Building and Pest Inspection - Do you need one?

Yes, we recommend that you do.

A Building and Pest Inspection Report can help you identify any structural faults or defects in the property that were not apparent from a visual inspection. If your contract is subject to satisfactory Building and Pest Inspection reports, you can terminate the contract before the Building and Pest Inspection date if there are problems with the reports you receive.

Recent changes to the standard REIQ contracts require you to notify the Seller if you are satisfied with the inspections or if you intend to terminate the contract by 5pm on the inspection date or the Seller will be able to terminate the contract.

Previous versions of the standard REIQ contracts allow the Seller to deem the reports you have obtained to be satisfactory if you do not notify the Seller of your intentions before 5pm on the inspection date.

Remember to ensure that any building and/or pest inspector you engage holds the appropriate licenses and that you obtain a copy of the written report.

Prior Inspection - Do you need one?

Yes. We recommend you do one on the day of settlement.

The standard terms and conditions of the Contract only allow one inspection by the Buyer prior to Settlement. It is recommended that on the day of settlement you arrange with the Real Estate Agent for a convenient time for an inspection at the premises to ensure the property is in the same condition as when you first inspected the property before you sign the Contract.

Collection of Keys on settlement.

Can you arrange to collect the keys? Absolutely.

It is our usual practice to have the keys left at the Real Estate Agent’s Office for collection by you following completion of the Settlement at your convenience. However, we can arrange to have the keys to the property handed over at settlement on your behalf, but you will then have to arrange to have the keys collected from our office. Unless we hear from you to the contrary, we will arrange to have the keys to the property left at the Real Estate Agent’s Office for collection by you.

Services to Property - Should I co-ordinate them?

Yes. Services to the property such as telephone, electricity and gas (if connected) should be transferred to your name to ensure the services are properly connected prior to settlement. You should make the appropriate arrangements with the relevant authorities and the Seller prior to completion.

Insurance. When should I obtain Insurance for the property?

As at the date of the Contract.

The Law deems that the property is owned by you as at the date of the contract, being the legal point of sale therefore if any damage occurs to the property, you may be responsible for the damage unless it can be shown that the damage was as a result of wilful neglect or destruction by the Seller. If you have not obtained insurance, the property burns down and the seller does not have insurance, you will have to proceed with the contract regardless.

As the property is at your risk from the date of the contract we therefore urge you to immediately arrange insurance cover over the property to protect yourself in the case of damage or destruction to the property and its fixtures. If you need any assistance in this regard please do not hesitate and seek our advice. A Certificate of Insurance noting a fully paid premium and your financier’s name as First Mortgagee will be required prior to them releasing any finance to you.

Settlement Date. Can I depend on the settlement date being fixed?

Yes you can. Please note that the Contract stipulates that "time in all respects is to remain the essence of the Contract". Only if the Seller is agreeable can there be any extension of the settlement date nominated in the Contract.

Please keep this provision in mind because if you do not comply with your obligations under the Contract on the due date, you may be in breach of the terms of the Contract and the Seller may have certain remedies against you, including forfeiture of the deposit.

Building restrictions of my house. Are there any?

Yes there may be! If the property is effected by covenants / restrictions on use, the terms should be set out in a document attached to the contract. We suggest that you hand a copy of the covenants to your Builder, as the covenants impose certain restrictions and requirements with respect to the building of improvements on the property as to the area, height, building materials, garages etc.

Please also note that the covenants may contain a condition stating that should you contract to sell the property in the future, you agree to include a special condition in the contract that the new Buyer will also be bound by the same terms and conditions as the covenants contained in this contract.

We can advise you as to the wording of any covenant to ensure that you understand its effect on the building of any dwelling on the property. If in doubt, please seek our advice.

Buying a property. Can I keep specific items?

Yes. In order to do so, each item must be listed on the contract as an included Chattel.

Purchasing a home. Does the house include the fixtures?

Absolutely. The sale of the property includes all fixtures on the property. A fixture is something that is attached to the land that must have been intended to remain there permanently. Sometimes it is difficult to determine whether an item is a fixture ie: television antennae, fencing, clothes

Stamp Duty. How much do I pay?

