Nothing is more certain than death and taxes

Nothing is more certain than death and taxes

  A very Happy New Year to everyone and I hope 2016 is amazing for you and your family. I start this year wrestling with the issue of taxation on deceased estates. It is very often overlooked by the key beneficiaries of an estate as they are always keen to get their hands on the cash. The problem is, before the Executor can make a payment, they must assess exactly what tax is payable, otherwise they will find themselves personally liable for the assessment by the ATO and no funds with which to pay the bill. With rising balances held in self managed super funds it is more than likely that there will be a death benefit payable from that as the source of funds. Before making payments the trustee must calculate the tax payable to the person based on their status as a “tax dependant” or not. A spouse will be able to receive a super fund payment without tax but a non-dependant adult child may not, subject to age, living at home status and study. It is very important a Will maker take into account the different tax consequences for different individuals when making an allocation between family members in terms of the overall estate assets, including family trusts and super. This gets even trickier when you have second or third marriage status and children of prior relationships. How do you ensure they get their share but allow the source of income to continue for the spouse? Control of a self managed super fund is critical and often the surviving spouse will want to maintain the assets...
Illegal Movie Downloads – Is it you?

Illegal Movie Downloads – Is it you?

All of us at some point know someone that has told us about illegally downloading a movie via an internet site. It seems unfair for those of us who pay full price through iTunes but most of us just figure that the younger generation are smarter than us. A new Federal Court case sheds some light on the rights of the movie makers as owners of the copyright and those pesky downloaders. What happens when they get caught and how do they get caught? It seems from the evidence in the Dallas Buyers Club Movie (DBC) and a group of Internet Service Providers (ISP), including IINet, Internode and Dodo, that the fight continues. On 14 August the Federal Court gave an indication of the compensation copyright owners can expect to claim in future copyright breach matters and how the illegal downloaders might expect to receive a bill. What happened here was a digital investigator found 4,726 IP Addresses from which the DBC movie was illegally downloaded and shared on “Bit Torrent”. The owner sought a Court Order requiring the relevant ISP to provide details of the owners of the IP Addresses. To get an Order like this they had to demonstrate a right to obtain relief against potential Defendants, namely the ISP account holders. The judge ordered the ISP to provide this information but DBC had to provide the letter of demand to the account holders. The concern here was an unreasonable demand for the level of damages suffered from the copyright infringement. In terms of the amount of money the owner of the copyright intended to claim, the...

Is my email a binding Contract?

It is a surprise to many of our clients that the exchange of emails can constitute a binding Contract. The courts are frequently holding people to these Contracts and it is a topic that requires some careful consideration in times where email is the dominant method of communication. Stodgy old paper Agreements with a lengthy witnessing clause might get left on the desk when parties are talking. However, if there is sufficient dialogue and certainty of terms by email, that may be enough to create a legally binding agreement. When parties are negotiating it is a real danger time and there are some rules that should be followed during those exchanges. Although the Courts are often perceived as being backwards in regards to technology, they have in fact responded to this shift in communication by accepting email as a means of creating binding agreements. Not all business managers have caught up with this trend and are regularly placing their company at risk.  It is a mistake to believe that what is said or agreed over email is not binding, and that a legally binding contract is only made when a formal written document is signed. Take a look at some recent cases with us and let us know if you have a similar issue in your business. EMAIL NEGOTIATIONS – BINDING OR NOT? If you have started to negotiate by email but don’t want your emails to be a binding contract, then you must clearly state in your emails that “no binding agreement is formed unless and until a formal contract has been executed”. If you don’t expressly state...

Electronic Signatures – Binding or Not- Part 2

Last week we talked about different methods of electronic signatures and why the process is important for binding agreements. This time we round off the discussion about how best to achieve the signing by law What are the obvious legal risks? There is a risk that the identity of the person using the private key is not accurate, or at least may be subject to a legal challenge. This would be similar to a situation where a handwritten signature is required and a person fraudulently signs the contract. There is no practical way to verify the person’s identity with one hundred percent certainty using digital signature tools. Arguably the biggest failing with digital signatures and public-key cryptography generally, is that they are dependent on the private key being kept secret. If the private key is exposed, it is open for someone to dispute that they were indeed the person who “digitally signed” a document. If a targeted cyber-attack or data breach exposed a private key, then it would have a cascading effect on the enforceability of digitally signed documents which depend upon that key. Accordingly, some may argue that this is also true for more traditional methods of signing, although there is certainly still a commonly held belief that wet ink signing trumps digital signatures in security – this is largely due to the fact that a wet ink signing can be witnessed and verified by another person also signing by a wet ink signing. To help reduce this risk, there have been a number of additional verification and authentication techniques made available to users. Most digital signature software...

Electronic Signatures – Binding or not? Part 1

It is a strange thing to find yourself increasingly challenged by the pace of change, and none greater than the impact of technology. People live in a very different way, than say 20 years ago, when I started this business, and the way we communicate with each other is fundamentally altered. We are under real pressure to respond faster, process more efficiently and create a platform of client interaction that meets the “what’s in it for me” requirement. We live in a smaller global community, events and the means to communicate have become easily accessible and barriers of distance and time zones have been removed. The way we conduct business transactions is also affected and the bridging of the international barrier has meant much of the mindset has fallen away. People see no issue with downloading agreements from different jurisdictions and using templates for negotiations in many different circumstances. This is regardless of the legal technicalities concerning enforcement if the deal goes bad and great caution should be exercised. Consider the types of transactions affected, the purchase of foreign goods or services on-line, a merger or takeover by a foreign company, property investments by non-Australian residents, contracts for Information Technology and multi-jurisdiction commodity agreements.  These are all regularly negotiated and confirmed using electronic documents and communications. It is all very well to have documents downloaded, but how do parties effectively sign them? Are electronic signatures in fact legally binding, and can they be used as evidence in court? The law of contracts formed through electronic means is a tricky area, so consider the following legal issues about electronic signatures....

Employee Share Schemes (ESS)

  It has been a little while since I have had an opportunity to blog about interesting things I encounter when helping clients. The year goes quickly and despite the arctic vortex freezing us there is some heat in business activity right now. It seems that there is a bit of political football going on with major policy decisions but there is one small glimmer of hope for those business owners wanting to give further incentive to key employees. Take a look at the recent amendments to the Income Tax Assessment Act 1997 which will mean that many small companies can offer tax effective incentives to employees under an employee share scheme (ESS). What are the new rules? The new rules operate from 1 July 2015, for companies that are: Not listed; Comprising turnover below $50 million per annum; and Incorporated for less than 10 years. This will appeal to many of our small to medium business clients. If  shares in the company are issued to a key employee, it is not counted in the employee’s assessable income on one big condition.The discount on the price of shares cannot be any more than 15% of the market value of the shares in the company. This would require an accountant to do a valuation of the shares as at the date of issue. Options to acquire shares at a later time, require different rules. If the exercise price of the option is equal to or more than the market value of the shares at the time that the options are granted, it is not assessable to the employee. This is great news...