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Apr 21
resolving construction disputes

How Builders Can Resolve Disputes Quickly

By Ligitation, Podcasts

The building and construction space is the source of many legal disputes that arise out of complicated contract arrangements. This will often lead to the parties enforcing their legal rights, which can lead to costly and protracted legal battles. To better understand the issues, and what you can do about them, in this podcast, Commercial Litigation expert, Cameron Marshall of OMB Solicitors discusses the matter.

Podcast: Play in new window | Download

TRANSCRIPT:

Dan: Cameron, is there one intrinsic thing in these matters that tends to be the problem?

Cameron:   Yes, I find that it’s probably, it sounds pretty simple but the thing that can be done is for the parties just to read and understand the contract that they’ve signed, that’s probably the first place to start to try and avoid any disputes.

Dan:   Is it the case that most people don’t, is that common?

Cameron:  I’d say quite a lot unfortunately, it sounds very basic but I see it quite a lot from in my field of work all the time, that disputes could’ve been quite easily avoided by the parties understanding what they had to do, and knowing which way to go when a dispute arises, yeah.

Dan:  Is there something about the contract or particular clauses that you think that are typically the drama?

Cameron:  Yeah, well, not … Yeah, typically they come from a whole range of problems, because I’ve been doing this job for 20 years odd, so I see a lot of different ones. So when I see things such as something as simple as just the parties, or how they may be named in the contract, they need to make sure that the exact legal entity is named. That comes a real problem if we ever have to enforce payment for work being done if we haven’t even got the contractual parties correct, because it gives wriggle room to a party trying to avoid payment, possibly.

Cameron:  Other things like that come up is often when contracts have been negotiated, that’ll take a little bit of time and a start date for the commencement of the work might be included. But, often when the actual contract’s signed, that start date’s passed. So if we’re working on a practical completion date, we’re already halfway through that, we could be halfway through that period and the contractor will be facing some problems down the track, when the completion date’s quickly coming up and he might be getting pressed for completion, etcetera, etcetera. So it’s just those things that need to be sorted out beforehand.

Cameron: The construction schedule’s one that also comes up a lot. It’s one of those things that sometimes gets overlooked in the contractual negotiations, the contractors and the owners and the builders need to just make sure that the construction schedule is one that they can keep, and one that’s realistic. We don’t wanna, again, get into disputes with someone falling behind when the contract, construction schedule itself was just not able to be done.

Cameron: There are even situations where I’ve seen contracts not signed. So-

Dan:  Wow.

Cameron: We get a couple of hundred thousand dollars worth of work and the dispute arises and then one contractor says that they haven’t signed the contract. There’s legal ways of getting around that, but you don’t really wanna have to go there if you just check the contract and make sure it’s being signed by the proper party. So there are some of the examples that I see quite often.

Dan:  Now, Cameron, when things go wrong, where’s a starting point for people to sort of consider how to resolve this, is it typically the case that they don’t do anything at all, they let these things linger, or what’s the best way around it?

Cameron:  Well, again, let’s go back to the contract, let’s see what the contract might say. So let’s talk about a breach of the contract. Normal construction contract if someone’s noncompliant, maybe they haven’t paid a bill, maybe some bit of work is being delayed, then it’s something that can be addressed in the contract by simply providing a notice to the other party. Usually it has to be in writing, but once again, it clears the air and provides certainty as what the other party alleges isn’t done, and it gives time for the other party to do it, and if it’s not done then you can have a look at your legal rights, but again, you go back to the contract, see what it says, and it will guide you through a lot of the problems.

Cameron: There are dispute resolution clauses often in building contracts, now these can be used, I’ve seen one recently where we had a latent defect come up because of soil testing. And it needed to be, there was a dispute between the builder and the contractor, and it needed to be resolved so the parties went through their conciliation process and the arbitration process in the contract which required eventually an independent expert to decide whether it was a latent defect, latent condition sorry, and that resolved that issue so the contract could proceed. It’s not always the case the parties are happy with those rights, but it’s a lot better than going down the legal course if it can be done prior to incurring legal costs, yeah.

Dan:  From a practise perspective Cameron, is sort of traits that you see of builders who may sort of sit on these things longer than they should in terms of bringing the issue to a resolution, sort of practical issues that sort of emanate?

Cameron:   Well, the building site is, I’ve been on them before in my younger days, it’s a different world there, there’s a lot of trust between the parties and a lot of things spoken orally, which is the normal way to do it and good, but it’s not the good legal way to do it. So, what may be said by one party and understood, thought to be understood between the parties that things may be okay, may not be the situation and when a dispute does arise and the lawyers get involved, then again the contract will be the document that we all look at and will be the one that we’ll be trying to enforce. So, it’s one of those situations where on the building site you don’t wanna rest on your belief and understanding of what the other party thinks is the case, or what you think is the case, rather, let’s get it clarified, let’s go back to the contract, make sure what the parties are doing is understood, and then you can go forward. You don’t want, you thought it was the case, ’cause you’ll just end up in problems down the track.

Dan:  So, undeniably, the real take-home message for people listening to this podcast, those that work within, in the industry, is to get advice and make sure these contracts are watertight.

Cameron: Yes, it’s just really … They’re a daunting document when you look at them, but once you’ve had a little bit of experience with them, and you read them, it’s, they’re pretty straightforward and they all have the general similar tone and vein to them, so just understand what you need to do, and if something does go wrong, how do you address it? There are ways to go enforce your legal rights through the courts and the different tribunals, but a lot of that can be avoided simply by knowing what you need to do under the contract and doing that.

Dan: Cameron, thanks for joining me.

Apr 21
levies unpaid body corporate

What Happens When Body Corporate Levies Go Unpaid?

By Body Corporate, Podcasts

When Body Corporate Levies Go Unpaid?

If you own a lot within a community title scheme, then it’s likely that you may be aware that they are required to pay Body Corporate levies. However, it can be a conundrum for many of them, in particular, understanding what Body Corporate levies are, what they are used for, and what happens if you do not pay them, and how Body Corporates encourage the payment of these levies.

In this podcast, Body Corporate Law expert, Juliette Nairn discusses the matter.

Podcast: Play in new window | Download

TRANSCRIPT:

Dan:  Juliette, what are these Body Corporate levies?

Juliette: That’s actually a very good question, because we often come across it a lot within a Body Corporate. We have the commission members, who obviously know very well what Body Corporate levies are, but for those individual lot owners who live in a strata scheme, they might necessarily not know that they have Administration Fund levies, which is for daily repair and maintenance of the Body Corporate, a Sinking Fund levy, which is for capital work that a Body Corporate undertakes, and also insurance, which is very important to pay on behalf of a Body Corporate.

