Archive for the ‘Newsletters’ Category

The difference – Employee vs. Independent Contractor

There are a number of factors which may contribute to determining the difference between an employee and an independent contractor. However, no single indicator can determine if a person is a contractor or an employee. Sometimes contracts are drafted with the parties genuinely thinking they are contractors or employees when in fact they are not.

However, where one or more parties intentionally try to deceive, severe penalties apply to those who misrepresent the employment relationship and this is captured in the sham contracting provisions.

Generally someone who is hired for a specific service or purpose and paid for this specific service or purpose will be deemed to be a contractor rather than an employee. An agreement will exist between the principal and the contractor. Importantly, this agreement will not be subject to the same legislation and implied terms as those within an employment contract.

When there is an agreement for work to be completed in exchange for payment, an employment contract will usually exist between an employer and employee.

There are some common indicators that may contribute to determining whether a person is an employee or independent contractor and should be used as a quick check list:

An employee:

  • Is paid for the time that they work
  • Receives paid leave
  • Is not responsible for providing materials/equipment required to do their job
  • Must perform specific duties required of their position
  • Agrees to provide their personal services
  • Works hours set by an agreement or the appropriate award
  • Is recognised as part of their employers business
  • Takes no commercial risks, and cannot make a profit or loss from the work that they perform

A contractor, on the other hand:

  • Is paid for their individual job and the result achieved
  • Generally provides most materials/equipment required to do their job
  • Can delegate work to other entities as it sees fit
  • Has control in the way the work is done
  • Provides services to the general public and to other businesses
  • Can accept and refuse work
  • Takes commercial risks, and is in a position to make a profit or loss

Why is the distinction important?

This distinction between employee and contractor is crucial as it determines just what rights and obligations will be owing to that employee or contractor. An employee’s contract must comply with certain standards including the maximum hours of work per week, leave entitlements, public holidays and notice of termination. In addition they will also be regulated through appropriate awards, any enterprise agreements that may relate to their industry and implied contractual obligations.

Consider the difference when drafting Employment Contracts

An employer must initially determine which relationship (employee or contractor) is most appropriate. Consideration can be given by the employer assessing the type of work to be done, establishing the level of control one will have over the work and then correctly labelling the relationship for what it is.

Penalties can also be imposed as set out below not only from Fair Work inspectors but also for unpaid superannuation.

Sham contracting arrangements

A sham contracting arrangement occurs where an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is usually done for the purposes of avoiding responsibility for employee entitlements such as superannuation, annual leave and workers compensation for example.

Under the sham contracting provisions of the Fair Work Act 2009, an employer cannot:

  • Misrepresent an employment relationship or a proposed employment arrangement as an independent contracting arrangement;
  • Dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor;
  • Make a knowingly false statement to persuade or influence an employee to become an independent contractor.

Under the Fair Work Act 2009 serious penalties apply to employers who contravene these provisions. Fair Work Inspectors can seek the imposition of penalties for contraventions of sham contracting arrangements and reform opt-in provisions. The courts may impose monetary penalties.

What should businesses do?

If you are an employer and don’t get it right there are practical and expensive consequences. Not only are there penalties under the Fair Work Act for misrepresenting the employment relationship as independent contracting, but employers could also be ordered to make back payment of wages set by awards or enterprise bargaining agreements.

So, if there is no simple answer about the difference between an employee and contractor, what should companies do?

First, don’t think that the terminology in a contract will determine the issue, because the courts won’t. A contract which clearly sets out respective rights and duties between the parties will, however, be an important part of the factual matrix which a court will use to make its decision.

Secondly, you might be running on the assumption that your service providers are contractors. If those individuals do not run their own business, then they are not contractors. Considering the costs of getting this wrong, or proving otherwise, it is worth reviewing these relationships and being sure that you are not inadvertently treating an employee as a contractor.

If you need more information or if you need assistance or advice on how to proceed please call us on 07 3281 6644 or email mail@powerlegal.com.au.

Understanding easements in your property contract

Identifying and understanding easements in a property transaction is an important part of the conveyancing process.

Vendors are required to disclose all easements affecting the land they propose to sell in a property contract, and buyers should ensure they are aware of the impact an easement will have on the land they are about the purchase.

Your property lawyer will identify any easements affecting your proposed purchase and explain their effect on the use of the land.

What is an easement?

An easement is an interest attached to a parcel of land that gives another landowner or a statutory authority a right to use a part of that land for a specified purpose.

The easement is registered on the title of the property and affects a defined area of the land. The easement is generally shown on the plan of the land with a brief description noted or more fully described in a further document (instrument).

Examples of easements include:

  • a right of carriageway (right of way) allowing the owner of landlocked property to access their land by travelling over a portion of neighbouring land – example; a shared driveway used for a battle-axe block;
  • a cross-easement which provides neighbouring properties reciprocal rights to use each other’s property in the same manner – example; for mutual support of a structure such as a party wall between terrace houses;
  • an easement for services such as electricity, water or sewerage – the easement may be over or under the property, and may run parallel at the rear or side of a property – example; sewer pipes laid underneath the land by the local water authority or an overhead electricity transmission line.

