Newsletter March 2017

  1. Off-the-plan dwellings that fail to settle are considered new properties
  2. Acquisition and Sale of Business
  3. Migration
  4. Risk Management
  5. Family Law / Wills & Estate Planning
  6. Putting the “Off” in Off-the-Plan Nominations

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Message from Peter Nevile

A Happy New Year to all our clients and colleagues and a Happy Chinese New Year to all our Chinese clients in the year of the Rooster.

We live in times where the only certainty seems to be the uncertainty of constant change. We need to expect the unexpected. Donald Trump being just one example. Disruptive technology continues to affect us all in one form or another. While we might sometimes long for the familiarity of the past we all need to adapt to and embrace the changes or risk being swept aside.

The law has traditionally been one area which is slow to change. The way we practice and provide our legal services to our clients today will be significantly different and perhaps even unrecognizable in ten years. We recognize this and have implemented a policy of constant change to provide the type and level of service to match our client’s changing expectations and requirements.

It is now a year since the firm moved its information technology systems completely into the Cloud. This has provided a better platform for the sharing of information between our members of staff to enable a better service to you our clients.  While it has on the whole been a smooth transition it has not been without issues. We are now on top of them!

Our website has been recently completely updated and is available in English, Chinese and Indonesian. We encourage you to visit us at www.nevile.com.au and click on the flags for other language versions. We also encourage you to REGISTER which will give you access to further information not available to the public at large including investment opportunities. We are moving to the next stage of development, where clients will be able will submit information to us online in a number of areas.

We have also appointed a Social Media consultant who has been working with us to improve our presence on a number of social media platforms. You can find us on Facebook and LinkedIn again by clicking on the icons on our website.

Our role as lawyers is principally as Risk Managers.  Life, marriage , children and death are all known risks.  Business has constant risk which cannot be removed.  However we can assist you to identify those risks , whether they be through Wills, Legal structures, Agreements or other actions . The risks can then be managed and generally minimized.

We look forward to provide support you our clients in the coming year.  We welcome your enquiries and are always happy to have initial discussions with you without fees about any issues which concern you. We do suggest you arrange such a discussion to review your areas of both personal and business risk.

We need to differentiate between practice of the law as a profession and the business of law. In the second area, we are enjoying some success in attracting Inbound Investment. We have introduced a number of wineries and agricultural properties to investors from overseas. We have a number of farms and also other investments available. Please do not hesitate to enquire if you have interest.

We look forward to spring, and oncoming summer, after what seemed to be a longer and colder winter this year.

Off-the-Plan dwellings that fail to settle are considered new properties

Changes implemented under the foreign investment framework will allow foreign buyers to purchase an off-the-plan dwelling when another foreign buyer has failed to reach settlement.

An apartment or house that has just been built, or is still under construction and for which the title has never changed hands, is not considered an established dwelling.

Therefore, in the event of a failure to complete settlement, the dwelling should revert to its previous status – that is, a new dwelling.

The changes are in response to developers who have experienced a rise in the default rate for settlement of off-the-plan property sales which in turn was a result of the big four banks clamping down on lending for foreign investors following several cases of fraudulent claims of income.

Foreign persons who apply to purchase a dwelling that is considered established, only due to a failed settlement, will be assessed as if it was a new dwelling.

This action will ensure that markets will not be impacted negatively by an increased amount of off-the-plan sales, particularly from foreign purchasers, not being completed.

If you require assistance with your purchase, or any clarification in relation to the above, please do not hesitate to contact Nevile & Co.

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Acquisition and Sale of Business

Nevile & Co. receive many requests to buy and sell businesses.

We have access to many types of businesses ranging from wineries and farms, through to commercial property purchases, throughout Australia.

Wineries

These range in value from $A 2M to $A 50M, and may include a cellar door, reception/conference/ accommodation and often, export licences.

Farms

These range in value from $A 5M to $A 100M, and can be cropping, grazing, dairy, or mixed activities.

Lifestyle Villages / Housing

Lifestyle Villages for over 55 is a rapidly growing business in Australia. This is a great opportunity for investors who would like to explore this niche of the market.

Details of a selection of these opportunities may also be viewed on our website www.nevile.com.au. For further enquiries of any of the above businesses, please email ken.matheson@nevile.com.au.