Juliette: What happens is, the Body Corporate, usually through a Body Corporate management company, will send out a notice and agenda for an annual general meeting, and it’s actually at that time that the lot owners need to read that documentation and look at what is the budget for the Body Corporate in terms of how much money does the Body Corporate need to raise to cover its day-to-day expenses.

Juliette:  We often talk about Body Corporates being a bit like a not-for-profit organisation because a Body Corporate has to get in exactly the amount of money that it needs to pay its expenses throughout a 12-month period. So it’s not a business that actually raises money, or has any revenue.

Dan: So Juliette, where is all this information enshrined? Is there a contract? Is there a document of some sort that somebody can go to and go, “Ah, that’s what my Body Corporate levies are,” or whatever the case might be?

Juliette: Unfortunately there’s not, because the only place it exists is in the legislation, which is called the Body Corporate Community Management Act, and an appropriate module that applies to each strata scheme.

Juliette: So, for example, that information about levies is not contained in your bylaws, it’s not contained in a community management statement. What happens is when I’m a purchaser and I might be looking into purchasing into a strata scheme, I would do what is called a Section 205 search, and that’s actually a letter that gets written to the Body Corporate management company on behalf of the Body Corporate, and the solicitors usually do that on behalf of an individual lot owner who might be buying into a Body Corporate.

Juliette:  What they get back is a little snapshot which says, “Oh, this is the budget for the Body Corporate, and this is what your contribution is, and this is how we pay it in quarterly instalments.” So, that’s the only information, really, that individual lot owners get. So often what happens is a Body Corporate management company might send out a welcome packet to its lot owners that actually explains in a little bit more detail what levies are. We also have a really good website which is the BCCM office website, being the commissioner for Body Corporate in Queensland, and they give a summary of what levies are and what is a Body Corporate debt.

Dan: Can there be a great divergence in what those levies are across Body Corporates?

Juliette: Yes. Definitely, Dan. It depends on the size of the building that you live in, actually, and even the type of plan that’s being recorded. A lot of the high-rise buildings are what we call building unit plans, and those building unit plans, you know, you’ve got one level stacked on top of the other. You’ve got charges for lifts and all sorts of other costs, and maybe even care taking costs or letting fees associated with that Body Corporate, as well as its normal admin.

Juliette: But if you live out, say Ribena or Matriba you might live in a duplex-style complex, or where there are actually individual homes under what we call a standard format plan, and those levies are very different, because they can be much lower from a Body Corporate perspective.

Dan:  So, what happens if people don’t pay these levies?

Juliette: Usually what happens is that the Body Corporate then can’t afford to pay its bills. We often have Body Corporates approach us, or committee members or individual lot owners within a Body Corporate, where they may have run out of money and can’t afford to pay the insurance for their building.

Juliette:  If a Body Corporate gets to that situation where it can’t pay its bills, it then looks very carefully at which individual lot owners haven’t been paying their levies on a regular basis, and will look at implementing processes or steps to recover those levies, which usually include receiving reminder letters. So the people, the lot owners, might receive a reminder letter from the Body Corporate management company, and then maybe a second reminder letter, then a final letter of demand, and also often the Body Corporate manager might make a phone call as well to try and get an understanding as to why that individual lot owner is not paying its levies.

Dan:  So, in contrast, if the lot owner doesn’t pay their levy, what are the penalties? Is there any sort of ramifications on them?

Juliette:   Yes. So in terms of the penalty which will apply to the individual lot owner, because the lot owner and the levies that they pay are basically the lifeblood to the Body Corporate, because there’s no way the Body Corporate receives other money, the penalties are actually very high. So one, not only are your levies outstanding, but the legislation specifically allows the Body Corporate to charge a 30% simple interest per anum charge to each and every levy that’s outstanding.

Juliette:   Now 30% simple interest adds up very quickly when you have outstanding levies, and it’s applied on a monthly basis. It’s actually far higher than what you would pay on a VISA card. It’s far higher than what you might pay, definitely, on your mortgage, and it’s certainly far higher than what you might pay on a loan if you got a personal loan if you’re in some hardship to pay your levies.

Juliette: The reason why the legislators made the 30% simple interest a general rule that applies across the board to all Body Corporates in Queensland is because they wanted lot owners to be penalised, because there’s no other way in which a Body Corporate can raise revenue. It can only come from those individual lot owners.

Juliette:  In addition to that, Dan, if you actually have, and the Body Corporate engages legal representation, being a Body Corporate solicitor to institute legal proceedings against that lot owner, that individual lot owner will become responsible for all the costs. So, the Body Corporate manager’s cost being expenses and outlays, and any expenses and outlays of the Body Corporate, including any legal fees that it incurs as well.

Dan: Is there Body Corporates out there that don’t pay their levies. Does that typically happen?

Juliette:   Unfortunately there are a lot of lot owners out there who don’t pay their levies. Because of the amount of information that we’re seeing these days, particularly through our Queensland Commissioner’s Office, we find that individual lot owners are better educated, particularly if they live in Australia.

Juliette: Fortunately we do have a lot of overseas investment, but some of those individuals who live in Bodies Corporate may not have Australian agents, and so, for example, if Chinese is their first language, or they’re in a country like Japan where the levy notices are being posted to them, one, it’s very difficult for them to understand the reason behind paying levies to the Body Corporate. They’re just aware that they’ve purchased the lot and paid that purchase price, but didn’t realise that there were individual, ongoing costs associated with the Body Corporate. So we do see much more foreign investment in that form.

Dan:  So what can they do to become more aware and make sure that they pay their levy?

Juliette: The best thing to do is that most of these buildings do have a Body Corporate manager appointed, and just contacting that Body Corporate management company and having a good conversation or an email conversation with the Body Corporate manager will enable you to get all of your information. They keep their roll up to date, and the best way is to have a role address by way of not only a postal address, but also an email address, so that they receive newsletters on behalf of the Body Corporate as well as any relevant information from the Body Corporate regarding their levies and their notices of contribution by receiving that information and understanding what levies are for, the Body Corporate manager, through their welcoming packets that they send to individual lot owners, that’s how people are encouraged to pay their levies.

Contact our Gold Coast Lawyers team today.

Apr 21
Buying a Property on the Gold Coast? Contact OMB Solicitors today.

Before You Buy a Property on the Gold Coast, Listen to This!

