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The Federal Government has recently announced that it will be providing a targeted Capital Gains Tax (CGT) exemption for granny flat arrangements, which is expected to commence as early as 1 July 2021, (subject to the passing of legislation to put the exemption into effect). Importantly, one of the key elements approved by the Federal Government is that, in order to qualify for the exemption, the granny flat arrangements are required to be documented by way of a formal written agreement. A granny flat arrangement is usually an informal family arrangement which provides for a parent or other relative to reside at the residence of another family member, either by way of occupying a discrete part of a residence or a purpose-built accommodation. In some cases, the accommodation might be as part of a shared living arrangement (such as occupying a room). Currently, in most cases these family arrangements are not documented by way of a formal agreement. CGT implications arise where there are new buildings, extensions or other improvements which increase the value of the property. Granny flat arrangements are also significant in respect of social security entitlements as the Federal Government has, through Services Australia (Centrelink), made a number of concessions in respect of the impact that creating a granny flat interest might have on a person’s social security entitlements. As the entitlement to and amount of social security entitlements is subject to means-testing, there are limitations on the value of assets which can be disposed of (the term used by Services Australia being deprived assets) without impacting on those entitlements. Whilst Centrelink recommend that the arrangements be recorded by way of a formal written agreement, it is not presently a mandatory requirement. The announcement by the Federal Government may materially change this situation, given the requirements for these arrangements to be recorded by way of a formal written agreement. Capital Gains Tax implications arise where the granny flat improvements add to the value of a residential property. Whist a person’s main residence is CGT–exempt, a granny flat which is separate to the main residence is not treated as part of the main residence for CGT purposes. If the granny flat is fully or partially paid for directly or indirectly by the recipient of the accommodation, then CGT implications might be triggered when the residence is sold. As to how the Australian Taxation Office (ATO) will ascertain whether there is a granny flat arrangement in existence or whether its value adds to a property is a matter which the ATO will need to address. However, it can be expected that there will be an obligation on an owner to self-report, and that there may be some information passing between government departments which might identify such an arrangement (for example, Centrelink having a record of an arrangement at a property involving certain individuals – particularly if provision of a copy of a formal written agreement to Centrelink becomes a part of their reporting requirements). Recording the granny flat arrangements in writing by way of a formal agreement also assists the parties to that agreement to give consideration to a number of matters which might not otherwise be addressed at the time that the arrangements are being put into place. By virtue of the fact that these arrangements are made between family members, there may be some sensitivity around discussing these matters. However, if a formal written agreement is required by the ATO and also Centrelink, then the requirement simply must be met. CONSIDERATIONS Matters to be considered by both parties when documenting a granny flat arrangement include the following: Each of the parties should receive legal and financial advice; What impact the arrangements will have on any social security entitlements; If property is provided as part of the arrangement, what the arrangements are in respect of: the resulting ownership of the property; the costs associated with the transfer of the property; and the costs of modifications to or refurbishment of the property. If funds are provided towards the provision of the accommodation, how the funds provided or to be provided by the recipient of the accommodation are to be categorised. For example, are the funds to be: gift; a loan repayable in full or in part if the accommodation is no longer used; regular payments towards accommodation (i.e. board). What support will be provided to the recipient of the accommodation; Will the family member providing the support be seeking or be entitled to seek a carer’s pension; What are the recipient’s anticipated healthcare needs and what happens if the recipient needs to be moved to a hospital or care facility for a prolonged period of time or indefinitely. For example, will funds be reimbursed to assist with ongoing care? Who is responsible for the maintenance and outgoings of the accommodation; How is this arrangement going to be dealt with in the recipient’s Will and also the Will/s of the family member/s providing the accommodation; If the arrangement involves a capital contribution or a loan, whether the interest of the recipient should be protected by way of security (such as a non-lapsing caveat); What happens if the owner needs to sell the property or his/her family circumstances drastically change (for example if there is a divorce or financial difficulties); Whether