Easements are recorded on the title deed to a property, noted on the registered plan and incidental instruments, and / or shown on sewerage diagrams.

Legal terminology

When discussing easements, you may hear the terms ‘private and public – dominant and servient – positive and negative’. These terms generally refer to how the easement is created and who benefits from the easement.

A private easement is an easement created between landowners. When such an easement is created one parcel of land will benefit from the easement (the dominant tenement) and the other parcel of land will be burdened by the easement (the servient tenement).

A positive easement provides a landowner with a benefit, such as the right of way described above that allows the landowner to cross over another’s property to access his or her own. That same easement is considered a negative easement by the neighbouring landowner, as allowing the access impacts upon that landowner’s unrestricted use of the land.

A public easement is one created by a statutory authority over one or more parcels of land such as the easement for water services described above. This is also an example of a negative easement as the easement will restrict building over that part of the land (see below).

The effect of an easement

An easement provides certain rights and restrictions and owners of land with registered easements should understand their legal implications.

A party who is lawfully authorised to benefit from an easement, such as the neighbour with a right to use your driveway to access his or her property, and who uses the easement in the prescribed manner, will not be liable for trespass. As the owner of the servient tenement you must not interfere with or restrict these rights.

If an authority has an easement registered over your land, such as an easement for electricity or sewerage services, then the authority will have the right to access your property and to carry out repairs and maintenance on the easement.

An easement will also impact on your building and development plans. Owners are generally prohibited from building over or too close to an easement or must obtain approval from the authority who owns the easement to do so. If a structure is built over an easement without permission or where permission is denied, then the owner will be legally required to remove the structure.

Extinguishing or terminating an easement

In some circumstances, an easement may become redundant or may no longer be required. In such cases, it may be practical and advantageous for an owner to have a registered easement removed from the property’s title. Removal of a negative easement may increase the value and / or appeal of your property.

There are several ways that an easement may be extinguished or terminated.

  • Express release – the parties affected by the easement may agree to terminate the easement and register their agreement with the relevant land titling authority.
  • The owner of the servient tenement may apply to have the easement extinguished on the grounds of ‘abandonment’. This is established by the non-use of the easement and an intention on the part of the owner of the dominant tenement to abandon the easement.
  • In some circumstances, where the dominant and servient tenements are consolidated into a single parcel of land.
  • In circumstances where there is an alteration of use of the dominant land to the effect that use of the easement by the servient land comes to an end or is rendered obsolete.

Conclusion

Understanding easements and their effect on property is a fundamental part of the conveyancing process and buyers, in particular, should ensure they are aware of the impact an easement will have on the land they are about the purchase.

This information is for general purposes only. You should obtain professional advice before undertaking any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Common misconceptions about estate planning

An estate plan involves more than signing a Will and leaving it in a safe place. An effective estate plan requires consideration of several matters and ongoing review to ensure it reflects your testamentary wishes and covers unexpected events.

In this article we look at some misconceptions about Wills and estate planning and dispel some common myths. The information is general only and you should obtain professional advice specific to your circumstances before you undertake any course of action.

I have a Will – isn’t that an ‘estate plan’?

A Will is a great start to planning your estate, however a Will alone does not appoint a trusted person to look after your financial and property affairs when you are away or if you are incapacitated. Likewise, a Will cannot appoint a guardian to make health and lifestyle choices on your behalf if you are incapacitated, taking into consideration your morals and values.

Tip: Various legal documents form part of your overall estate plan. Think about what you would do if the unforeseen happened and you could no longer manage your affairs. Talk to you lawyer about the benefits of appointing an attorney or guardian to assist you if you are incapacitated.

Only the rich need an estate plan

This is certainly not the case. No matter what your financial status, an estate plan enables you to appoint a trusted person to administer your assets when you die, ensure your hard-earned property is left to beneficiaries chosen by you and not others, maximise the gifts and benefits you leave to your loved ones through appropriate taxation planning, and prepare for unexpected crisis (illness and incapacity) by appointing somebody you trust to deal with your affairs when you cannot.

Tip: Think about your current assets and the assets you aim to accumulate in the future – they soon add up. Think about who you would like to benefit from your estate and how you can maximise the value of your assets for your beneficiaries.

I can leave joint property to whomever I wish

The right of survivorship means that upon the death of an owner of a jointly held asset that asset automatically vests in the surviving owner/s, despite any contrary intention expressed in a Will.

Jointly held assets such as real estate often comprise the bulk of the estate’s value. For spouses and de facto partners, this may be ideal as many would simply wish the surviving partner to benefit. However, joint ownership may not be appropriate such as property held with certain other family members, non-family members or other entities, or property that remains jointly held after divorce or separation.

Tip: Review your assets (real estate, bank accounts, investments) and check how they are held. Your lawyer can assist in this process and if necessary, sever joint tenancies so that your share of property can be separately held and left to whomever you wish.

Superannuation is automatically dealt with in my Will

Many people assume their superannuation will be divided up in accordance with the wishes in their Will, but that is not necessarily the case.

Death benefits, comprising the superannuation account balance and any life insurance payments, are paid to a ‘dependant’ (defined by legislation), as determined by the fund trustee or in accordance with a Binding Death Benefit Nomination (BDBN).