By Podcasts, Property Law

The Gold Coast if you know, is renowned for its diverse property appeal, but in 2018 property experts are saying that infrastructure in the Northern and Central suburbs will contribute substantially to an already booming market, not to mention the impact of the Commonwealth Games on the city, but if you’re an outsider contemplating buying into this flourishing market, there’s probably a few idiosyncrasies along with the stable cold hard truths, you need to know before buying that strategically positioned unit on the 24th floor.

Podcast: Play in new window | Download

Simon Bennett of OMB Solicitors discusses the risks and opportunities.

Dan: Simon is all this glitz and glamour of living on the coast potentially at risk of not doing your due diligence?

Simon Bennett: I think that’s right. I think sometimes purchases of property on the Gold Coast get caught up in the excitement and the glitz and glamour and fail to probably undertake what I would consider basic due diligence when looking to purchase property. Now that could be split up. I think there are two real types of category of buyer. You’ve got your owner-occupiers, so someone who’s buying to actually live in the property. Then you’ve got an investor who is someone simply making a property investment. I think there’s really key characteristic differences between those two.

Dan: How should each of those cohorts look at the market?

Simon Bennett: Well an owner needs to look at livability. Am I going to be happy living there? They really need to pay attention when they’re buying into a body corporate about bylaws and rules because these are things that will govern how they can occupy that property. They really need to determine whether they’re going to be happy living there, as well as whether it’s a good commercial purchase. Where the investor on the other hand, really shouldn’t be looking at, do I like it? Does it feel good? It’s really a numbers game. How’s the return? What’s the likely capital growth? They need to be a little bit more removed from the feel, and as I said before, getting caught up so much in what they might like because they need to remember they’re not going to be living there.

Dan: Simon, for the owner I assume that really looking at the bylaws is going to be important, and maybe even so for the investor. Particularly if they’re looking at Airbnb and those other opportunities, but if we talk about the owner first up is what about the bylaws that they should be really analysing or wanting to understand?

Simon Bennett: Sure. Well the bylaws in really basic terms are set as the rules and regulations by which the owner or the occupier of a unit in a body corporate are governed by. Now these are designed to protect an owner, but they also restrict you. Now when I say they protect, what they do is, they govern all owners and say for example, you can’t change the external appearance of your unit. You can’t hang your washing out over your balcony, so that the view of the building doesn’t get the look of a slum or a building you might see in Hong Kong for example, whereby the washing is all hung out the side. That protects values, but it also restricts what you can do. Another common one is you can’t have loud late night parties, which restricts your use of your unit, but also it protects the general common ownership from being disturbed by other owners.

Dan: Simon, is there a divergence among what bylaws are from a complex to complex? I’m assuming that there may well be some that have very, very tight bylaws and others that are a little bit looser.

Simon Bennett: Yeah, that’s correct. It’s important to look at these if you have a specific concern. One of the most common ones we see is with pets. Now this is a really sensitive topic. Quite often a purchaser, or a potential purchaser in a complex, will not go ahead with a purchase if they can’t take their animals with them. It’s important to read those. Know what your specific requirements are if you are planning on letting, if you are planning on living there and taking animals et cetera. To check those bylaws have an experienced, qualified lawyer read through them, and point out what is important to you.

Dan: Okay. Let’s talk about the investor. There’s all this hullabaloo and excitement around Airbnb, and stories about people making thousands and thousands of dollars each week on their property. The investor that wants to buy, say, a unit at Surfers Paradise has got visions of being able to Airbnb it every night. What do they need to ensure is in those bylaws to allow them to do that without sort of running foul with the body corporate?

Simon Bennett: Sure. It’s important to read the bylaws and find out if there are any restrictions in the bylaws on short-term letting, then a qualified lawyer would need to look further beyond that and see whether that constitutes a valid bylaw or not. It may depend on what the original approval or the development approval was granted to that building for. If there were restrictions on what that building could be used for it would come back to town planning, but it is important as an investor to work out what you can and can’t do with it, not just with that letting process, but whether you’re going to put it with an onsite agent, whether there is an onsite letting agent, or whether you’re able to use a commercial letting agent maybe down the road.

Dan: Okay. Now in terms of the contract, or signing the contract, I mean it never ceases to amaze me how many people will go down and chase the cut-price conveyancing law firm to do their work. When in fact it’s a significant asset for many people. What are the risks of going down that path?

Simon Bennett: Yeah. Look, it amazes me as well. I quite often use the analogy of an individual who’s getting brain surgery doesn’t go out and find the cheapest brain surgeon. You generally want to find the best. For most people, buying a property of this nature is one of the biggest monetary financial transactions they will undertake in their life. They shouldn’t be looking at, necessarily, the cheapest option. They should be looking at getting really good value for their money. They should be looking at engaging an expert in that area. I am an accredited specialist by the Queensland Law Society in Property Law. That is an accreditation given by the Queensland Law Society saying that this person is an expert in that area. It’s really important because let’s get to the contract that you mentioned. Realistically, before you sign a contract you should give your solicitor an opportunity to peruse it for you.

Simon Bennett: As a general rule at OMB Solicitors we’re more than happy to look at our client’s contracts before they sign them, no obligation, and no charge. We would rather look at these contracts for our clients up front to say, “Yes, it’s all fine. You’re okay to sign it or gee, we really need to mend these clauses.” Quite often it’s something really technical. It may be the use of a simple word, may or must or something of that nature, that may need to be amended, but the ramifications are quite huge. What we say is before you execute your contracts, get them checked just for piece of mind. That way we don’t have to sort out problems later on.

Dan: Getting quality legal advice just makes common sense.

Simon Bennett: It does. I must say there is a misconception that you want to buy, I want to sell, straightforward it just happens and people go and put the importance on that transaction that they should. I can tell you this is that these transactions often have major problems, end up in court being litigated, and huge amounts of money are spent. The benefit of having an experienced practitioner looking after your matter is that they will have the experience to, not only deal with problems when they come up, but most often anticipate the problem before it becomes a major issue and cut it off at the pass, and things will run smoothly through.

Dan: Yeah. It’s very true isn’t it, I mean given that OMB Solicitors is a diverse practise law firm, you’ve got their back there should things go off track.

Simon Bennett: That’s right. Quite often throughout the course of a matter like this if we do have an issue I will go and consult with our specific body corporate team about body corporate issues, or I will go and discuss with our litigation team what if A, B, or C occurs how do we stand if that ended up in a court? We can use those other areas of expertise in the firm to assist the client quite informally before the problem arises.

 

Apr 21
airnbnb body corporate

I Want to List My Unit on Airbnb. Do I Need Permission from the Body Corporate?

By Body Corporate, Podcasts

Do I Need Permission From The Body Corporate To List My Unit On Airbnb?