We will calculate this for you.

Stamp Duty is assessed at differing rates, depending on whether the property is:-

A. Your first principal place of residence;
B. Your Principal place of residence;
C. An investment property; or
D. Vacant land.

Concessional rates are available if the property to be purchased is either A. or B. above, provided you intend to reside in the property for a continuous period of not less than twelve months. The starting date of this twelve month period is from the date nominated by you. This nominated date must be no later than twelve months from the Settlement date.

The concessional rates are not available if the purchase is an investment, is vacant land or if the property is being purchased under a Company Name or Trust.

Once you tell us your intentions we will be able to calculate the correct Stamp Duty payable by you.

Joint Tenants or Tenants in Common?

It is important how you hold the property. If you are purchasing the property with someone else, you have a choice as to how you wish to hold the property, either as Joint Tenants or Tenants in Common.

The important differences are: as joint tenants, on the death of one person, the interest of the deceased person passes automatically to the surviving person notwithstanding the contents of that person’s Will.

In the case of tenants in common, upon the death of one person, the interest of the deceased person passes in accordance with the provisions of the Will of the deceased person.

Property Details. Do I need to give them to you?

Yes you do. The contract refers to certain structures on the property and you need to confirm whether there are any other structures or improvements to the property that are not detailed in the contract such as a swimming pool, room conversion, carport, pergola, garden shed etc. The Council will record only the structures on the property that have been approved and therefore they will have no records of any structure or improvement that does not have approval. If approval is not granted then you may be required at some future time to either comply with Council regulations or remove the structure.

If the property is purchased as inspected by you, you have no rights to object at a later time that the condition of the building is defective or does not have sufficient approval. You should employ an Independent Building Adviser to attend on the premises who could determine whether there are additions to the property which should have Council approval.

Final Approvals - Does it matter?

It does matter! If the house or any other structure (i.e. pergola, carport, pool, etc) on the property was built or erected after 1986 then an inspection of building records search should be carried out to confirm that the dwelling and any other structure has received a final certificate. Some Councils charge a separate search fee for each improvement or structure.

Prior to 1986, some Councils only hold records of approvals and not the inspection details of the construction.

If the dwelling or any improvement on the property was built within the last six years, then a Queensland Building Services Authority search should be carried out to ensure that a registered builder carried out the work.

If it was not built by a registered builder, then you will not have access to insurance in relation to any construction faults, and need written permission if it was built by an owner builder.

Witnessing my signature. Who can do it?

Legislation in Queensland provides strict requirements for the witnessing of documents, hence a witness must take reasonable steps to ensure that the individual is the person entitled to sign the document. Proof of identity (ie driver's licence or passport) must be provided when signing documents in our presence.

Purchasing a home. Can I be assured that I will be recorded as the owner of the property?

We will do all we can!

At present, a Certificate of Title search will not reveal the past registrations. It is important therefore, to ensure that once a search is done that either a Caveat be lodged or a Settlement Notice be lodged with the Department of Environment & Resource Management (Titles Office) to reduce the risk of fraud.

The procedures to effect a settlement are greatly affected by not having a "paper" Certificate of Title as there is a heightened concern as to the likelihood of fraud in the market place by unscrupulous Sellers. No doubt you may have read articles in the newspaper about such events. Therefore, it is essential where a Certificate of Title has not issued that a Caveat or Settlement Notice be lodged to protect your interest, primarily for the period between when we have conducted the searches on the property and the lodgement of your transfer documentation.

The lodgement of a Caveat is more expensive than a Settlement Notice but provides total security. A Settlement Notice is similar to a Caveat in that it prohibits any dealings to be registered over the Certificate of Title, however it allows for registration of the documents nominated by the lodger.

It will remain over the Certificate of Title for a period of sixty days at which time it will lapse or alternatively, it will be automatically removed upon the lodgement of the relevant transfer. Should there not be a current Certificate of Title over the property your financier will insist on a Settlement Notice being lodged.

Certificate of Title - Do you get one at settlement?

Generally, No. The legislation which governs land title in Queensland has allowed for all Title records to be computerised, therefore, a Certificate of Title no longer issues upon registration of a Transfer from the Department of Environment & Resource Management.