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Migration

Temporary and Permanent Work Visas – subclass 457
In our recent experience, it would appear that the Department of Immigration and Border Protection (DIBP) is scrutinising visa applications for both subclasses of these visas more closely than previously.

In particular there is a requirement for the employer of some visa applicants to have paid training expenses in their business for the duration of their Sponsorship, for the training of Australian citizen and permanent resident employees.

In order to be granted a temporary work visa, the visa applicant has to locate an employer willing to nominate them for an occupation which is listed on a list called the Consolidated Skilled Occupation List. The list changes from time to time.

The sponsor must pay for training expenses under one of the 2 types of legislated Training Benchmarks-

(a) by paying 2% of their gross payroll (wages plus superannuation) to an industry training fund. The fund should offer training or studies in the area of work being undertaken by the employer; or

(b) 1% of their gross payroll for training courses, seminars, certain types of on the job training by trainers qualified to do this, and the like.

DIBP is presently more closely ensuring that employers are meeting this sponsorship obligation – at the time of sponsorship approval, sponsors agreed to be monitored by DIBP in relation to their various obligations. Employers are required to have met this training obligation for each year of their sponsorship, and provide actual invoices and receipts for payments of training expenses.

Failure to do this by a sponsor can lead to dire consequences, such as the sponsorship being cancelled, or the inability of employees to seek a permanent residence visa as their nominating sponsor has not met their earlier obligation. Employees who have been nominated for a temporary work visa, will have to either find another sponsor employer, or wait until their current proposed employer lodges and obtains a further Standard Business Sponsorship.

This all the more so, as Sponsorships are now granted for 5 years, as opposed to the previous 3 year period. An exception is that start up employers (who have been trading for less than 12 months), can only obtain a sponsorship for a period of 18 months.

Sponsorship periods can be extended by further Application.

Below is an excerpt from the DIBP website in relation to Sponsorship obligations –

Who monitors my sponsorship obligations?

We will monitor you to make sure you meet your sponsorship obligations.

You must comply with your obligations as a sponsor. We monitor your compliance with the sponsorship obligations and whether your visa holders are upholding their visa conditions.

We monitor you while you are a sponsor and for up to five years after you cease being a sponsor. We do this routinely and in response to information provided to us, and in three main ways:

  • writing to you to ask for information in accordance with the obligation to provide records and information
  • site visits, usually to the sponsored business premises, with or without notice
  • exchanging information with other Commonwealth, State and Territory Government agencies, including the Fair Work Ombudsman, the Department of Employment and the Australian Taxation Office.

Your compliance with the sponsorship obligations might be monitored by Immigration inspectors, Fair Work Inspectors or Fair Work Building Industry Inspectors, who have investigative powers under the Migration Act 1958. Failure to cooperate with inspectors is a breach of the sponsorship obligations.

For more information, contact jstone@nevile.com.au.

Interesting Migration Statistics

A report issued by the Department of Immigration and Border Protection indicates a high volume of Visas were granted during the Financial Year 2015 / 2016 –

Temporary Visas Granted                                                            7.7 million*

Visitor Visas granted                                                                               4.8 million

Student Visas granted (incl. student guardians)                              310,845

Working Holiday Maker Visas granted                                              214,583

Special Category (s/c 444) Visas granted                                          1.9 million

Maritime Crew and Transit Visas granted                                        345,873

Temporary Work (skilled) (s/c 457) Visas granted                            85,611

Temporary residents (other) Visas granted                                     130,807

Permanent Residency Visas granted                                                 190,000

Australian Citizenship                                                                           133,000

Humanitarian                                                                                          19,000

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Risk Management

What is PPSR?

PPSR is the national online database of security interests in personal property.  PPSR is a risk management tool that can help protect your business from risk. It also improves the ability of your business to use your property to secure lending to increase your available working capital.

What could happen if you decide not to register?

Having your rights in a contract, or relying simply on ownership (for example, in a lease), is no longer enough to protect your position. If you do not register your interest and the grantor (the person to whom your property was granted) becomes insolvent, your rights will be ineffective. Registered creditors will have priority, and you may lose rights to recover the goods or proceeds sold, leased or transformed.

How else can PPSR help your business?