the recipient of the accommodation can share that accommodation with another person (such as a new partner, where this relationship is entered into after the granny flat arrangements are put into place). A more precise analysis of the requirements and implications can be given once the relevant legislation and any guidelines are put in place by the Federal Government. In the case of existing granny flat arrangements, it is anticipated that these arrangements will also need to be documented in order to meet the requirements of the proposed CGT exemption. This is because current arrangements are not exempt and it is likely they would also need to meet all relevant requirements in order to qualify for the exemption. Accordingly, persons involved in current granny flat arrangements should turn their minds to documenting the arrangements once the position is clearer. The following links contain recent media releases: https://www.afr.com/politics/federal/granny-flats-to-get-cgt-exemptions-20201005-p56203 https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/removing-capital-gains-tax-granny-flats Updates will be provided as these matters are advanced by the Federal Government. Written by Dale Treanor, Consultant Solicitor, Commercial Law Division
Introduction In R v Jones [2011] QCA 19, the appellant had been convicted in the District Court at Mount Isa of sexual assault. He appealed to the Court of Appeal. On appeal, he argued that there had been a miscarriage of justice because the trial judge had directed the jury that his intention or motive was irrelevant when it came to determining whether an assault was indecent. The first innocent event The appellant was a paramedic. He attended the home of the complainant who had chest pains. The appellant carried out an electrocardiogram by attaching electrodes near the complainant’s collar bones and on her ribs. The reading from the electrocardiogram was such that the appellant decided the complainant should be admitted to hospital. On this first occasion, the complainant said she was quite comfortable with the appellant’s conduct. The second suspicious event Two days later the appellant attended the complainant’s house again wearing his paramedic uniform. He told the complainant that she needed to have another electrocardiogram done. The complainant’s evidence was that the appellant had told her that a doctor had asked him to come back to do another electrocardiogram. On that basis, the complainant let the appellant do it. The appellant knelt in front of the complainant. He put two electrodes over her breast tissue. He then lifted up her shirt and placed two electrodes directly under her breasts. He then carried out the electrocardiogram. The complainant’s partner then arrived home. The appellant told the complainant the test was “fine” and then he packed up quickly and departed. The equivocal evidence regarding the intention or motive of the appellant The following evidence came out in the course of the appellant’s trial: Two days after the appellant’s second visit to the complainant’s home, the appellant showed his boss the electrocardiogram readings, and he described them as “unusual” and demonstrated some intrigue in relation to the readings. Generally speaking, it was unusual for a paramedic to follow up on treatment with patients. It was not hospital policy to request paramedics perform follow ups with patients. The placement of the electrodes on the appellant’s second visit was not legitimate. The appellant was the type of paramedic who was very caring and concerned about his patients, and who continually sought further information and self-education. What happened in the District Court at trial At trial, the District Court Judge persistently told the jury that the motive of the appellant in doing what he did was not relevant in relation to whether or not it was indecent. The Judge emphasised that the test of indecency was objective and did not depend on whether the appellant did it to obtain sexual gratification. His Honour said the fact that the appellant might not have thought his conduct was indecent at the time did not assist him because the test was objective. What happened in the Court of Appeal on appeal The Court of Appeal did not concur. It was said: … where there is evidence capable of casting doubt upon the sexual quality of the alleged assault, the motive of the alleged offender must go to the jury for their deliberation and decision. That did not occur here and the appellant has lost a real chance of acquittal. The error meant that the appellant’s conviction was set aside, and a re-trial was ordered. Conclusion Often indecent assaults are unequivocally sexual in nature, but sometimes circumstances will make an alleged indecent assault equivocal in the sense that it might have a sexual connotation or it might not. When it comes to assaults of the latter kind, it is important that the intention of the defendant is properly put before and considered by a jury. Written by Michael Finch, Senior Associate, Criminal Law Division michael@oreillystevens.com