In order to obtain a computer generated duplicate Certificate of Title, the Registered Proprietor makes a separate application in writing to the Registrar of Titles requesting a duplicate Certificate of Title. If you wish us to assist you in this regard, please contact us. A fee may be required to obtain this.

Finance Approval. Who should I speak to?

Speak to us! If we are representing you in the purchase of your property, we must hear about the outcome of your application for finance before the Seller or Seller’s Agent are told. There may be conditions that limit the effect of the approval and therefore you should talk to us first.

A communication of an approval of finance to the Seller or Seller’s agent will mean that you will be expected to proceed with the purchase of the property on the due date for completion. Please therefore talk to us first before advising anyone of your approval, so we may advise you further.

Finance Approval. Should it be obtained prior to entering into a contract?

Yes. Do your homework first. We suggest that you know exactly what your limitations are with your finances. Therefore we strongly recommend you talk to your financier to determine just how much money you can borrow prior to signing a contract.

Building Approvals. Can I terminate a contract if an improvement has not been approved by Council?

Unfortunately not. The current version of the REIQ contract doesn’t make provision to terminate the contract if the improvements have not been properly approved by the Local Council. If a search of Council records reveals that an improvement did not receive Council approval i.e. dwelling (slab, plumbing, frame, final), pergola, carport, pool or pool fencing, then you must proceed with the contract. A special condition may be inserted in the contract, prior to signing, making it subject to satisfactory search results. Talk to us first before you sign a contract.

Flooding. Does the standard REIQ Contract cover me if the property floods?

No. The current version of the REIQ contract doesn’t allow a Buyer to terminate the contract if the property floods in any way. A council search will reveal if the 1974 floods affected the property but unless the contract is made subject to satisfactory search results from the Council, you will have to proceed with the contract.

We came across this article on the LawCentral website and thought that it was a very good discussion of the topic at hand