PPSR makes it easier to use your assets to secure lending, as financiers can easily view interests registered against your assets when deciding whether to lend to you.  You can also register and offer a wide range of assets as security, as financiers will be able to register their interests on these assets.

What can you register? 

‘Personal property’ is all forms of property other than real estate, including goods, equipment and intellectual property.

‘Security interests’ are interests in personal property that secure payment of a debt or other obligation, regardless of the form of the transaction. Examples include mortgages over motor vehicles, and financing leases. Certain transactions are also deemed security interests by the Personal Property Securities Act 2009 (Cth), such as consignment arrangements.

How is PPSR relevant to you?

The PPSR is particularly relevant to businesses that are selling, hiring, renting or leasing on terms, or buying or selling valuable second-hand goods. It is also relevant for businesses wanting to raise finance using stock or other personal property as collateral.

How can PPSR protect your business? 

Buying goods

A search of PPSR will indicate if the goods are free from an existing security interest and thus, safe from possible repossession.

Selling on terms, such as retention of title or consignment, or hiring, renting or leasing out goods

Your business can register your interest in goods you have yet to receive payment for, helping you to recover the debt and lessen the risk of losing the goods if the customer does not pay, sells or leases the property. The PPSR also legally defines the priority of security interests, with a ‘first in, best dressed’ principle.

How much does it cost?

A PPSR search costs $3.40, while PPSR registration starts from $6.80 for a registration period of up to 7 years. Note that these prices are subject to change.

For more information on how Nevile & Co. can assist, please contact our solicitor Mr. Meng Cheong meng.cheong@nevile.com.au

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Family Law / Wills & Estate Planning

Can my step-child contest my Will?

The first hurdle to clear if someone wants to contest a Will is whether they are an ‘eligible person’ under the relevant legislation. A ‘step-child’ is specifically included in the list of such eligible persons in the law.
Seems straightforward? Think again. A recent case in the Supreme Court of Victoria (Bail v Scott-Mackenzie [2016] VSC 562) tackled the below thorny hypotheticals:

Hypothetical #1: what if you weren’t married to your partner? Does their child still count as your ‘step child’?

On the basis of the wording of the rest of the legislation, and the fact that it was drafted to reflect modern attitudes about relationships, the Court decided that a child is still considered a step-child even if the parent and their partner are in a de facto relationship, but not married.

Hypothetical #2: what if your partner, the biological parent of your step-child, died before you? Can your step-child still claim against your estate in this scenario?

On this question, the Court decided that a step-child can contest their step-parent’s Will if, at the time their natural parent died, they were in a still married or in a de facto relationship. In the recent case, this was decided even though the natural parent had died 15 years before the step-parent. If the married couple had divorced prior to the death of the natural parent, the step-child relationship would have ended.

It must be said that simply satisfying the ‘eligible person’ test isn’t a get out of jail free card for someone seeking to contest a Will. A claimant must also demonstrate, amongst other things, that the deceased had a moral duty to provide for them, and that they are in financial need.

So what?

The above case highlights a number of important factors in relation to estate planning for blended families:

  1. Ending a marriage or de facto relationship

If a married couple’s marriage has broken down irretrievably, as opposed to where the couple has separated with some hope of reconciliation, steps should be taken to obtain a divorce prior to death. Many couples simply don’t get around to it, notwithstanding that they may have finalised property matters between them through consent orders or a binding financial agreement.

While failing to divorce might sound harmless, as set out above it could make it easier for a step-child to contest a step-parent’s Will, and of course it also makes it easier for the spouse to contest the Will. Further, where the deceased failed to make a Will, the surviving spouse may be automatically entitled to a share of the estate, and even if they disclaim their interest, this usually has adverse tax consequences for the estate.

The situation is more complicated for those in unregistered de facto relationships. There are steps you can take, however, to more formally finalise your relationship.

2.  Thorough estate planning

It is crucial that partners in blended families carefully turn their mind to their estate planning. There are a number of mechanisms which can be used in Wills to assist in the wishes of the couple/step-parent being met, such Will contracts, or including reasons in the Will for leaving someone out.

Nevile & Co can assist you with all aspects of family law, including divorce or finalising a de facto relationship. We can also guide you, or you and your partner, through the estate planning process, ensuring that your unique familial circumstances and wishes are best accounted for in your Wills.