Tip: Review your superannuation and life policies to determine whether you have in place a valid and current BDBN. Talk to your lawyer about the formalities required to execute a BDBN and strategies to minimise adverse tax implications on the payment of your death benefits to your beneficiaries.

If I die without a Will my assets go to the Government

If you die intestate your assets are distributed according to pre-determined formulae set by legislation in each state and territory. The rules attempt to reflect society’s ‘expectations’ as to who should benefit from a person’s estate. They provide a specific order of distribution to the deceased person’s next of kin.

The problem with these statutory rules is that they do not necessarily consider the wishes of a deceased person nor his or her unique circumstances.

Tip: Don’t rely on a statutory formula to determine those entitled to benefit from your estate. Although only in the most extreme cases will the Crown have a right to an intestate’s estate, a Will is essential to nominate with clarity your executor and chosen beneficiaries.

I need to update my Will when I have a child or more children, move or acquire new assets

You should always review your Will when your personal and financial circumstances change significantly. Your Will may already provide for children (or future children) and you may not need to update it for every change, but it is good practice to review it when you experience major changes in your life.

You should also be careful about naming specific assets in your Will, for example details of a particular vintage car that you may own. A gift in your Will of a specific asset of considerable value which is disposed of during your lifetime may fail and cause an unintentionally unequal distribution amongst beneficiaries.

Wills are generally drafted to provide flexibility with respect to the nature and value of assets held, and to provide for future generations (unborn children) and substitute executors and beneficiaries.

Tip: Flagging to review your Will each year, for example when your annual tax return is prepared, makes good sense. In many cases, no changes will be needed but it is good practice to make a habit of a regular review. If you separate, divorce, or your financial or personal circumstances change significantly contact your lawyer immediately to see how these changes impact your existing Will and, where necessary, prepare a new Will.

Conclusion

Effective estate planning takes time and careful consideration. If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

What can you do if your visa application is refused?

Having a visa application refused can be extremely disappointing, particularly after spending considerable time completing forms, gathering documents and having paid the relevant fee, which is generally only refundable in limited circumstances.

Visa applications in Australia are processed and considered by the Department of Home Affairs. A decision not to grant a visa may be made for a number of reasons including:

  • applying for the wrong visa type, which is quite common and may occur more frequently when applications are lodged without legal assistance;
  • failing to meet the conditions required of a previous or existing visa;
  • failing to meet eligibility criteria such as health and character requirements;
  • incomplete information or inconsistencies in the application and / or supporting documents;
  • insufficient funding.

If your visa application has been refused, you may be able to have the decision reviewed. The visa notification letter should state the reasons for refusal and whether the decision is reviewable. Not all decisions can be reviewed, and it is important to act quickly to determine your rights and lodge the appropriate application.

The review process for visa refusals

The Administrative Appeals Tribunal, Migration and Refugee Division deals with the review of visa refusals. The Tribunal is required to make decisions which are fair, just and economical and takes an informal approach to the review process.

When reviewing a case, the Tribunal has the power to reconsider the case in its entirety and make a new decision based on the relevant facts and circumstances.

The types of decisions reviewable by the Tribunal, who is entitled to apply for a review (which may be the visa applicant, a sponsor or close relative), the fees and time limits are set out in the Migration Act 1958 (Cth) and Regulations. The relevant timeframe within which to lodge a review application will be stated in the Department’s notification letter. The Tribunal is not authorised to make exceptions, so it is imperative to lodge the application on time.

The application for review may be completed and lodged online, by post, fax, in person or by email, and the relevant fee must be paid at the time of lodgement.

Preparing for your case

Following is an overview, and some information regarding the Tribunal’s review process.

  • After an application for review is lodged, confirmation is given to the applicant and the Department of Home Affairs. The Minister for Immigration or the Department are not represented during the review process, however they must provide the Tribunal with all relevant documents concerning the case.
  • The case is allocated to a Tribunal member who reviews the documents.
  • A hearing date is usually set, and the applicant invited to attend and / or provide further details or respond to information.
  • An applicant may nominate a representative to run the case, prepare submissions and evidence, and attend any meeting or hearing arranged by the Tribunal. The representative may be invited to comment on matters raised during the review process.
  • Preparing good written submissions and evidence to support a case, and planning for the hearing is critical for an applicant to have every chance of achieving the best possible outcome of the review.

Submissions should provide background information concerning the applicant and respond specifically to the matters raised by the Department. The submissions must directly address the reasons for refusing to grant the visa.

  • The Tribunal is required to inform an applicant of certain information that could result in an adverse outcome of the review and provide an opportunity for the applicant to respond within a specified time. It is important to respond timely and appropriately so the opportunity to put forward a case is not lost.

The decision

The Tribunal may:

  • affirm the decision;
  • vary the decision;
  • substitute the decision for a new one;
  • send the case back to the Department to make a new decision.

The timeframe for the Tribunal to determine a case will depend on the circumstances and complexity of the matter, noting that some cases will be given priority in accordance with legislation and policy directions.

In most cases, a decision will not be made at the hearing and the Tribunal member will send the applicant and Department a written determination afterwards.

