rights and responsibilities. It will also define policies for what should happen in this worst-case scenario.

Our succession planning experts can help you ensure that you retain financial security and minimise tax liabilities during the transfer of ownership or management.

We can guide you through the Will & estate planning process, answering any questions you may have along the way, giving you the confidence that you will be leaving your business and family secure.

We have vast experience in business valuations that take into consideration all aspects of your operations.

If something has already happened to your business partner without legal agreements in place, we can also offer legal advice.

With some forward planning and formal legal agreements in place, some distress and interruptions to your business can be avoided in the heart-breaking event that something were to happen to your business partner.

Take control of your future today by meeting with the Geelong-based Legal team at The Hrkac Group. Call us today on 03 5224 2366.

Many businesses are experiencing great difficulties due to the COVID 19 Pandemic, with a significant or even complete drop in turnover.

The Federal and State Governments have announced restrictions on landlords taking action against tenants for falling behind on rent. The new measures also require that tenants and landlords negotiate in good faith to try to reach an agreement.

The COVID-19 Omnibus Emergency Measures Act and Regulations 2020 have been passed and they set out the rights and responsibilities of the parties involved in Commercial Leases and Licences.

As stated in the Act, if the landlord and tenant reach an agreement on any rent reduction then, that agreement will remain in place as long as both parties agree to do so.

In order for a tenant to be eligible for rent relief the following must apply:

  • The lease is an ‘eligible lease’ pursuant to the regulations;
  • The tenant must be small to medium enterprise (SME), and;
  • The tenant must be a participant in the JobKeeper scheme.

If an agreement hasn’t or can’t be reached, then the tenant should immediately write to the landlord:

  • Stating that the lease is an eligible lease and the lease is not excluded from the operation of these Regulations (under section 13(3) of the Act);
  • Provide evidence that the tenant is an SME and is a participant in the JobKeeper scheme

Once received, under The Act the landlord must offer rent relief within 14 days.

If an agreement still cannot be reached between the parties then either the landlord or the tenant may refer the dispute to the Small Business Commissioner for mediation.  

Here at the Hrkac Group, we’re here to help.

If you are a tenant and you have qualified for the JobKeeper scheme and you need a rent reduction, you should immediately write to your landlord.

As part of our professional services, the Hrkac Groups Legal team is across the latest measures and can offer assistance with rent relief negotiations.

Contact us today on 03 5224 2366.

In today’s world, planning for an unknown future is something of increasing importance. The reality of your future may involve an accident or illness that takes away your capacity to make your own financial, medical, and residential decisions. To help safeguard your future, appointing a trusted person to help you make those decisions, as you would have, will give you the confidence to continue living life to the fullest.

 

What is a Power of Attorney?

When you are unable to make important decisions for yourself, and you have appointed a trusted friend or relative as your Attorney, they are legally allowed to make those decisions for you. They are required to sign a legal document that gives them certain decisional powers over your financial, personal, and medical affairs so that your money, property, and well-being are cared for in a way you approve of.

There are different types of power of attorney for different decisions.

  • Enduring Power of Attorney: At a time of your choosing or at the point where you no longer have the capacity to make decisions about your finances, your property, or paying your bills, an attorney appointed by you as an Enduring Power of Attorney will have the legal authority to act on your behalf to ensure your best interests are taken care of.
  • Enduring Power of Attorney (Medical): Wherever possible, your Attorney appointed as Medical Power of Attorney will be able to accept or refuse medical treatments, surgeries, and medication on your behalf. There are restrictions to their range of power.
  • General non-enduring power of attorney: appointed to make financial decisions for a specific purpose or set period of time (generally used in companies and not initiated by illness).

 

Who can be an Attorney?

You are free to make the decision of who your Attorney(s) are, you are even allowed to appoint multiple attorneys with different designations on how decisions are made.

Generally, a spouse, partner, relative, or close friend is chosen as someone’s Attorney, however, it’s important to consider that this person must: act in your best interest, make the same decisions you would, keep accurate records of their decisions on your behalf, avoid conflicts of interest and keep your finances and property separate to their own.

You can limit their range of power by choosing the tasks they are responsible for and which they aren’t; you can also appoint more than one so that they must make joint decisions or majority decisions. It’s also possible to appoint a backup in case your primary appointed Attorney is unavailable.


 

What can they do?

An Attorney’s duties begin when they are designated to. You can have them commence immediately

after the Power of Attorney document is signed, at a certain time or on the occurrence of a certain event.

If you choose for the Attorney’s powers to start on a specific date, or event, they cannot make decisions before that occurs.

An Attorney may also be required to provide evidence that you are no longer able to make decisions on your own behalf – this can be in the form of a medical certificate or letter from a medical professional.

