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Estate Planning and Superannuation

ESTATE PLANNING and SUPERANNUATION – The importance of considering Superannuation as part of your overall Estate Planning

Estate Planning Decision: In D17-18/120 (2018) SCTA 24 the Superannuation Complaints Tribunal (“Tribunal”) had to consider an application by the Deceased three minor children for payment of the death benefit and whether the binding death benefit could be overruled.

Facts

  • The Deceased had two adult children with his first wife and three minor children with his second wife.
  • After being diagnosed with a terminal illness the Deceased signed a new Will and at the direction of his solicitor, a Binding Death Benefit Nomination (“BDBN”) ( six months prior to his death.)
  • Both the Will and BNBN were in favour of his two adult children in equal parts.
  • The evidence supplied was that the Deceased had not been in contact with his second wife for many years; however had a strong and close relationship with his adult children.
  • The second wife sought that the death benefit be split equally among all children.  This application was rejected by the Trustee.
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Record Keeping for a SMSF

Record Keeping for SMSF’s

Introduction (SMSF)
Most SMSF trustees are aware that record keeping is important to ensure their fund remains compliant and eligible for tax concessions, but few trustees understand the actual ramifications of what happens when you don’t keep the right records.

Record Keeping Requirements
The ATO website contains a great deal of helpful information for SMSF trustees including the records a fund must keep. See https://www.ato.gov.au/super/self-managed-super-funds/administering-and-reporting/record-keeping-requirements/

For example, copies of annual returns must be retained for at least 5 years but records of changes of trustees and minutes recording investment decisions must be kept for at least 10 years.

Wrong Turns – Real Life Examples

1. Maintaining the Chain of Deeds
A and B set up the AB Super Fund in 1987.  They are the trustees of the fund in their own capacity.

In 1990 and again in 1998 they updated the provisions of their SMSF trust deed.  Their accountant arranges this for them.

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Do you know what PPSR interests affect your business?

Do you know what PPSR interests affect your business?

Selling
Selling your business can be both exciting and stressful at the same time. Once a purchaser is found the parties usually move as quickly as possible to enter into a sale contract and then to completion.

PPSR Considerations
An area often overlooked by a seller is taking the time to consider what security registrations (PPSR Interests) under the Personal Properties Securities Act (PPSA) may exist over the assets being sold including vehicles, stock, plant and equipment.

Standard Sale Condition
If the Contract for Sale of Business 2015 edition is being used:

  • a standard clause requires a seller to provide a release of each security interest that applies to the assets being sold (or such other statements or documents confirming the security interest does not apply to those assets
  • often a seller mistakenly believes that because they have already paid for various assets that they are not subject to any security interest
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Business Succession Planning

Business Succession Planning from the Perspective of a Commercial Lawyer

A Commercial Lawyer sees all sorts of businesses and deal with the effects of human nature in business on a daily basis. They document business ventures, estate and succession plans and we are often brought in to clean up the mess when things don’t go smoothly.
Planned Succession

Planning assumes there is time to plan. Often the business is closely tied to the founder who has a significant bank of knowledge which should be documented and communicated during the planning and handover process.
There are many issues to consider when preparing a succession plan:
– Will the owner leave completely or will the owner have some future involvement with the business?
– Who is to be the successor? This doesn’t matter if the business is being sold at arm’s length
– How will the owner conduct discussions with the preferred successor? Is there a backup successor?
– Will the owner appoint an independent person to lead the discussions and to chair meetings?
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The Importance of Record Keeping

COMMERCIAL LAWYERS UNDERSTAND THE IMPORTANCE OF RECORD KEEPING

As commercial lawyers we understand that in this electronic age it is tempting and we are often encouraged not to print documents. However it is often a good idea to have a printed copy of some records, as well as an electronic copy.

Good record keeping may sound rather Dickensian but here are a few pointers to make things easier for you as the years roll on, people move on or retire and memories fade. Nobody may remember what happened to that beige filing cabinet in the corner outside Jim’s old office and sometimes you will need is not the current document.

Insurance policies

Particularly if you shop around for the best insurance deal from time to time do you have a copy of your policies in one spot? This is very important for workers compensation policies where a claim would be handled by the insurer at the time of the injury and not the insurer at the time of the claim.
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Commercial Law – Selling Your Business? Beware the Warranty

By Natalie Gosper, a Solicitor in our Commercial Law team.

The standard conditions contained in the Contract for Sale of Business 2015 edition contain a number of warranties or promises made by the vendor about certain aspects of the business.

As they are contained in the ‘fine print’, they can’t be that important, right?

Wrong.  The vendor’s warranties and promises must be carefully reviewed to ensure the vendor knows exactly what they are stating about the business and how they will conduct the business between exchange and completion.   If a vendor makes incorrect representations or warranties, the purchaser may be able to make a claim for damages, rescind or terminate the contract.

The vendor promises that ‘the equipment is proper working order’.  If some equipment is not in proper working order, this must be disclosed in the contract.  This sounds simple enough, but is easy to overlook especially for businesses using old or dated equipment.

There is no subsisting breach by the vendor of a lease’ This sounds straight forward, however the vendor should check rent payments, bond requirements and insurance obligations are up to date and any redecoration or other specific obligations under the lease have been met. During the period between exchange and completion the vendor must continue to comply strictly with the lease terms, including exercising an option to renew if applicable.
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Commercial Law – Selling your business? Consider the PPSR

By Natalie Gosper, a Solicitor in our Commercial Law team

Selling your business can be both exciting and stressful at the same time.  Once a purchaser is found the parties usually move as quickly as possible to exchange.

An area often overlooked by vendors is taking time to consider what security registrations under the Personal Properties Securities Act 2009 (PPSA) may exist encumbering vehicles, stock or plant and equipment included in the business sale.

Under the most recent Contract for Sale of Business 2015 edition, a standard clause is included requiring a vendor to provide a release of each security interest (or such other statements or documents confirming the security interest does not apply to assets being sold).

Often vendors believe the plant and equipment in their business is unencumbered and it can be quite a surprise to receive a PPSA search showing security registrations do exist despite the vendor not owing any money on the particular asset.   It is then necessary to contact the secured party and request a Financing Change Statement (release) which, depending upon the secured party, can take days or often even longer.   This can result in delays in completion and an unhappy purchaser.
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Implications – SMSF Record Keeping (or lack thereof)

Following on from the previous blog on record keeping, below is yet another example which highlights the importance of record keeping for SMSFs.

Where it can go wrong – another real life example

Lost Deeds 

L and M are members of the L & M Super Fund and are the original trustees.  In 1993 a newly incorporated company called LM Holdings Pty Ltd was appointed trustee.

In 1997 the Fund buys a property.  A title search for the property shows that ‘LM Holdings Pty Ltd’ is the registered owner.

In 2014 L and M divorce and M becomes the sole member of the Fund. A new trustee, Life after L Pty Ltd is appointed.

The appropriate forms are completed to change the name on the title of the property. An application is submitted to the Office of State Revenue (OSR) for concessional stamping.

OSR requests evidence that LM Holdings Pty Ltd owns the property as trustee of the Fund. The records showing that company’s appointment as trustee in 1993 have been lost.  The contract of sale (which showed ‘LM Holdings Pty Ltd as trustee for the L & M Super Fund’ as purchaser) has also been lost.
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