Occasionally, a decision may be made at the end of the hearing and the Tribunal member will announce this verbally and may provide written reasons for the decision within the following 14 days. Alternatively, the member may announce the decision and reasons at the end of the hearing. In such cases, an applicant may request in writing within 14 days, to be provided with a written version of the determination.

Applicants who are not happy with the Tribunal’s decision may have a further opportunity to appeal to the Federal Circuit Court, but only on a question of law. This is a complex area and visa applicants should obtain legal advice regarding their eligibility to appeal Tribunal decisions.

Conclusion

Many factors may cause a visa application to be refused. No matter what the reason, it is important to act quickly to protect your rights and to make sure that all avenues are explored to achieve the best possible outcome under the circumstances. Obtaining timely advice from an experienced immigration specialist is vital.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Protecting your workers’ compensation rights

If you have been injured at work or have developed a work-related illness, it is important to act quickly and take appropriate steps to protect your legal rights.

No matter how minor you think your injury is, a basic understanding of the laws that protect workers, and the relevant timeframes for pursuing compensation is essential.

Although some injuries may seem insignificant when they happen, they can deteriorate over the course of days, weeks or months, affecting your capacity to work and provide for your family. Workers should not be deterred by offhand comments, pressure or threats, from pursuing their rights to access appropriate treatment and to be fairly compensated for a workplace injury.

Many people do not realise that the responsibility for seeking compensation rests with the injured worker and that failure to lodge a claim, no matter how seemingly incidental, can have significant repercussions on the ability to pursue their rightful entitlements.

Understanding workers compensation

Workers compensation laws exist for very good reason – they set out the rights and responsibilities of workers and employers, and support those who are injured, aggravate an existing injury or become ill while performing their usual work duties.

The Workers’ Compensation and Rehabilitation Act 2003 (Qld) establishes a no-fault compensation scheme which provides statutory minimum ‘safety net’ benefits to injured workers or the families of those who die from a workplace incident.

Employers must provide a safe workplace and work systems, and ensure that employees, whether full-time, part-time or casual are covered by workers compensation insurance. In some cases, ‘deemed’ workers such as contractors and self-employed workers, will also be covered.

Employers must report certain workplace injuries and cooperate with relevant bodies and providers to facilitate optimum recovery for an injured worker. Attempts to avoid these obligations, discourage or prevent an employee from following the correct processes for making a legitimate claim may breach these laws.

The role of WorkCover

WorkCover Queensland is established under the Act and provides workers compensation insurance for all Queensland employers, unless an employer is a self-insurer.

WorkCover processes workers compensation claims, makes payments to injured workers in accordance with their entitlements, oversees injury management and coordinates return to work plans.

Understanding time limits and making a claim

A worker, not the employer, is responsible for lodging a workers’ compensation claim. The following timeframes apply and may only be waived in specific and exceptional circumstances.

  • Workers should report the incident and their injuries to the employer as soon as possible after the injury occurs and before making a claim.

A worker may complete an incident report or notification of injury, however he or she should be clear that this is not an application for workers compensation.

  • An application for workers compensation must be lodged by an injured worker with WorkCover. The application is generally only valid if lodged no later than six months after the entitlement to compensation arises.

 The Act states that an entitlement to compensation arises on the day a worker is assessed by a doctor, a dentist (if the injury is an oral injury) or a nurse if the injury is minor. Injured workers should seek medical assistance as soon as possible after they are injured to obtain a work capacity certificate.

  • If an application is lodged more than 20 business days after the entitlement to compensation arises, the insurer does not have to pay compensation from a date any earlier than 20 business days before lodgement of the claim.

This means that the insurer will not have to ‘back-date’ any compensation payments for more than 20 business days before the claim was lodged.

What does WorkCover pay?

 A workplace injury or illness may include physical or psychological injuries. Because the scheme is no-fault, provided the injury is work-related, compensation is generally payable even if the injury was not the employer’s fault.

Compensation may include any one or more of the following payments:

  • weekly payments during incapacity;
  • expenses for medical treatment by providers such as doctors, dentists, physiotherapists, occupational therapists and psychologists;
  • assessments for industrial deafness and diagnostic processes;
  • the provision of nursing, medical or surgical supplies and equipment;
  • travel expenses reasonably incurred in attending treatment, medical examinations and medical assessment tribunals;
  • lump sum benefits for certain injuries that result in permanent impairment;
  • return to work support when an injured worker cannot resume his or her pre-injury role but may be suitable for other employment;
  • death benefits for certain family members of a worker who dies from a work-related injury or illness, as well as funeral benefits.

Pursuing a common law claim for damages

A common law damages claim may be made by an injured worker if the employer (either directly or through another employee or agent) was negligent and deemed responsible for the injury. The claim must be commenced within three years of the date of injury.

Generally, a damages claim cannot be made until an injured worker has pursued his or her compensation rights through the no-fault statutory scheme. Accordingly, failure to lodge a claim with WorkCover within the prescribed timeframe can adversely affect a worker’s right to pursue a common law claim for damages.

A settlement or award for work injury damages usually includes a lump sum payment (accounting for future economic loss and pain and suffering), medical and hospital costs.