Have you heard of Airbnb? You probably have and heard also about owners of properties who are making significant money letting their place out on the Airbnb platform. But if you’re an owner of such a property in a strata complex, are you allowed to do it? It’s a commonly asked question, and in this podcast, Body Corporate expert, Tom Robinson, a lawyer at OMB Solicitors, explains more.

Podcast: Play in new window | Download

TRANSCRIPT:

Dan: Tom, for those unaware of what Airbnb is, what is it?

Tom: It is that short-term, do-it-yourself type letting, which essentially means as an owner, you can let out part or all of your lot to someone else via that online marketplace. Which is interesting because we have been seeing real estate agents are taking control of people’s Airbnb accounts and operating it like another type of rental units for their portfolios.

Dan: It’s been a game-changer hasn’t it? I mean, for many people that once would struggle to try to let out their property, now they’ve got this incredible platform that reaches the masses.

Tom: It does, and even on that, as a bit of an interesting fact. More than 50 million people in more than 34,000 cities around the world are using Airbnb. So it’s big, and it’s understandable that it’s here to stay, and there’s a reason why our body’s corporates are wanting to know when owners are using and listing their lots and units on Airbnb.

Dan: At a practical level, if I’m on the Gold Coast and I own a unit within one of these body corporate complexes, do I need to actually ask permission?

Tom: Look, it’s a very good question, and I’m going to answer it in a typical lawyer way, and I’m going to say maybe. It’s all dependent on the type of body corporate, being that we will have bodies corporates that will be affected by the use of Airbnb, and there will be bodies corporates that are not so affected by Airbnb. And it comes down to not only the type of body corporate, but the regulations, so those bylaws that are in place and apply to all owners and occupiers.

Dan: Is there examples of Airbnb and how it might impact upon the body corporate? By positively and negatively?

Tom: Yeah, definitely. From a good perspective to start with is looking at bodies corporates that are probably negatively affected. They’re the ones that are more or less are going to want to know when lot owner’s listing their unit on Airbnb. Those types of effects that we have seen come across, mostly relate to the type of disruption that is occurring, and that’s by way of your increased noise, your increased foot traffic, the increase in use of common property facilities that the body corporate, the actual physical body corporate itself is not used to.

Tom: Which leads into other issues like insurance. Those bodies corporates that are not designed for short-term accommodation poses a risk to the body corporate in terms of their insurance policy, and whether or not an owner using a lot for a short-term accommodation basis where the building or the body corporate was never designed that way. Is that going to increase premiums, and some insurers are saying “Yes.” Is there appropriate fire safety services systems in place in those types of bodies corporates that aren’t designed for that short-term accommodation like a hotel-style body corporate? You know, if they don’t have those types of fire safety systems or evacuation plans in those buildings, and is that a risk if something does go wrong. Those are the effects that one mostly is seeing by Airbnb and most bodies corporates that are not designed, and never were designed for that short-term type accommodation.

Dan: For these body corporates that are interested n in moving down this path, what do they do? I mean this sounds like an awful amount of work to get ready for this.

Tom: Look, there’s a lot involved, and I think from a body corporate’s perspective they’re generally quite limited. If we look at a couple of quick examples, taking an example of a high-rise building in Surfers Paradise, which has very few permanent residences, it’s designed as that holiday-maker’s hotel-type building. Is the whole concept of that body corporate has been designed for short-term accommodations?

Tom: When we look at those smaller bodies corporates, those little three-story walk-ups that might be down at Burleigh Heads where a majority of residents are permanent, they’re either owner-occupiers or permanent letting. They don’t have an on-site management or any letting staff.

Tom: When we look at those impacts that are on that body corporate, how does the body corporate then try to regulate that Airbnb? And that is by way of its bylaws. The biggest issue with regulating through our bylaws is we don’t have a lot of guidance to go by in terms of what our legislation says, except that our bylaws cannot be oppressive or unreasonable. And with respect to that, we can’t restrict or prohibit someone from using their lot in a lawful way. You’re allowed, as an owner, and your individual property rights, you are allowed the usual lot and let your lot out in any way that is lawful.

Tom: Where we have seen a bit of a win for not so much bodies corporates, but a win for regulating this short-term accommodation and protecting the bodies corporates who haven’t got it in there, is by your local council laws. So Gold Coast City Council, as of 2016, require an application for material change of use if someone wants to use their lot for short-term accommodation. That application carries a application fee of over $8,000, which is quite hefty-

Dan: Yeah.

Tom: … Potentially off-putting for people who are using their lots in short-term letting.

Dan: Tom, the starting point for a body corporate that might be listening to this podcast, what do they do on a case that they’ve got an increasing number of people within their complex that are wanting to play in the Airbnb patch? What do they do now?

Tom: The first thing and the best thing to start with, is review of your bylaws. You want to review your bylaws which you can update, basically at any time throughout a year, and that is having that review to identify what areas need to be regulated more. So the bylaws, as we say, can’t be oppressive or unreasonable, which means they can’t be prohibitory or restrict the use of a person’s lot. But what they are designed to do is regulate, not only the use of common property, but to a smaller extent the use of someone’s lot and their lot property, to a point where the use of the common property and lot doesn’t cause a nuisance. Doesn’t disturb the peaceful use and enjoyment of other people, owners and occupiers, within that body corporate.

Tom: A review of your bylaws is a starting point, because in there you can look at regulating and putting in requirements that an owner must notify the body corporate of their lot being listed in Airbnb. They must ensure that the owner of the lot provides bylaws to every person who comes and stays in their lot under the Airbnb platform. The only difficulty with this, and this is where we will be looking to our legislative writers, is the enforcement of that. Our current enforcement process under our body corporate legislation, is the Commissioner’s Office for Body Corporate and Community Management, the issue that we face is trying to reach someone who is in breach of the bylaws when they’re gone within four days. We don’t have a process, a dispute resolution centre, that can deal with that type of complaint in such a short turnaround. Which means the breach happens, and then is remedied, because they’re no longer there. So that’s where we’re probably falling short.

But at least the bylaws are an informative way to regulate as best we can, as a starting point to Airbnb, and then to supplement that, is looking to our local governments and making sure that those laws are in place. Like Gold Coast City Council putting in the material change of use application requirement. And if lot owners aren’t complying with those local laws, it’s up to our local governments to enforce that, and that is via a notification basis. So yeah.

Dan: There’s a lot to it, isn’t there?

Tom: There is. There is a lot to it, and there’s a lot that we’re hoping to see come about, and we are starting to see that change, and we’re starting to see that there will be an ability under the bylaws, hopefully in the coming years, for a property law reform that we’re going for at the moment, where we might be able to have some more ability to not over-regulate, but have a more of an ability to deal with these types of matters through our bylaws. Which is realistically the best ability and tool for a body corporate.