For more information about our family law services, contact David Dudderidge: david.dudderidge@nevile.com.au; and

for estate planning, contact Anna Goodluck: anna.goodluck@nevile.com.au

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Putting the “Off” in Off-The-Plan Nominations

The latest credit crunch on foreign investors has impacted the Victorian real estate market in a way seldom seen before. Many foreign investors who purchased a new property before registration of its plan of subdivision (“off-the-plan”) have resorted to on-sale transactions – more commonly known in Victoria as a nomination – to avoid failure to complete the purchase transaction.

To a purchaser, the financial benefits of being on the receiving end of such a nomination for an off-the-plan contract could be enticing: the promise of significant savings in stamp duty since the property was initially purchased off-the-plan; the willingness of the original purchaser to do away with part of their deposit; the avoidance of a long wait (perilous at times) for completion of an off-the-plan property.
Nomination transactions may have its redeeming qualities – but do nominees know what they have just signed up for?

Contract or No Contract?

The power to nominate another purchaser in a contract of sale, does not create contractual obligations between the Vendor and the nominee.

The original purchaser remains liable to complete the contract. Save and except where there is direct involvement between the Vendor and the Nominee, the Nominee cannot enforce any contractual obligations against the Vendor, his remedy is against the original purchaser.

The Victorian Supreme Court made this clear in the case of Commissioner of State Revenue v Politis:

…any interest the nominee may have in the land is one which derives from the [original] purchaser, and relevantly the most that can be said is that the nominee may acquire an interest in the land equivalent to that which the [original] purchaser had or would have had under the contract of sale.

Some nomination clauses do result in the substitution of the nominee for the [original] purchaser. But even there the nominee would not acquire the [original] purchaser’s rights under the contract. The substitution of the nominee for the [original] purchaser would work a novation of the agreement…

So, the nominee does not have a contract with the Vendor – but at most, has merely obtained the right to complete the existing contract as a substitute for the original purchaser.

Significant Stamp Duty Savings?

Section 31 of Duties Act 2000 (VIC) provides that nominees taking an interest in land do not attract additional duty UNLESS the transaction are of a certain type – one of these transaction which will incur additional duty is a transfer involving additional consideration.

Additional consideration is the amount of monetary consideration (or the value of non-monetary consideration) that exceeds the consideration given or to be given to the Vendor under the contract of sale. Certain defined costs are not included as additional consideration (e.g. legal costs, selling agent’s commission, and survey and valuation fees) as they represent reimbursements of the costs of on-sale.

The below scenario is one that we frequently encounter at Nevile & Co: –

  • The Vendor agrees to transfer land to Bill (the original Purchaser) under a contract of sale; and
  • Bill passes on its right to take a transfer of the land to Bob (the Nominee); and
  • Bob pays Bill additional consideration for that right; and
  • The Vendor transfers the land to the Bob.

The transfer will be treated as a dutiable transaction. It is immaterial that the nominee obtained the transfer right by nomination.

Separate duty will be levied on Bill on the dutiable value of the Contract (as if it had been completed) AND on Bob, stamp duty will be assessed on the whole dutiable value of the subsequent transaction – not just on the value of the additional consideration.

Bob will be surprised by how much stamp duty he now must pay.

What can Nominees do to Protect their Interest?

These suggestions may be cliché; however, they will stand test of time:

  1. Have a lawyer or licensed conveyancer represent you

Obtaining professional advice and having the contract reviewed by a lawyer or licensed conveyancer is imperative to avoiding pitfalls and surprises. The last thing you would want as a nominee is having no contractual right against the Vendor and also ineffective representation to assist you to complete the nomination process.

  1. Stop paying too much

          Quite literally.

Some nominees are willing to pay “a little extra” to obtain “that better lot” they missed out on obtaining when it was first released. That “little bit more” may end up costing you a whole lot more on stamp duty.

Nevile & Co can assist you with all aspects of property law, including conveyancing or contractual advice. We can also guide you through the conveyancing process, ensuring that your unique circumstances and wishes are best accounted for.

For more information about our property law services, contact our team at property@nevile.com.au. Alternatively, please feel free to visit our website at www.nevile.com.au to learn more.