Executor goes bankrupt - Accountant powerless
Question: There is a new case where the trustee's personal liability is extended. Even the courts are following a socialist agenda. Our accounting practice assists many executors of deceased estates. Does this extension of liability also extend to executors?
Answer: The case in question is Barkworth Olives Management Ltd v DCT [2010] QCA 80. The facts are: Barkworth administered an estate. It didn't get one red cent from the estate. No money came into the estate. However, the ATO (who is a wicked power freak) decided to tax Barkworth on all income. In total, this came to over $80m. The assessment was initially under section 99A Income Tax Assessment Act 1936. The deceased had been involved with a tax effective scheme.
When executors administer estates, their actions are regulated under the local state Trustees Act. Trust law states that a trustee is responsible for all losses and expenses incurred by a trust. However, the trustee is also entitled to an indemnity against these losses.
Further, taxation legislation holds the trustee responsible for lodging tax returns and paying tax. It also limits personal liability for associated tax debts. Our Platinum Members can read how section 254 of the ITAA operates here.
The relevant provision of the ITAA 1936 section 254(1)(d) and (1)(e) states that:
"Agents and Trustees
1. With respect to every agent and with respect also to every trustee, the following provisions shall apply:
(d) He is hereby authorized and required to retain from time to time out of any money which comes to him in his representative capacity so much as is sufficient to pay tax which is or will become due in respect of the income, profits or gains.
(e) He is hereby made personally liable for the tax payable in respect of the income, profits or gains to the extent of any amount that he has retained or should have retained under paragraph (d); but he shall not be otherwise personally liable for tax."
Section 245(1)(d) states that a trustee has the authority to take monies from the trust to pay trust taxes.
Section 245(1)(e) states that a trustee is not personally liable for tax except for the taxes generated from the income produced from monies taken out of the trust. However, the courts admit that it is not easy to precisely say what type of income is taxed.
Barkworth argued that the section making it liable to pay the assessed tax was section 204 of ITAA 1936. But that this is qualified by section 254(1)(e). It argued while it ordinarily is liable under section 204 to pay tax assessed to it as trustee under Division 6 of Part III the effect of section 254(1)(e) precluded the ATO from obtaining a judgment against it unless, under section 254(1)(d) and (e), it had or should have retained sufficient money coming to it as trustee to pay the tax. Barkworth argued that section 254(1)(e) defines the extent of a trustee's liability to pay tax; it is a specific provision that limits the liability otherwise created by section 204 to pay tax; and that a notice of assessment has no role to play because it merely sets out the amount of tax payable out of sums received and retained or required to be retained by him as trustee.
Let's look closer to the taxation of the income of trust estates: Division 6 of Part III of ITAA 1936. "Net income" of a trust estate is taxable income. Section 96 states that a trustee is not liable as trustee to pay income tax upon the trust income except where the Act so provides. Accordingly, where tax is payable upon the trust income, it is the beneficiary who is assessed and is liable to pay the tax. This is unless some provision exceptionally renders the trustee liable. Where a beneficiary (not under a legal disability) is presently entitled to the trust income then the trustee is not liable to pay tax on the trust income. The beneficiary is assessed and liable to pay that tax: section 97.
However, if the beneficiary is under a legal disability, the trustee is assessed and pays the tax: section 98. Or, if no beneficiary is presently entitled to part of the trust income the trustee is assessed: sections 99 and 99A.
Barkworth argued that the law requiring it to pay tax on the deceased's estate was reduced by section 254(1)(e) ITAA36. Therefore, it should not be personally liable for any taxes merely stated in a notice of assessment because it did not receive a cent of the monies subject to taxation.
Barkworth argued that the process of assessment of a trustee did not involve the ATO in determining the amount of money which the trustee received or retained in the trustee's representative capacity for the purposes of section 254(1)(d). The ATO agreed with this.
In my 21 years of practice there has never been certainty as to the trustee's tax liability. This causes confusion and uncertainty about trustee obligations.
Summary
However, there is now some clarity after the decision in Barkworth Olives Management Ltd v DCT. Thanks to this decision, a trustee is now personally liable for the entire trust tax debt - or in this case the estate's tax debt. The trustee's personal liability is not limited to the amount it should have retained. In particular Judge Fraser states:
"For these reasons I construe s 254(1)(e) as having no potential application to limit a trustee's personal liability where the trustee is assessed to tax under a provision in Div 6 of Pt III, such as s 99A, which expressly provides for the liability of the trustee; that is so at least where the same person remains trustee during the whole of the period in which the relevant taxable income is derived and up to and including the date upon which the liability for tax accrues under s 204."
Section 254(1)(e) ordinarily limits the liability of the trustee to money received by the trustee after the due date for lodging a return and thus after the derivation of income. But the protection of section 254(1)(e) is lost thanks to Division 6 of Part III. This unfairly imposes liability to tax the trustee as an exception to the general rule that the beneficiaries are liable. Section 254(1)(e) has no potential application to limit a trustee's personal liability where the trustee is assessed to tax under a provision in Division 6 of Part III. See, for example, section 99A, which expressly provides for the liability of the trustee. This is where the same person remains trustee during the whole of the period in which the relevant taxable income is derived and up to and including the date upon which the liability for tax accrues. The court acknowledges the great hardship for innocent executors. However, the court could find no way around the clear terms of the statute.
These are strange and dangerous times. What does this mean for an accountant who is assisting executors and trustees with the administration of deceased estates? Accountants are now under an additional burden to advise executors that they risk owing the tax office more than the entire value of an estate. The shortfall, under certain circumstances, is unfairly payable out of the executor's own pocket.
For our platinum clients the full transcript of the decision is at the following link:
http://archive.sclqld.org.au/qjudgment/2010/QCA10-080.pdf

The Importance of having a Signed Will

It is every executors nightmare – finding out that the Will they need to administer is invalid due to a very basic, yet important, step in the process – being signed by the Will maker.

If we go back to first principles, the law is very clear that an unsigned Will cannot be enforced unless it can be shown to the Court that the Will maker or testator had a clear intention for the document to be binding. Proving that, however, can be a difficult and costly excursion.

We can demonstrate this scenario with a recent matter we took on. The client’s aunt had a valid binding Will signed some years ago. Naturally, circumstances changed, and she had the Will redrafted. Unfortunately, she passed away soon after the new solicitors had redrafted her Will, leaving it unsigned.