Dan: Tom, thanks for joining me.

Tom: Thank you very much, Dan.

Contact our Gold Coast Lawyers team today!

Apr 17
Wills – The Unavoidable Topic

Wills – The Unavoidable Topic

By Articles, Wills and Estates

It’s human nature to refuse to accept the obvious – nothing is more certain than death and taxes. Making a Will isn’t morbid – it is the only way to protect hard earned assets.

Most people wouldn’t leave their car door open with a wallet displayed on the front seat. Few people leave their homes open so thieves can help themselves but many people leave their estate wide open to claims. A valid will ensures assets go to those who are near and dear. The absence of a Will leaves the estate open to claims from all and sundry and this includes the taxation office.

There is no legal obligation to make a will, but it is the smart option. Without a Will, assets can be distributed by anyone to anyone. When people die without leaving a will, assets are distributed according to a legal formula.

The process applies to financial assets, property, and may determine the guardian of children under 18 years of age. Avoid creating ongoing hassles and legal wrangles by preparing an estate plan.  This usually means writing a straightforward will and an enduring power of attorney.

Enduring power of attorney offers protection if an accident or a medical condition prevents people handling their own affairs. An executor is appointed to ensure a will is followed to the letter. Power of attorney allows a trusted person to deal with financial and legal affairs of another.

A will can be relatively straightforward or a complex legal document incorporating protective clauses and tax effective structures such as testamentary discretionary trusts (TDTs). TDT’s are not for everyone, but can be very advantageous.

TDT’s may offer tax advantages and protect assets involved in Family Law Court proceeses or creditors threatening bankruptcy.

TDT’s also protect spendthrift beneficiaries from themselves and ensure ongoing care for children, grandchildren and mentally disabled beneficiaries.

Legal advice is recommended when making a will. It is essential to cover all likely eventualities, choose an executor to administer the estate; appoint the guardians of children, list assets and liabilities (individual, jointly owned or placed in a trust), name beneficiaries, show how assets should be distributed and make provisions for the future of any children.

Recent legislation allows people to place large proportions of their wealth into superannuation.

Superannuation is not always distributed according to a person’s will because the asset is controlled by the trustee of the superannuation fund.  This is not usually the executor of the estate.

The superannuation fund trustee may decide who receives the proceeds of the fund.  This is an important estate planning issue.

Gold Coast Lawyers at OMB Solicitors has almost 40 years estate planning experience. For further information contact Simon Bennett on 07 5555 0000.

This article was featured in Label Magazine, by Simon Bennett

Apr 17
Signing a Power of Attorney

Don’t Get Lost in the Shuffle

By Articles, Wills and Estates

Volcanic ash created an international debacle as people were stranded far from home; it highlights the need for a back up plan

Life does not always go to plan but most people are unprepared for the unexpected according to Gold Coast solicitor Simon Bennett. Simon says responsible people prepare for all eventualities. “Life is unpredictable, we must hope for the best and be prepared for the worst,” he says.

“People can sometimes become incapacitated due to a so-called act of god like the volcanic ash eruption or as the result of an accident or illness. It is essential to have a plan of action in place to avoid compounding the problem. A power of attorney ensures a trusted family member, friend or professional person is able to take over financial and health affairs,” Simon says.

A power of attorney is a legal document that allows any person aged 18 years or over to nominate another to deal with financial, health and any other situations if they are not capable of dealing with these matters themselves. An enduring power of attorney continues if the loss of capacity is ongoing. It allows the person with the enduring power of attorney to make decisions on behalf of another.

Simon says government officials take over when people who are no longer capable of dealing with their own affairs have failed to arrange a power of attorney. “It would be terrible to rely on state officials.

“These people have no idea of what an incapacitated person would want or expect. The individual becomes a faceless subject of the State. A power of attorney ensures individuals don’t get lost in the shuffle. OMB Solicitors experienced legal team can help everyone plan for the unexpected,” he says.

Do not get lost in the shuffle

This article was featured in Label Magazine, by Simon Bennett

Apr 17
Putting a Price On Pain & Suffering

Putting a Price On Pain & Suffering

By Articles, Insurance

Recent reform to awards for pain and suffering for those who have suffered a workplace injury brings the Workers Compensation & Rehabilitation Act into line with the damages available under the Civil Liability Act for motor vehicle and other accidents, thereby creating a more uniform compensation scheme in Queensland.

Serious injury invariably leads to loss of income and added expenses for the claimant. The cost of medical treatment coupled with an inability to work during rehabilitation is a source of serious financial strain for many Australian families. A successful claim for damages will help offset this loss.

Unless the claimant is a minor, the right to claim will generally expire three years after the accident occurred, or after the claimant became aware their injuries were caused by an accident. Thus, it is vital that claims are initiated in a timely manner.

Personal injury claims only succeed if another person (such as your employer or other vehicle driver) owed a duty to the claimant, and breached that duty through negligent action or inaction. A causative link to the injuries must also be demonstrated.

Negligence by the claimant may reduce or eliminate the compensation. Claimants must avoid obvious risks and take care for their own safety.

Awards for pain and suffering (general damages) are based on medical opinion which determines the severity of the injury suffered and any resultant long term impairment. For injuries sustained from 1 July 2010 onwards, the Workers Compensation & Rehabilitation Regulations Injury Scale Value tables sets out the awards payable.

However, there is more to a personal injuries claim than simply attempting to quantify the pain and loss of enjoyment of life suffered. Additional types of awards may be made to successful claimants:

  • past economic loss (and past superannuation);
  • estimated future economic loss (and future superannuation);
  • past hospital/medical/rehabilitation costs and related out of pocket expenses;
  • predicted future rehabilitative expenses and out-of-pocket expenses; and
  • care provided, in the past and/or future, by family and friends, or employed carers and other service providers.

These awards aim to put the claimant back in the position they would be in had the negligence and resultant injury not occurred. This can return some kind of financial normalcy to the lives of those affected by serious injury.

 

 

Apr 17
Ladies Protect Your Assets

Ladies Protect Your Assets

By Articles, Family Law

Women who have gone through a separation or divorce will be the first to tell you that the process is daunting, expensive, lengthy and exhausting. You work hard, build your wealth, meet “Mr Right” and fall head over heels into a relationship, only to realise some years later that “Mr Right” was not all you expected. Suddenly, the joyride comes to an abrupt stop as your relationship is reduced to paperwork and numbers.