Other benefits including help for non-work-related accidents and illnesses

Workers who need to take extended leave due to an illness or injury may be able to claim income protection insurance, even if their condition is not work related. Income protection covers a portion (usually up to 75%) of a person’s usual income if they are unable to work due to certain illnesses or injuries. This type of insurance may be stand-alone, or form part of a superannuation policy, and many people are unaware that they even have such insurance.

Many superannuation policies provide lump sum benefits if a person is totally and permanently disabled. These payments are generally in addition to any relevant workers compensation payments.

Claiming under an income protection policy or superannuation fund can be complex and often involves jumping through ‘hoops’ to substantiate that the condition suffered falls within a category covered by the policy.

Navigating legal terms and conditions can be distressing, particularly when dealing with the physical and emotional effects of a serious illness or injury. A lawyer can help to analyse fine print, lodge a claim and supporting documents, and assist in resolving any disputes with superannuation funds and insurers.

Conclusion

Employers have a range of workplace health and safety responsibilities however the onus rests on injured workers to ensure their compensation rights are properly pursued and protected.

Obtaining legal advice early will help you to understand and manage the time limitations that apply and may make a significant difference to your entitlements.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Appointing a Solicitor as Executor of your Will

An executor is a person who will carry out the instructions in your Will once you have passed away.

In general, you can appoint any person as executor of your Will, this includes solicitors. It is not uncommon for a solicitor to be appointed executor of a Will. The advantage of having a solicitor as executor is their experience handling Wills, as opposed to someone who has never undertaken the role of an executor.

It is quite likely that whomever you appoint as the executor will have to seek advice from a solicitor while acting as executor anyway.

Why should I appoint my solicitor as executor of my Will?

If you have a complicated estate and family situation, it may be worth considering appointing a solicitor as executor of your Will.

Solicitors bring professionalism and experience to the role of executor. It easier for a solicitor to remain impartial and manage disputes, should any disagreements arise as to the contents of the Will.

An experienced solicitor can also ensure your Will is executed in a timely manner, communicate the progress of execution of the Will to beneficiaries and ensure account keeping is properly maintained.

What is required from a solicitor who is to become executor of my Will?

If you decide to appoint a solicitor as executor of your Will, they must notify you in writing to confirm they will be acting as executor of your Will and should include the following in a confirmation letter;

  • Any entitlements they may be able to claim from carrying out instructions in your Will;
  • Costs and charges for legal fees or executor’s commission;
  • Any people who may not make a claim against the executor’s commission.

The solicitor must disclose their fee structure for your consideration.

Can a solicitor charge a fee for executing my Will?

Yes, they can! There are a few ways in which a solicitor can be paid for executing a Will, for example, a clause in the Will provides for a legacy to be paid to the executor/s or a rate of commission or right to charge for professional rates for non-professional work.

Solicitors acting as executors must ensure they comply with Legal Profession Uniform Rules when renumerating themselves for executing the Will.

The subject of executors’ remuneration has potential to become complex, hence we recommend you speak to one of our specialist lawyers to ensure you have everything covered.

Conclusion

An experienced solicitor is able to bring professionalism and impartiality to the role of executor. If a solicitor has accepted to take on the role of executor of your Will, they must notify you in writing to confirm they will be acting as executor. They can also explain their obligations to you as executor of your Will and the different ways in which they can be renumerated for carrying out your final wishes.

This area of law is extensive and can be overwhelming to understand. We recommend you speak with one of our specialist lawyers, who can ensure you have everything in order when it comes to appointing a solicitor as executor of your Will, as they will after all, be fulfilling your final wishes.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Bankruptcy and family law proceedings

Dividing property after partners separate is generally stressful, with each party concerned about his or her financial future. The bankruptcy of one party adds a further dimension of complexity to a family law property settlement.

Even partners whose relationship is intact should seek urgent advice if one of them is facing bankruptcy or insolvency issues. In particular, the non-bankrupt party should take immediate action to protect his or her interests in assets.

This article provides an overview of bankruptcy laws, how property is usually divided after a relationship breaks down, and how the processes interact when one of the parties to a property settlement is bankrupt. Bankruptcy and family law are complex areas and the information in this article is general only. Parties should obtain professional advice relevant to their individual circumstances.

What happens when a person becomes bankrupt?

A person is considered bankrupt when he or she is unable to pay his or her debts. Apart from certain protected property, the bankrupt’s assets vest in an appointed trustee in bankruptcy who may sell those assets to satisfy the claims of creditors. Protected assets generally include clothing, certain personal possessions, tools of trade, a motor vehicle to a prescribed value, awards of compensation and superannuation and life policies.

The trustee controls the bankrupt’s financial affairs while the bankrupt is protected from being personally sued by creditors.

How is property divided after a relationship breakdown?

The division of property after a relationship breakdown generally requires a four-step process to:

  • identify the parties’ pool of assets available for distribution;
  • determine the parties’ respective financial and non-financial contributions;
  • consider the parties’ future needs; and
  • determine a split that is, in all the circumstances, just and equitable.

What happens when one of the parties to a property settlement is bankrupt?

When a relationship breaks down and one of the parties is bankrupt, the interplay of the Bankruptcy Act 1966 which regulates individual bankruptcy, and the Family Law Act 1975 which governs the division of property, must be considered.