We are currently applying to the Court under section 18 of the Succession Act 1981 (Qld) for the unsigned Will to be proved as the deceased’s last intention. The Court requires evidence from the Will drafter (the deceased’s former solicitor) as well as evidence from “beyond the grave” that the deceased did in fact intend for the unsigned Will to reflect her final wishes.

Gathering sufficient evidence will prove to be a timely and costly exercise, and if anyone decides to contest the application to the Court, the costs to the Estate will increase exponentially.

To avoid your family having to go through a difficult process such as this – don’t delay – make an appointment with our experienced Wills and Estates team today!

The Value in Regularly Checking your Trust Deeds

The High Court in Bamford v Federal Commissioner for Taxation has caused ripples in the approach as to the treatment of income by the ATO and the ruling that the Court made to the assessment of taxation in relation to trusts.

The Australian Taxation Office, has attempted to deal with this with the release of Practice Statement PS LA 2010/1.

So what was the issue in Bamford? Essentially, it boiled down to two questions – did the trust deed have the power to define trust income?, and what approach needed to be taken when assessing the tax on trust income. On the first question, the High Court held that yes, a trust deed can define what is and what is not considered income. It is this second question where the argument really comes in. The Federal Commissioner for Taxation argued that the proportionate approach should be adopted in all cases. Counsel for Bamford, on the other hand, argued that the circumstances surrounding each case should determine whether the quantum or proportionate approach should be taken. The Court held in favour of the Commissioner. It said that the tax should not be limited to fixed amounts of distributed trust income, it should be on the entirety of what is received by the trustee on behalf of the trust.

Quantum v Proportionate Approaches
The primary difference in the approaches is who is taxed what. Under the quantum approach, tax is calculated on the taxable income (which, depending on the definition of trust income under the trust deed may be different to the trust income). So even if the trust income is $10,000, and that is all distributed to the beneficiaries, the trustee is liable for the tax on the difference between the taxable income and the trust income. In contrast, under the proportional approach, if each beneficiary receives $5,000 of the trust income, they will be liable each for 50% of the taxable income.

A further aspect to consider for your trust deed is the “streaming” of income. Streaming is where trust income of one type is given to one beneficiary, and trust income of another type is given to another beneficiary. If a trustee plans on doing this, then it must be expressly provided for under the Trust Deed. The Trust Deed should also make provision for income remaining of the same character that it comes in as.

This shows why you need to regularly review your Trust Deed. Should you have any questions, please feel free to post them below and we will endeavour to answer them.

Contemporary Copyright Issues

The purpose of copyright is to enable the creative effort of writers, artisans, craftsmen and the like to be protected from copying without the need for registration procedures. The Copyright Act provides protection for a wide range of diverse items such as literary works, sound recordings, news articles, photographs and so on.

Copyright protection is not a monopoly since it does not extend to prevent independent creation of similar work but rather protects the reproduction or copying of the work. In saying this though, these are subjective tests and reproduction may be broad enough to include similar or substantially similar works.

The term of copyright protection is very long, generally in the order of 50 years after the date of the death of the creator depending on the type of work created. Further, unlike patents, trademarks and designs, there is no registration process involved in order for a work to be protected by copyright. Copyright inherently exists in every piece of work created by a person (be it a song, piece of writing, picture, photograph script etc) in order to protect the integrity of that work for the creator’s benefit.

Recently, we had a client who wished to use articles and photographs from other newspapers and online news sources in order to publish them in his own newspaper for a specific market.

Our advice was that the simple act of copying or translating such pieces of writing and copying photos from other sources would breach the Copyright Act and the owner/publisher of that material would be able to take legal action against you in that respect.

Especially with a newspaper article, there are considerations not only with respect to the author’s rights (individual journalist) but also considerations as to the publisher’s rights to the material it has published for commercial gain. Similarly with photographs, consideration needs to be given to the photographer’s rights in addition to the person of whom the photograph is taken.

In order to ensure you have not breached any of the author’s/publisher’s rights with respect to such material, their written authority must be obtained prior to any reproduction.

Should you have any questions, please feel free to post them below and we will endeavour to answer them.