It is a harsh reality when you are told by your solicitor that when it comes to your property matters, it does not matter that he cheated on you, and that it does not necessarily matter that he did not bring the same amount of wealth into the relationship or contribute as much as you did financially… the reality is, he potentially has a claim to your assets, even those you owned prior to your relationship. You can fight it in Court and potentially win, but in most cases; it will cost you more than it’s worth, both financially and emotionally.

So what do you do? At the risk of saying the words that are still considered by many as taboo, you protect your assets, and you get him to sign a Binding Financial Agreement, or what is more commonly referred to as a Pre-nuptial Agreement.

Sure, it’s easier said than done, after all, how do you ask the man you love to sign a document that in short says, “in case we don’t work out, I keep my things, and you can’t touch them”. It implies you do not trust the relationship will work and that you do not trust him… at least that is how a lot of people see it. What you are really saying is, “I have worked hard to build my wealth. If things were to get ugly between us, promise me you won’t try to take away what I have worked so hard on my own to build.”

A Binding Financial Agreement will protect the assets you have accumulated prior to moving in with or marrying your partner. At the same time, it will allow you to decide together, in advance, and whilst you both have each other’s best interests in mind, what you think is fair and what you will do with your property in the event you separate.

You can do this and be proactive, or alternatively, take a reactive approach and try and sort through the mess when both of you are broken hearted and potentially upset at one another. Spend a little now to secure your interests, or spend a lot later in a bitter fight to the end, where potentially, no one wins.

Binding Financial Agreements can be entered into prior to or once a couple are living together; and at any time prior to or during a marriage. If you have separated, and you are concerned about your rights, we can also assist you. Contact our Gold Coast Family Law Solicitor on 07 5555 0000.

This article was featured in Label Magazine, by Simon Bennett

Apr 17
Happily Ever After

Happily Ever After

By Articles, Family Law

The urban myth lives on despite the reality of separation, divorce and bitter wrangles.

An ever increasing number of marriages fail to fulfil the happily ever after expectations most people dream of. Gold Coast lawyer Simon Bennett says it is wise to set romance aside and enter into marriage with a degree of protection.

“Few people would enter a business partnership without an agreement that protects against the unforeseen; the same rules should apply to marriage. It’s not very romantic but it does go someway to avoiding the hassles that can result from a relationship breakdown,” Simon says.

“Approaching a relationship breakdown is difficult when emotions are running high and most people are focused on anger, resentment and revenge. Both parties should take a commonsense approach and settle for a fair, equitable and just resolution. It is easier to do this when there is a cohabitation agreement in place,” he says. When a marriage or relationship breaks down there are a number of areas that must be resolved. These usually include property settlement, financial maintenance and custody of children.

Simon says that during a divorce, property settlement involves the division of matrimonial property, including all assets and liabilities including superannuation. “Division of property or deciding how much time is to be spent with children shouldn’t be about greed or point scoring. Family Law can far too often become the enemy rather than the means of resolving disputes, rectifying relationships and allowing parties to move forward,” he says. “The custody of children can be very complicated. Specific issues may include parental responsibilities such as day to day decision making, the time each parent spends with the child or children and child maintenance. Financial maintenance is generally controlled by the Child Support Agency,” he says.

“Advice should be sought from an experienced divorce solicitor. This ensures both parties are fully aware of their positions. The initial discussion should outline a plan for reasonably resolution. The next step generally involves another meeting with the parties involved and their representatives.

“When issues are resolved, agreements can be entered into. Where children are involved Family Court Consent Orders can be obtained. If agreements can’t be reached further legal advice is recommended,” he says.

This article was featured in Label Magazine, by Simon Bennett

Apr 16
Courts, Cost & Considerations

Courts, Cost & Considerations

By Articles, Ligitation

An experienced solicitor offers viable solutions in the face of legal action.

Leading Gold Coast lawyer Simon Bennett says courts are often described as casinos for the rich. “Most people think only large companies and wealthy individuals can afford the cost of litigation and there is some truth in this,” he says. “When civil and business matters can only be resolved by legal action or it is necessary to defend against proceedings there are ways to minimise costs.

“It is essential to remove emotions from the equation. Litigation is often driven by feelings about justice or rights and wrongs. Legal action should only be taken after all the facts and the likely results are established. Few can afford the expense of proving a point in court.

“It is important to choose a specialist solicitor who is experienced and competent. Very few lawyers have experience in running complex litigation in the superior courts. An inexperienced solicitor may make costly tactical errors. Sound representation comes through experience, knowledge of court procedure, and rules of evidence. Poorly drafted court documents are often challenged or redone – this all adds to the cost.

“People who plan legal action should ask their solicitor detailed questions. This will show whether the solicitor has the necessary qualifications and experience. Superior court actions involve a barrister’s fee. The choice of barrister is crucial.

“Errors in the preparation and presentation of a case are costly and may result in a negative outcome. Ensure money is spent wisely by engaging a solicitor who has intimate knowledge of and a good relationship with the bar, and I don’t mean the local pub,” he says.

Simon says the best way of reducing legal costs is to work with a solicitor to establish a reasonable settlement. “Provide the solicitor with as much information as possible as soon as possible,” he says.

“A settlement that is commercially acceptable in the light of risks and costs is a positive result. If a settlement can’t be reached then at least the solicitor has the full picture and the opportunity to gain the tactical advantage,” he says.

viable solutions in the face of legal action

This article was featured in Label Magazine, by Simon Bennett

Apr 16
Know Where to Stand in Body Corporate Levies Change

Know Where to Stand

By Articles, Body Corporate

Are you ready for your Body Corporate Levies to change again?

The calculation of who pays what levies in a body corporate has been contentious for some time. The major reason for this is that the Legislation has changed a number of times.

It all started in 2003 when the then Labor Queensland Government introduced changes to the Legislation to make it clear that levies should be equal except where it was just and equitable for them not to be equal. This was interpreted by the Court of Appeal in 2004 to mean that everyone should pay the same amount of levies; unless it can be demonstrated that one unit in a body corporate has the effect of increasing the costs of running the body corporate.

An example of this may be where a penthouse apartment has its own lift and the body corporate is responsible for monitoring the lift.

After the Court of Appeal decision the legal system was flooded with bodies corporate responding to applications. The old Commercial and Consumer Tribunal saw the majority of these cases and for a period towards the end of 2009 it appeared that the body corporate section of the Tribunal did nothing else other than consider applications to make the calculation of levies equal.

Obviously, when some unit owners have their levies reduced some must have theirs increased and this caused some concern and ultimately forced the then Labor Government in 2011 to amend the Legislation again to reverse the previous charges. On 14 September 2012 the new LNP Queensland Government introduced a Bill into Parliament that will effectively require that the calculation of levies be equal once again. That Bill has now been sent to the Legal Affairs and Community Safety Committee which is required to report back to Parliament by 22 November 2012.