The Family Law Act enables a person to apply for the alteration of property interests after the breakdown of a relationship, and specifically includes circumstances where property is vested in a trustee for bankruptcy if one of the partners is bankrupt.

This allows the Court to alter the interests of property that would otherwise vest in the trustee, enabling the non-bankrupt partner to claim an interest in vested assets for his or her benefit and / or the benefit of any dependants. The legal title to the property in such cases is irrelevant.

The interests in the family home of a non-bankrupt party may also be protected. The family home is generally not a protected asset and the bankrupt’s interest is available to a trustee to satisfy creditors. However, where legal title to a family home is held solely by a bankrupt, the Court may nevertheless conclude that the home is held jointly thereby protecting the interest of the non-bankrupt party.

A person affected by an order or proposed order such as a creditor, may apply to have it varied or set aside. In some circumstances, a trustee will apply to be joined as a party to the proceedings and to have orders set aside on grounds of fraud, duress or a failure to disclose relevant information. This could result in the recovery of certain assets to satisfy creditors.

The Court must balance the competing rights of the creditors and the non-bankrupt party and make orders that are just and equitable in the circumstances. It may take into account a range of factors including:

  • the non-bankrupt partner’s direct and indirect financial and non-financial contributions to the relationship;
  • the effect of a proposed order upon either party to the relationship;
  • the future needs of the non-bankrupt party including the responsibility for caring for children, employment status and health;
  • the effect any orders will have on creditors of the bankrupt person including whether the debt will be repaid in full.

The need to achieve a just and equitable outcome may result in the non-bankrupt partner and his or her dependants obtaining a share of certain assets that would otherwise be vested in the trustee, to the detriment of the creditors.

Key takeaways

  • The property of a bankrupt individual vests in the trustee in bankruptcy for distribution between creditors.

 

  • The ex-partner of a bankrupt person may pursue a property division despite the bankruptcy.

 

  • Court proceedings for a family law property settlement when one partner is bankrupt will generally be between the non-bankrupt party and the trustee in bankruptcy.

 

  • In such proceedings, the Court may be required to determine:

 

–        applications by the non-bankrupt party to restrain the trustee from dealing with certain property and / or distributing funds amongst creditors;

–        claims that property vested in the trustee and otherwise available to satisfy creditors should be altered for the benefit of the non-bankrupt partner;

–        claims that exempt property or property not vested in the trustee should be made available for distribution to creditors.

If you or your partner are facing insolvency issues, whether or not your relationship has ended, or is likely to end, you should obtain immediate legal advice.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Wage theft is a crime in Queensland

Failure to pay employees their proper entitlements could leave employers exposed to criminal charges (including jail time) under new laws introduced in Queensland.

Criminalisation of ‘wage theft’

The Criminal Code and Other Legislation (Wage Theft) Amendment Act 2020 (Qld) introduces new provisions to the Criminal Code Act 1899 (Qld) expanding the definition of ‘stealing’ to include a failure to pay an employee (or other person on his or her behalf) an amount in relation to the performance of work by the employee.

The Explanatory Notes of the introducing Bill state that the provisions are ‘intended to capture a broad range of payments and entitlements, including:

  • unpaid hours or underpayment of hours;
  • unpaid penalty rates;
  • unreasonable deductions;
  • unpaid superannuation;
  • withholding entitlements;
  • underpayment through intentionally misclassifying a worker including wrong award, wrong classification or by ‘sham contracting’ and the misuse of Australian Business Numbers; and
  • authorised deductions that have not been applied as agreed.’

The penalty for an offence is imprisonment for a maximum of 10 years and, in the case of an employer committing fraud against an employee, a maximum term of 14 years.

The laws target deliberate ‘wage theft’ and are not intended to apply to employers who accidently underpay workers and subsequently rectify their mistake.

Background to the reforms

The Queensland Parliamentary Education, Employment and Small Business Committee’s report, ‘A fair day’s pay for a fair day’s work?’ (November 2018) notes that over 437,000 Queensland workers do not receive their full entitlements – at 5% loss in income per worker, this would equate to $1.22 billion in wages annually.

The report suggests that wage theft not only affects workers and their families but impacts other businesses and the economy overall through the underpayment of superannuation, annual reductions in consumer spending and federal tax revenue.

The reforms target employers who blatantly engage in wage theft, gaining an unfair advantage at the cost of employees and other competitors in the market.

Proposed streamlined processes for recovery of wages

The reforms will also amend the Industrial Relations Act 2016 (Qld) by introducing a simplified process for workers to make wage recovery and fair work claims to the value of $20,000 through the Industrial Magistrates Court.

The system will promote the low-cost and efficient resolution of claims by enabling the registrar to refer parties to conciliation before a matter is heard by a Court. Parties not wishing to participate in conciliation will need to promptly notify the registrar. The purpose of conciliation will be to facilitate agreement between the parties, whether on all matters, or at least narrow the scope of unresolved issues. Once referred, conciliators will be required to commence the conciliation process as soon as practicable.

Employers should review wage systems

Rather than punish employers who have inadvertently made an error or oversight in calculating or paying employee wages, the laws target intentional conduct aimed at deliberately depriving workers of their full entitlements.

