Archive for August, 2016

The Family Court and de facto relationships

Over the last decade an increasing number of Australians are living in de facto relationships, while marriage rates have fallen.  Reflecting this societal change, the law was changed in 2009 (2002 in Western Australia) so that the same law now applies to separating de facto couples as applies to separating married couples.  That is, any financial dispute arising from the breakdown of a de facto relationship is decided by the Family Court and the Family Law Act (the Family Court Act in WA), rather than State law and the States’ Courts.

 

What is a de facto relationship?

The basic test is whether the parties, of the same or opposite sex, lived together as a couple on a genuine domestic basis.  In applying that test, the Court will consider factors including:

  • the length of the relationship
  • how and for how long they lived together
  • any sexual relationship
  • the financial arrangements, particularly whether the parties intermingled their finances or if one person financially supported the other
  • any joint purchase of property
  • whether there were children of the relationship and how they were cared for
  • the public reputation of the relationship and the degree of the parties’ commitment to a shared life
  • any registration of the relationship.

If a party wishes to apply to the Court for property settlement following a de facto relationship breakdown, one or more of the following criteria must also be met:

  • the parties lived together for a total of at least two years
  • there were children of the relationship
  • the applicant made substantial contributions to the other party’s property.

A de facto relationship can exist even if one or both parties were, at that time, in a relationship or living with or married to someone else.  Indeed, a mistress may satisfy the definition of having been in a de facto relationship with her married partner.

 

Registering a de facto relationship

Just as the State governments maintain a register of births, deaths and marriages, they also maintain a register of de facto relationships.  While it is compulsory to register a birth, death or marriage, de facto relationship registration is voluntary.  The registration regimes differ from one State to another, however they are similar.  Registration requires both partners to complete an application form, provide identification documents, sign a Statutory Declaration stating that they are in a relationship with the other person and pay the relevant fee.

Registration should limit or avoid disputes as to whether there was a de facto relationship should that relationship end.

If the relationship does break down, there is a relatively straightforward process by which to revoke registration of the relationship.

 

De facto property settlement

The laws that now determine a property settlement between a separating de facto couple are the same laws as apply to a separating married couple.

In general terms, if the Court determines that there should be a property division between the parties, the first step is to work out what is in the pool of net assets to be divided.  That pool includes all the assets and liabilities in each person’s name and in the parties’ joint names, as well as each person’s share of an asset owned jointly with another person.

Next, the Court must consider what contributions each partner made and consider their respective future needs, in order to work out the percentages of the net assets they will each receive.  Contributions include financial contributions – i.e. who earnt what, who brought what lump sums into the relationship, who bought and paid for what – and non-financial contributions – such as being a homemaker and parent, physically renovating a home or landscaping a garden, managing the parties’ financial affairs, etc.  Future needs are things like income, earning capacity, financial resources, ongoing care of children, age, health, etc.

 

De facto spouse maintenance

Following the breakdown of a de facto relationship, as is the case following the end of a marriage, one party may be entitled to “spouse” maintenance from the other party, although usually only for a limited period of time.  Such maintenance will only be ordered if:

  • the applicant cannot support her or himself because of childcare responsibilities or if she or he cannot work due to health, age or other incapacity, and
  • the other party has the capacity to pay such maintenance once he or she has met his or her financial obligations to any children and his or her own reasonable living expenses.

 

Conclusion

De facto relationships are an increasingly common part of modern life in Australia.

There are a range of factors of which the Court must be satisfied to find that someone was in a de facto relationship, although it is possible to register your de facto relationship to reduce any uncertainty.  When such relationships end, the same law regarding property settlement and spouse maintenance applies as applies to separating married couples.  Arrangements for children are also decided in the same way, regardless of whether their parents were married, in a de facto relationship or not even living together.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.

Traps to Avoid when buying a Property – pre contract inspections

Traps to Avoid when buying a Property – pre contract inspections

 

Buying a home is the biggest investment or financial outlay that most of us will make in a lifetime. It is critical to your financial future that you make well-informed decisions when you purchase a property, whether it be for your own home or an investment.

The Contract for Sale of Land basically follows the common law of “caveat emptor”– let the buyer beware. This means that the purchaser must make their own enquiries and investigate the quality of the improvements on the property before they enter into a contract to buy that property.

A vendor or seller of the property is not allowed to deliberately hide defects or deceive the buyer by fraud but the purchaser should undertake searches and inspections of the property to discover any defects in the property. Failure to do this may result in the buyer losing their deposit and being sued by the seller for breach of contract, or the buyer can end up with a property that needs expensive repairs.

 

Pre-contract inspections

There are various inspections that a purchaser should get done prior to entering into a contract to buy a property. The number of inspections and searches depend on the location and type of property you are purchasing, the inspections may be different for a residential house in town, a strata unit, vacant land, rural property or industrial property.

In this article we shall look at pre-contract inspections for a standard residential house.

 

Timber Pest Inspection

In locations which are susceptible to pest infestation a qualified and insured pest inspector will conduct a visual inspection of the property to discover if there is any termite or other pest activity at present or in the past.

More detailed inspection such as thermal imaging or photographs of the walls and bathrooms to highlight any damp areas that should not be present may also be conducted if required. The inspector will also conduct a moisture meter reading of the bathrooms and other wet areas as termites are attracted by damp timber. They will also examine the property for any wood decay, borers or rot that will affect the structure of the home.

Termite damage undiscovered can not only increase but can cost many thousands of dollars to repair. Sometimes if the damage is really bad that part of the house might have to be demolished and rebuilt wreaking damage on your investment.