Given the level of control that the LNP has over the Queensland Parliament it would seem a foregone conclusion that once the Committee reports back to Parliament the Bill will become law sometime towards the end of this year or early 2013.

Gold Coast Lawyers at OMB Solicitors we have an expert Body Corporate Team that has been involved with the calculation of levies right from the start.

If you are currently faced with an Application to amend the way your levies are calculated, or your body corporate has previously had the calculation of its levies adjusted, we would be pleased to meet with you to discuss the effect of the proposed Bill and how we may assist you when it becomes Law.

Apr 16
Body Corporate Feuds

Body Corporate Feuds

By Articles, Body Corporate

Body corporate disputes are nothing new but Juliette Nairn from OMB Solicitors has the ability to steer you through what can be a minefield of litigation.

Are you frustrated by your Body Corporate neighbour’s failing to pay their contributions, leaving you to pick up the difference? The good news is you can take steps to recover your money. The Court of Appeal of Queensland recently made a landmark decision in the area of Body Corporate Law regarding the ability of bodies corporate to recover contributions, penalty interest and all reasonable recovery costs from a lot owner who fails to pay their contributions on time.

The decision was made with respect to a Body Corporate feud which began in 2011 relating to a prestigious unit in Surfers Paradise worth over $1m. The unpaid amount in question was around $5,500 and the owners of the lot claimed they had no capacity to pay their debts, despite owning several other units in Surfers Paradise of similar value. This resulted in the remaining lot owners having to cover the shortfall in contributions to cover the daily expenditure of the body corporate.

When this matter was brought before the Queensland Court of Appeal, Gold Coast Lawyers at OMB Solicitors as legal representatives for the body corporate, successfully argued that if a single lot owner fails to pay their body corporate levies, this places an unfair burden on the other lot owners who have always abided by their responsibilities. As the saying goes, it only takes one bad apple to spoil the barrel.

In the lead up to this matter being brought before the Court of Appeal, over $400,000 in recovery costs were incurred due to the unreasonable pursuit of litigation through five different Courts over a number of years. The Body Corporate for The Wave has been forced to expend these costs as part of the lengthy proceedings, which resulted in each lot owner being forced to make further contributions to the body corporate administration fund. These costs were incurred as a result of the non-contributing lot owners continually pursuing the matter to a higher Court, despite them being unsuccessful at all five levels of the Court proceedings.

This ever-ballooning debt owed to the Body Corporate, and essentially the remaining contributing owners, resulted in the bank repossessing the property in mid-2013. It should be noted that the bank, Westpac, failed to take steps to protect its interest throughout the court proceedings. The Court agreed that ultimately it is the contributing lot owners who are meeting their share of the expenditures and who are disadvantaged by the non-payment of one lot owner. This cannot be, and was not, the intention of the legislation protecting everyday owners within a body corporate. The body corporate’s success in this matter ultimately resulted in a Court order that Westpac pay the body corporate debt including all contributions, interest and recovery costs.

The Court of Appeal is sending a very clear message to lot owners and mortgagees through this judgment to ensure they look carefully at non-payment of body corporate contributions. OMB Solicitors has handled over 2,000 body corporate levy recovery proceedings in the past five years, and the average costs incurred in recovering contributions from defaulting lot owners is less than $5,000. These types of matters also usually resolve with full payment being made to the body corporate within a period of about 3 months. However, this case highlights a rare example of just how expensive and time consuming body corporate matters can become if expert legal advice is not sought in the early stages of such matters to resolve them quickly.

If your body corporate requires expert legal advice on this type of matter, or any other Body Corporate matters, consider contacting the Body Corporate team at OMB Solicitors on 07 5555 0000.

Apr 10
Taxman Pays For Education

Taxman Pays For Education

By Articles, Wills and Estates

Save thousands of dollars on private education with savvy estate planning

You can take advantage of legal tax benefits and save on education costs with a trust. That statement comes from O’Keefe Mahoney Bennett estate planning manager Richard Dawson who says trusts are established in a will and funded by assets of a deceased estate or payments to an estate.

“A Testamentary Discretionary Trust (TDT) is otherwise known a lineal descendants trust,” he says. “The trust is controlled by a trustee. The trustee is usually the primary beneficiary and able to enjoy the benefits of the trust. TDTs often include other beneficiaries. These may be the children and grandchildren of the primary beneficiary because current tax legislation allows the proceeds of a trust to be distributed to beneficiaries.”

The benefit of correct estate planning is that tax savings result when the trustee distributes gains to the beneficiaries with the lowest marginal tax rate in a particular financial year. “These may be the mother, father, child, or grandchild of the deceased which means that the beneficiaries pay tax on trust proceeds at normal marginal tax rates.

“These beneficiaries are usually children as they are unlikely to be earning an income. Therefore significant tax savings can be gained by distributing trust income to children because children aged under 18 years are taxed at marginal adult rates as opposed to adults on high incomes who pay significantly higher tax rates,” Richard says. “Those tax savings from the trust income can therefore be used to subsidise children’s education costs and living expenses. By effective use of estate planning, we can ensure that those savings via the taxman can pay for their education and lifestyle.”

For more information on tax-effective estate planning contact O’Keefe Mahoney Bennett Solicitors 5555 0000 at OMB Solicitors.

Apr 10
Need help in Managing Superannuation? Contact OMB Solicitors today.

Managing Superannuation

By Articles, Superannuation

As world markets continue to melt down and share markets plunge concerns about superannuation fund losses escalate.

Superannuation was designed as a savings plan for workers. The goal was to create an investment fund with capital growth to draw on during retirement.  Many people are disappointed in the performance of superannuation funds.

Gold Coast solicitor at Simon Bennett says Self Managed Super Funds are an alternative to industry managed super funds.

“People can create a self-managed super fund. This means individuals have control over their superannuation investment,” he says “Self-managed super funds can be set up with the help of a financial advisor, a solicitor, and accountant.

Self-management allows individuals to make decisions about their investments. “People can decide when and where to invest their funds within the legislative guidelines.

“Recent legislative changes enable people with self-managed super funds to borrow so they can buy investments when the time it right,” Simon says.

“This may allow people to capture an investment opportunity that is not available to a superannuation fund. “Self-managed funds are not for everyone but all wealth protection options are worth looking into.

“It is essential to discuss the investment options of self managed super with a financial advisor, account and legal advisor. “There are legal limitations relating to the use of funds and the type of investments that are made,” Simon says.