Workplace laws are constantly evolving, and employers should conduct regular checks to ensure compliance with relevant awards, industrial instruments, and employment contracts. All employees should be correctly classified and receive their full entitlements. Any underpayments should be flagged and rectified immediately, with processes implemented to foster ongoing checks and audits.

Employers should obtain professional advice if they are uncertain of their obligations.

Employees – recovering unpaid wages

Wage theft may cover a range of circumstances where full employee entitlements have not been met, for example, not being paid the minimum hourly rate of pay for the work carried out, the withholding of leave entitlements or a failure to make compulsory superannuation contributions.

Employees who believe they are not receiving the correct entitlements should raise these concerns with the appropriate person at their workplace. If unable to resolve the issue with the employer, employees can make a complaint to the Fair Work Ombudsman, the Australian Taxation Office, or pursue recovery of their entitlements through the Courts. We recommend obtaining legal advice before pursuing a matter in Court.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Ensure the Will is up to date before a loved one loses capacity

The question of mental capacity is an important consideration in will-making and can be a contentious issue. How often do we hear family members arguing over a loved-one’s ‘state-of-mind’ and ‘what Grandad would have wanted’ when sadly, his memory and ability to make reasonable decisions comes into question. This may be due simply to age, deteriorating health or a combination of both.

A person must have mental capacity to make or update a Will – this is one of the key elements to ensure the validity of a Will and limit the possibility of it being challenged on the grounds of testamentary capacity.

One way of reducing conflict and a potential challenge to a Will is to ensure a loved one (particularly if aged or in declining health) is encouraged to regularly review his or her Will and estate plan before mental capacity becomes dubious.

The test of mental capacity

The test of mental capacity was established almost 150 years ago in 1870, in a legal case Goods v Goodfellow. The language used reflects the era, but the key elements remain relevant:

It is essential to the exercise of such a power that a testator shall understand the nature of the act, and its effects; shall understand the extent of property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.

Translated to a more contemporary understanding, the Will-maker must:

  • understand the nature and effect of the Will;
  • understand the extent of the property in the Will;
  • understand the claims he / she ought to consider; and
  • be free of illogical beliefs that are not in sync with his / her level of education and surroundings.

What happens if a Will-maker lacks mental capacity?

Lawyers must ensure that a Will-maker’s interests are protected and have an obligation to question a Will-maker’s mental capacity if it is in doubt. The lawyer must be able to obtain instructions directly from the Will-maker and be satisfied that he or she understands the legal implications of the documents being prepared and signed.

Given the many possible perceptions of an ‘unsound mind’ or being free of ‘insane delusions’, this is not always an easy task. A testator, who is intermittently unsound, may still make a valid Will if it can be shown that the Will was made at a time of sanity.

Unfortunately, once the capacity of a Will-maker comes into question, additional steps are required to confirm his or her ability to properly understand the nature of the contemplated document.

At the least, this usually requires obtaining medical and / or psychiatric reports from practitioners which may add expense and cause additional stress and anxiety to the Will-maker and his or her family. The extra time required to obtain these reports and to establish mental capacity is itself an issue, particularly when a Will-maker’s health is declining.

If the Will-maker’s capacity cannot be established, then the Will cannot be made or an existing Will updated.

An outdated Will that clearly does not express the intentions of the deceased can be a major disappointment to the deceased’s family and loved ones.

If a Will is made or updated at a time when mental capacity is in dispute, a contentious challenge and / or a family provision claim may follow, after the testator dies.

What happens if no Will is made?

If no Will is made, then the Will-maker will die intestate and his or her assets will be distributed in accordance with pre-determined formulae set out in legislation in each state and territory.

Essentially, these rules provide for a specific order of distribution to the deceased person’s next of kin – those who receive an inheritance will depend on the individual and family circumstances of the deceased.

The distribution of an intestate estate generally reflects the moral expectations of society, but not always the wishes of the Will-maker. There are numerous reasons why a Will-maker may have wanted to leave out an expectant beneficiary or indeed include non-family members in the distribution of his or her estate. For a variety of reasons, the testator may also have wanted to allocate unequal shares to beneficiaries whom under the legislation would otherwise share equally.

Dying intestate therefore cannot guarantee that the Will-maker’s assets will be distributed as he or she intended.

Points to remember

The problems of intestacy or having an outdated Will can be avoided by ensuring a Will is made whilst a person is in good health and of sound mind. Some points to remember:

  • Mental incapacity can occur progressively or suddenly and can affect the old, the middle-aged and the young. Whilst we can all exercise caution and moderation, nobody is exempt from the fragility of life and an unpredictable future.
  • Determining mental capacity when in doubt is not straight-forward, will exacerbate the will-making procedure and add undue cost and stress to the process.
  • Planning your Will now and making the effort to review it regularly will safeguard your estate from the possibility of unintentional distributions.
  • Encourage your loved ones to review their Will and other estate planning documents when there is a change in personal or financial circumstances and particularly when they are ageing or in deteriorating health.
  • Lead by example and make or review your own Will and estate plan!

Summary

The real intentions of a testator cannot be established once he or she has died or is permanently incapacitated, unless a valid and up-to-date Will exists. Spending time on your estate planning today will avoid the uncertainty, additional costs and stress of trying to get it right when it is too late.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Estate Planning – what is an Estate Plan?