 

Building Inspections

A qualified and insured building inspector should be commissioned to inspect the property including the house, any garage or other buildings located on the property.

The Inspector will investigate the interior and exterior of the buildings including the most costly items to repair being the roof, kitchen and bathroom/s, looking for any defects that are not usual “wear and tear”.

In an existing home there are usually small defects which accumulate over time due to use and are readily visible but it is the not so visible defects that are costly like a leaking roof that can cost tens of thousands of dollars to repair.

If the inspection reports show issues of concern, other specialist tradesmen may be required to check specific areas or issues.

 

Plumbing and Electrical

A licensed plumber may be required to inspect drainage issues.

If the property has a septic waste system that is not connected to the town sewerage supply, a plumber’s report should be obtained as a new septic system can cost $10,000+ to install plus excavation works in trenching a faulty system.

If there is any indication that electrical wiring may be faulty or the house is very old, an electrician may be requested to evaluate the property.

 

Pools and spas

If the property includes a pool or a spa then the pump and any ancillary equipment as well as the pool or spa itself should be investigated to ensure good working order.

 

Council records

It may be necessary to make application to the local Council for a copy of the building records for the property which will include any development applications (DA), building site records and floor plans.

The DA for the original dwelling house and other buildings should be carefully matched to the existing structure to make sure that the plans approved by council have been complied with. If an owner builds structures on a property that require council approval and the owner builds without an approved DA, the council can lodge a demolition order against the property or require it to be approved as “continuing use” after payment of hefty fees to council.

Structures such as decks, large sheds, pools and pergolas can also fall into this category.

Building Certificate

If there are unapproved structures on the property you should consider obtaining a building certificate to ensure that council will not look to you after the sale to demolish, rectify or obtain approvals.

 

Survey

A survey shows the dimensions and boundaries of the property. It will also identify any encroachments by structures erected on the land.

In areas inhabited for a long time the fences are often not right on the boundary or there may actually be part of a building encroaching on your land. In more extreme cases, a driveway which appears to be on the property you are buying may actually be on the next door neighbour’s property which would mean you may end up with no access to your new home.

 

Strata

If you are purchasing a strata property then a full examination of the strata management records should be undertaken by an experienced person. The strata records will show not only the financial details of the administrative and sinking funds but will also show plumbing, drainage, fencing, driveway and other problems that may exist or which have been repaired in the past. Any proposal for additional works or levies should be identified via a strata inspection.

 

A penny saved is a penny earned

Your lawyer can advise you of the pre-contract inspections which should be carried out for each property. Not doing pre-contract inspections before you buy a property is not only risky but it is also false economy. Considering that the cost of a building and pest inspection for an average house costs about $500-$650 the outlay represents about 0.15% of the purchase price of an average home!

The traps when buying a property are easily avoidable and the risk far outweighs the cost of proper and diligent investigation before you buy.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.

Choosing a Business Structure

Choosing a Business Structure

 

There are 4 main types of business structures for doing business in Australia, each with their own advantages and disadvantages. A person can carry on business as a sole trader, partnership, trust and company.

The choice of business structure is an important decision to make at the start of a business venture, as the structure can impact on tax implications and reporting requirements during the lifetime of the business. When setting up a business structure, consideration should be given to factors such as how many people will be involved in the business, what the business will do, how much income is likely to be earned from the business and the intended growth of the business.

 

Sole Trader

A person can carry on a business on his or her own behalf, as a sole trader. A sole trader can trade under his or her own name or a registered business name. The income earned as a sole trader is taxed at the same rate as individual tax payers.

This is the simplest form of business structure, with lower establishment costs and with minimal legal and compliance requirements. The main disadvantage to this type of business structure is that a sole trader is personally liable for all obligations incurred in the course of the business.

 

Partnership

Two or more individuals can carry on business in partnership, where the income from the business is received jointly. Partnerships are relatively inexpensive to form and operate. Most partnerships are established by a partnership agreement which sets out the rights and obligations of the partners. A partnership itself is not taxable, rather each partner pays tax on their share of the net income of the partnership.

The downside to this type of business structure is that partners are severally and jointly liable for the obligations of the partnership. There is also potential for dispute and loss of trust between the partners.

 

Trust

Under a trust, a trustee owns the property or assets of the trust and carries on the business on behalf of the beneficiaries of the trust. A trustee can be an individual or a company. A formal Deed is required to set up a trust and there are annual tasks for a trustee to undertake. As such, it can be expensive and complicated to set up and administer a trust.

The advantages of a trust are that there is flexibility in income distribution and income can be streamed to low income tax beneficiaries to take advantage of their lower marginal tax rate. Furthermore, assets can be protected through a properly drafted Deed. The disadvantages are that trusts can be costly to set up and there are more compliance and legal requirements.

 

Company

A company is a separate legal entity capable of holding assets in its own name. The words “Pty Ltd” after a business name show that the business is a registered legal entity trading in its own right. A company is owned by shareholders and directors manage the company’s day to day business and affairs. The shareholders of a company receive any company profits in the form of dividends. Shareholders can limit their personal liability and are not generally liable for the company debts. Instead, the financial liability of the company is limited to the company assets.

Companies are governed by the Corporations Law and there are a number of duties and obligations for company directors. Primarily, directors have an obligation to act in the best interests of the company. Establishment of a company and ongoing administrative and compliance costs associated with the Corporations Law can be high. There is also a requirement to publicly disclose key information.

 

Conclusion

Each business will vary and no business owners’ circumstances will be the same. It is advisable to talk to an accountant or solicitor about the costs and risks of each business structure to make sure that the business structure used is the right one for the business and its needs going forward.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.