This article was featured in Label Magazine, by Simon Bennett

Apr 10
be the boss

Be The Boss

By Articles, Business Law

Check before you become the boss and sign the cheques.

So you want to be the boss and control your destiny? Owning your own business is not a simple task and with regulation and rules on top of the difficult financial climate you must be sure that all your ducks are in a row.

From a legal aspect you need to ensure that before you enter into a contract to purchase a business that you consult your Gold Coast Business solicitor. Before you even get to a contract there are extremely important issues of structuring that must be considered. Don’t for a moment think you should just be buying in your own name, serious consideration should be had to owning the business in a company, trust or combination of these vehicles. This type of structuring when done correctly will provide asset protection and may also allow your accountant more flexibility when planning your taxation matters.

The contract must be properly drafted to ensure that you are protected as this is the single most important stage of the purchase. A sensible business contract should allow you the opportunity to investigate all aspects of the business before you are committed to buy. You need to make sure the accounts of the business are accurate and you should ensure your accountant verifies the figures. A trial period can be negotiated where you work in the business and get to see not only the workings but also the customers and the income.

It is essential that the premises from which the business operates is secure as often there is a large amount of the goodwill attached to the position of the business. Therefore your solicitor must check the lease and ensure you have security of tenure. All licences and approvals must also be in place to guarantee that you will be able to operate the business. Issues with staff, ownership and transfer of assets, business names, websites and the like form an integral part of the process. Franchises are often part of business purchases these days and it is essential that you are properly advised on these agreements.

Your solicitor will be able to guide you through the process and you will soon learn being The Boss simply means that you have responsibility for not only yourself but the whole business. Simon Bennett is a Partner and Accredited Property Law Specialist with O’Keefe Mahoney Bennett Solicitors.

This article was featured in Label Magazine – Summer, December 2008, by Simon Bennett

Apr 10
Will Kit

Will Kit

By Articles, Wills and Estates

Do-it-yourself Will Kit – What you use before they come to see the lawyers to fix everything up…

Most of us work tirelessly over 30 or 40 years to accumulate our wealth with the intention that we pass that wealth on to the next generation after our death. In the interest of saving a few dollars people often resort to the use of Do-It-Yourself (DIY) Will kits, colloquially known as newsagency Wills. DIY Wills have a myriad of pitfalls for the unsuspecting user.

Respected Gold Coast Estate Planning Lawyer Richard Dawson says to avoid these DIY Wills at all costs. DIY Wills have many “fill in the blanks” sections which, if completed correctly, created a legally binding document. If not, then lawyers are usually engaged in a very expensive exercise of determining what the Will-maker intended before his or her death.

DIY Wills usually cost between $20-$40 and then the Will-maker has to spend time completing the DIY Will with the hope that it reflects accurately their wishes. On the flip side, a simple and straightforward Will prepared by a lawyer can cost but a little more. Knowing you have peace of mind it is a very small price to pay. The Succession Act stipulates very strict requirements regarding the preparation of, signing and administration of Wills. One tiny error could render the Will entirely invalid. If this occurs then the deceased person is said to have died ‘intestate’, that is, without a valid Will.

When a person dies intestate an application must be made to the Supreme Court before a deceased person’s estate can be properly and legally administered. Depending on the circumstances, the person who has the right to apply to the Court may be very different from the person the Will-maker original intended. Richard says that any person contemplating making their Will should always use a qualified, experienced, estate planning lawyer so as to avoid the costly expense and anguish associated with Supreme Court applications.

Newsagencies should be seen only as a place to purchase your newspapers, magazines and lotto tickets, not a one-stop-shop for your legal documents. Having a lawyer prepare your Will is not only sound estate planning advice but highly recommended if you want to protect your family assets. He says the cost of professional legally prepared Wills is insignificant in comparison to the costs of a Supreme Court application.

This article was featured in Label Magazine, by Simon Bennett & Richard Dawson

Apr 10
All in the Family

All in the family

By Articles, Wills and Estates

Let the tax man pay for your children’s and grandchildren’s education.

Ever wondered how you could save tens of thousands of dollars on your children’s or grandchildren’s private education? Well the answer is quite simple, completely legal, and better still the tax man pays it for you!

The tax savings are achieved through a Testamentary Discretionary Trust or TDT. A TDT is a trust set up in a person’s Will and establishes on their death. TDT’s are funded by deceased estate assets, such as real estate, life insurance payouts or superannuation benefits.

A TDT is controlled by the trustee who is usually also the primary beneficiary. That is, the person who controls the trust also enjoys its benefits. TDT’s generally include children and grandchildren of the Will maker as beneficiaries.
TDT’s have a wide range of benefits and are designed to protect a beneficiary’s creditors and predators. A beneficiary’s creditor can include the ATO.

Proceeds of a TDT must be distributed to the nominated beneficiaries such as the Will maker’s children or grandchildren. The relevant tax law applying to TDT’s means children under 18 years are taxed as adults. This is different tax treatment under a
family trust where children taxed at extremely high rates.

The potential tax savings when income from a TDT is distributed to benefit a child or grandchild under 18 is significant. If the child’s parent is a high income earner and pays a high rate of tax, then TDT income paid to children under 18 years is very tax effective.

For example; Fred Smith’s mother died leaving him an inheritance of $1.5M and a TDT was setup in her Will. Fred is a doctor. Heearns $250,000.00 a year and pays the highest marginal rate of tax of 49%*. Fred has 3 children, Peter, Paul and Mary all under the age of 18 years.

The TDT receives income of $75,000 per annum from its investments. Fred, as the TDT trustee, distributes $25,000.00 to each of Peter, Paul and Mary. The first $18,200.00 is tax free. The other $6,800.00 is taxed at 19% or about $1,300.00 per child. Had this $75,000.00 been added to Fred’s $250,000.00 annual income, Fred would have paid $36,750.00 in extra tax. The total tax saving to the Smith family is $32,850.00 per year. Multiplying this tax saving by the average 15 years of private education (including university) potentially saves the Smith family nearly $500,000.00.

The moral of the story is through proper estate planning, setting upa TDT can create a completely legitimate tax-effective way to pay for your children’s and grandchildren’s education and lifestyle instead of seeing your hard earned dollars end up in the tax man’s pocket. To find out more on TDT’s and other estate planning strategies, speak with Richard Dawson, Partner and Estate Planning Manager at O’Keefe Mahoney Bennett Solicitors, phone 07 5555 0000 at OMB Solicitors.

*As at 1/7/2015 including Temporary Budget Repair Levy of 2% andMedicare Levy of 2%. Tax rates are subject to change and may be varied by the Income Tax Assessment Act.

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