 

An Attorney appointed as Enduring Power of Attorney can:

  • Make financial or legal decisions on your behalf
  • Manage your banking
  • Maintain your property
  • Pay your bills
  • Choose where you live
  • Decide how your healthcare is maintained

 

They can’t:

  • View or edit your will
  • Make medical decisions
  • Exercise personal powers, such as vote on your behalf

 

An Attorney appointed as Medical Power of Attorney can:

  • Agree or refuse medication or surgery
  • Agree or refuse your involvement in medical research
  • Refuse treatment if it will cause you distress or if you would warrant it unnecessary
  • Take precedence over an attorney with healthcare powers

 

They can’t:

  • Agree to treatment that will compromise your fertility
  • Terminate your pregnancy
  • Agree to the removal of tissue for a transplant
  • Refuse treatment to alleviate pain and suffering in palliative care

 

How to choose/appoint an Attorney?

Appointing an Attorney can be completed in four steps:

  1. Choose your Attorney or Attorneys.
  2. Advise them about your decision, and confirm they are happy to act as your Attorney.
  3. Instruct HG Legal to draft all required Powers of Attorney documents.
  4. Execute the Powers of Attorney in front of a fully qualified witness.

 

When does an Attorney’s authority end?

There are a few reasons why an Attorney is no longer required to make decisions on your behalf:

  • You recover or return to decision-making capacity.
  • You revoke their rights as your Attorney. You can do this by either filing a revocation or by appointing a new Attorney, which will overwrite the previous.
  • They can resign as your Attorney.
  • If you pass away, your Attorney is no longer able to make decisions on your behalf.

If you need assistance appointing an Attorney or have any questions on how to go about appointing one, Stuart and our Legal team are here to help you at any stage. Take control of your future and live life to the fullest. Contact us on 03 5224 2245 or legal@hrkacgroup.com.au.

What is a Will?

A Will is a legal document that says how your estate will be distributed after you die. The property that you leave when you die is known as your estate. Your Will can also include your wishes about things such as who you want to care for your children after you die and your burial wishes.

 

Why make a Will?

Everyone should have a Will. A Will is a legal document where you say what you want to happen to your estate when you die. If you don’t have a Will, your estate may not go to the people you want it to.

 

What if I die without a current Will?

If you die without a current Will the law will decide what happens to your estate. This may mean that your estate is not distributed in the way that you wish. Your estate may be distributed in accordance with an old Will. Otherwise, the court will appoint an administrator to distribute your estate following legal rules known as the rules of intestacy.

That means, your assets may go to:

• your spouse or domestic partner, children or parents, or more distant relatives, or

• if you have no relatives at all, your property will go to the State.

 

Choosing an executor

An executor is a person or trustee company that will manage your estate after you die. Your Will names the executor and gives them the power to deal with your estate in accordance with the terms of your Will. Your executor must follow the directions in your Will. They can’t make guesses and change your directions even if they think you might have changed your mind. If they fail to act on the Will, the court or Registrar of Probates can ask them to explain. The court or Registrar of Probates can take this action themselves or when someone complains.

 

Who should I choose as my executor?

Your executor could be a family member, friend, lawyer or other professional, such as an accountant or trustee company. When choosing an executor, you should consider their circumstances and skill set to decide if they are suitable.

 

What should I consider when choosing an executor?

• You need to make sure the person you choose to be your executor has the skills and time to do it. You should ask them if they are happy to take on the responsibility.

• Your executor needs to be someone you can trust to carry out your wishes. It is their job to take control of your estate and make sure the right people get what they should.

• The executor also needs to be able to understand basic accounting and deal comfortably with a range of people, including banks and lawyers, and your family. Sometimes they may need to deal with disputes between beneficiaries or claims being made against your estate.

• Your executor needs to carry out their responsibilities after you die, so an executor who is much older than you, is unwell, or likely to move overseas is not a good choice, especially if you have children who may not benefit for some years.

• If you appoint a professional as executor, they will need to be paid from your estate. You should refer to payment for their services in your Will.

• Sometimes an executor might need professional assistance to undertake their role. Any costs associated with such professional help will be paid out of the estate before the assets are distributed.

 

Why it’s a good idea to appoint more than one executor

Even though you trust your executor, it can be good to have two people who can keep track of what is going on and make sure the right thing is done. You are allowed up to four executors, but this is not usually recommended.

If you choose to appoint more than one executor, make sure they can work together. If you appoint one executor, it is a good idea to appoint an alternate person in case your first person can’t (or won’t) take on the role after you die.

 

 Your beneficiaries

Who is legally entitled to benefit from my estate?

You are expected to look after your dependents in your Will if they need your help and you have the resources. Dependants could include people like your partner or children, even if they are adults. If you don’t include these people, they may be able to challenge or contest your Will. If their claim on your estate succeeds, the court will make an order to give some of your estate to that person. It doesn’t matter what wording you use in your Will, you can’t get around this if the court decides it is appropriate. Some of the costs of such claims may be paid out of your estate.

 

Stuart and the expert Legal team at The Hrkac Group can help you through the Will making process, assisting you with any questions you may have along the way and give you peace of mind that your wishes will be complied with.

Make an appointment today via email or phone 03 5224 2366