National Cabinet Mandatory Code of Conduct: Commercial Leasing Principles During COVID-19 [1] The Code is a set of overarching principles to guide arrangements and negotiations between landlords and tenants. The Code will be enacted and regulated via state and territory legislative instruments. [2] The Code will last while the COVID-19 Commonwealth Government’s JobKeeper programme remains operational. The Code provides that: It applies to a tenant that is an eligible business for the JobKeeper program (i.e. the tenant has an annual turnover of less than $50 million and a 30% or greater loss in revenue). Notwithstanding this, the principles of the Code should apply in spirit to all leasing arrangements for affected businesses during the COVID-19 pandemic. Its objective is to share the financial risk and cash flow management proportionately between tenants and landlords during the pandemic, and arrangements should be appropriate for a subsequent reasonable recovery period. If the parties genuinely cannot agree on leasing arrangements, the matter should be referred to applicable dispute resolution processes. The overarching principles of the Code include: The parties should act in a transparent manner and provide each other with sufficient information to achieve outcomes consistent with the Code. Arrangements agreed under the Code will take into account the impact of COVID-19 on tenants, with specific regard to tenants’ revenue, expenses and profitability. The parties will assist each other in their respective dealings with stakeholders (i.e. banks). Landlords should agree to a tailored approach for tenants on a case-by-case basis. The leasing principles of the Code include: During the COVID-19 period and the recovery period: a. landlords must not terminate leases due to non-payment of rent; b. landlords must not draw upon financial security and guarantees in leases for non-payment of rent; c. landlords agree to a freeze rent increases (except for retail leases based on turnover rent). In relation to rent reductions and repayments: a. landlords must reduce up to 100% of tenants’ rent in the form of waivers and deferrals proportionate to the reduction in the relevant tenants’ trade during the COVID-19 period and the recovery period. Waivers and deferrals can be interpreted to include other agreed variations to existing leases (such as pausing and/or hibernating leases) or other commercial outcomes. Landlords may not recoup a reduction provided by waiver during the term of the lease. Proportionate means rent relief proportionate to reduction in trade as a result of COVID-19 plus the recovery period, consistent with assessments undertaken for eligibility for the JobKeeper program; b. rent waived must form at least 50% of rent reductions and should constitute a greater proportion in cases where failure to do so would compromise tenants’ capacity to fulfil ongoing obligations under leases. Regard must be had to landlords’ financial ability to provide such additional waivers. Tenants can waive the requirement for a 50% minimum waiver by agreement; c. payment of rent deferrals by tenants must be amortised over the balance of the lease term and for no less than twenty-four months, whichever is greater, unless otherwise agreed; d. landlords should allow tenants to extend leases for periods equivalent to the relevant waiver and/or deferral periods in order to provide tenants with additional time to trade on existing lease terms during the recovery period; e. where arrangements negotiated under the Code necessitate repayments, no repayment should commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government) or the relevant existing lease expiring, and taking into account the recovery period. tenants must continue to comply with their lease obligations, subject to any rental agreement negotiated under the Code; and tenants’ material failure to abide by any substantive terms of leases will result in forfeiture of the protections under the Code; landlords must pass on to tenants, proportionately, any reduction received in statutory charges (i.e. land tax and council rates); where appropriate, landlords should waive recovery of any other tenant expenses and outgoings during periods that tenants are not able to trade; no interest, fees and charges should be applied by landlords on deferrals and waivers; landlords may not apply any prohibition and levy penalties if tenants reduce opening hours or cease to trade due to COVID-19. Parties should negotiate in good faith on the basis of the Code and legislative instruments, bearing in mind that it appears the legislative instruments will apply to leases from 30 March 2020, in line with the commencement of the JobKeeper programme, as seen in the South Australian Act. Some examples of proportionality extracted from the Code: A 60% loss in turnover would result in a guaranteed 60% cash flow relief. At a minimum, half is provided as rent free/rent waiver for the proportion of which the qualifying tenant’s revenue has fallen. Up to half could be through a deferral of rent, with this to be recouped over at least twenty-four months in a manner that is negotiated by the parties. So if the tenant’s revenue has fallen by 100%, then at least 50% of total cash flow relief is rent free/rent waiver and the remainder is a rent deferral. If the qualifying tenant’s revenue has fallen by 30%, then at least 15% of total cash flow relief is rent free/rent waiver and the remainder is rent deferral. Care should be taken to ensure that any repayment of the deferred rent does not compromise the ability of the affected tenant to recover from the crisis. Please Note: This is general information distilled from the Code referred to herein and does not constitute legal advice, and it should not be relied upon in lieu of legal advice. Written by Kim Cousins, Associate, Commercial Law Division