An estate plan involves more than signing a Will and storing it in a ‘safe place’. Estate planning requires a holistic approach in consideration of a person’s present circumstances and foreseeable future.

A plan needs to consider who matters, what you have now, what you may have in years to come, and what your final wishes will be. Your lawyer’s role is to document these wishes to ensure they are legally enforceable and can be carried out when you die.

This article considers what an effective estate plan may entail and explores some of the thought processes involved in preparing an estate plan. The information is for general purposes only and we recommend obtaining legal advice specific to your circumstances when planning your estate.

What is effective estate planning?

An ideal estate plan will:

  • Appoint a trusted person or persons to manage your affairs (attorney / guardian) if you are incapacitated; and a legal personal representative (executor / trustee) to administer your estate (and any associated trusts) after you die.
  • Nominate your intended beneficiaries with certainty or provide for a class of beneficiaries to ensure that your assets pass only to those you intend to benefit.
  • Prevent undue stress and expense by minimising uncertainty and potential family provision claims.
  • Provide flexibility in distributing assets in anticipation of the present and future needs of beneficiaries.
  • Maximise the value of your estate through effective tax planning to minimise capital gains, and income tax payable by beneficiaries on their inheritance.
  • If relevant, provide for effective business succession or the winding up of a business.

Steps in estate planning

Your family

Every family is different and there is no one-fit solution for all. You should start with an overview of your family circumstances and a list of all family members whether or not you would like them to benefit from your estate.

Acknowledging where there is conflict between family members and identifying any eligible persons who might claim on your estate will assist in devising strategies to reduce the potential for future claims.

Blended families are common and require special attention as there may be competing interests between past and present partners, biological children and step-children.

Choosing your executor and trustee

The executor and trustee will be your personal legal representative and should be chosen with care. For simple estates, a spouse or child / children (or combination) are usually appropriate choices to oversee the administration and finalisation of the estate.

For more complex estates, with business interests or which will have ongoing trusts, it may be preferable to appoint a professional with expertise in this area.

Similarly, if there is conflict within the family a ‘neutral’ executor may be more appropriate to ensure that the role is carried out with impartiality.

Powers of attorney, guardianship and advance care directives

Each jurisdiction in Australia allows for the appointment of an attorney, guardian and / or decision-maker to manage your financial, legal and / or personal affairs for a defined or ongoing period, and to make health-related decisions if you are incapacitated.

These documents provide for flexibility in choosing the type of functions to be carried out, and the duration for which the authority is given.

These documents form an important part of your overall estate plan by ensuring the ongoing management of your affairs by a trusted person if you are incapable. A lawyer will explain the relevant documents in your circumstances and for your jurisdiction.

Your assets

A detailed list of assets and liabilities will assist in determining the overall value of the estate, how and when assets should be distributed, the appropriate structure of the Will and whether a testamentary trust would be beneficial (see below).

You will need a precise description of the assets, their location, whether they are held individually or jointly and their value.

If you are including specific gifts, such as items of sentimental value, antiques, or artworks, these should be clearly identifiable and described in the Will.

Remember, your assets may change over time and this needs to be factored into your estate plan. A gift of a specific asset of considerable value which is later disposed of may fail and cause an unintentionally unequal distribution amongst beneficiaries.

Using a testamentary trust

In some cases, it will be beneficial for a Will to establish a testamentary discretionary trust. This is a trust that comes into effect after the will-maker dies. Administration of the trust is carried out by a trustee pre-appointed by the will-maker. The trustee determines how and when estate assets are managed and distributed.

If managed properly, the flexibility of a discretionary trust may allow beneficiaries to access the most advantageous taxation treatment with respect to their inheritance and can provide protection for at-risk or vulnerable beneficiaries from claims by creditors or ex-partners.

Even modest estates may benefit from having a testamentary trust, particularly where the will-maker is part of a blended family.

Your superannuation

Death benefits, comprising the superannuation account balance and any life insurance payments, are paid to a ‘dependant’ determined by the fund trustee, or in accordance with a Binding Death Benefit Nomination (BDBN).

Most funds allow members to nominate their intended beneficiaries through a BDBN. This process forms an important part of estate planning – without a valid BDBN, the beneficiaries may be decided by the trustee in accordance with the terms of the trust deed and the relevant legislation. This decision may not reflect what the will-maker intended.

Business succession

If you are carrying on a business whether as a sole trader, partnership or through a company, you will need to think about how you would like these interests dealt with after you die.

If you conduct the business as a sole director through a corporate entity, you will need to consider who will take your place as shareholder and managing director. Alternatively, you may wish for the business to be wound up.

Some partnerships will have buy-sell insurance in place. This is a policy allowing a surviving partner to acquire the deceased partner’s share so the business can continue.

Business succession planning also requires consideration of the intended beneficiaries and whether they have the desire, skill and competence to continue managing the business.

Conclusion

Effective estate planning takes time and careful contemplation. Your estate plan will usually comprise various documents to ensure the effective management and finalisation of your affairs so that your life’s efforts reward those you intend to benefit.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.