Archive for the ‘Newsletters’ Category

The importance of financial advice in a family law property settlement

Most property settlements are reached through negotiation, without the need to attend Court. Negotiations can be formally documented through a binding financial agreement or consent orders. As a last resort, the parties may need to initiate Court proceedings whereby orders will be made regarding the division of the parties’ property.

No matter how a property settlement is reached, it is important to be aware of the financial impact of the proposed agreement before finalising it. Family lawyers often recommend working with a financial advisor to ensure a property settlement delivers an optimum financial outcome for the client. We explain below some of the benefits in working collaboratively with a financial advisor and lawyer.

Identifying and classifying assets and liabilities

A financial advisor can help to properly identify, classify and evaluate the parties’ assets and liabilities, whether these are held jointly or individually. Assets can be held in various ways, whether through a trust, company or shares and it is important that a full portfolio of the asset pool is obtained. Only by presenting a complete picture of the parties’ financial position, might a fair and reasonable property settlement be negotiated.

In some circumstances, a financial advisor or lawyer will recommend that certain assets, such as business interests and company shares, be formally valued.

Recommending tax effective strategies

Understanding the tax implications of a proposed property settlement can have a significant impact on the net result for each party.

The retention, transfer or division of different types of assets can have different stamp duty and tax consequences.

A financial advisor can recommend strategies and structures for the division of assets to take advantage of duty concessions and tax exemptions or deferrals that are unique to family law property settlements. This may include recommending that a certain asset be retained or transferred. Depending on the stamp duty and tax consequences applicable to that class of asset, it may be more advantageous to retain one type of asset over another.

A financial advisor can also flag and calculate potential future CGT liabilities which is an important consideration when negotiating the division of property. Advice on transactions concerning companies and trusts may also play a significant part of the advisor’s role.

Advising on superannuation

If a superannuation split forms part of the proposed property division then you will either end up with more, or less in your superannuation account. This may require a reassessment and restructure of your retirement plans. A financial advisor can evaluate the net effect of a proposed superannuation split and assess future needs and contributions towards superannuation.

Assessing future needs and planning ahead

Most financial advisors have sound knowledge of family tax payments and child support and can assist in determining entitlements and / or obligations.

Your financial adviser can help implement strategies on how to get back on your feet, financially, after separation. This may include budgeting advice and money management strategies, recommending appropriate insurance to protect your income, managing and protecting assets, and developing plans to work towards your financial goals.

Estate planning and death benefits

Once a property settlement has been reached and finalised, a financial advisor and lawyer can work together to implement an effective estate plan in consideration of your new personal and financial circumstances.

They will identify the most tax-effective beneficiary for superannuation entitlements and death benefits and help structure your assets to ensure maximum protection against future family provision claims.

Conclusion

Separating couples are often anxious about their immediate and future financial needs and may seek assistance to achieve a fair and reasonable property settlement. In doing so, it is important to remember that lawyers provide legal advice and not financial advice. Including a financial advisor in your professional team can provide significant benefits when negotiating a property settlement.

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.

A widow contesting a Will

All jurisdictions in Australia provide statutory rights for eligible persons to contest a Will on the basis that they have not been left adequate provision by the testator for their proper maintenance, education and advancement in life.

In Queensland, an eligible person includes:

  • a spouse of the deceased;
  • a de facto partner (whether same or opposite sex) who had been in a continuous relationship with the deceased for at least two years at the time of death;
  • a former spouse who was maintained by the deceased and not remarried, or is the parent of a minor child of the deceased and dependent at the date of death;
  • a child, stepchild or adopted child of the deceased;
  • a parent who was dependent on the deceased or the parent of a surviving child under the age of 18 years of the deceased, or other person under the age of 18 years who was wholly or substantially dependent on the deceased.

If a family provision claim is successful, the Court can order an appropriate adjustment to the terms of the Will to satisfy the claim. A range of factors are considered including the relationship the applicant had with the deceased, the obligations or responsibilities the deceased had to the applicant, and the nature and size of the estate.

The expectation that spouses should provide for each other generally places a widow’s needs ahead of other interested parties in a family provision claim. However, all cases will be individually assessed and balanced with the needs of the applicant and the competing needs of other entitled recipients.

The moral duty to provide for a spouse

There is a general expectancy that testators have a moral duty to provide for the proper maintenance of their spouse or de facto partner. The Court has explained this as providing what is necessary for the spouse to enjoy accommodation to the standard to which he or she is accustomed and, to the extent possible and having regard to the size of the estate, a fund to meet unforeseen contingencies. This is particularly so where the marriage or relationship has been lengthy.

Competing claims

Family provision claims by widows usually involve a contest between the applicant and a child or children from the deceased’s former relationship.

The applicant will generally apply for greater provision than what has already been provided in the Will based on his or her personal and financial circumstances, current financial position and future needs.

Generally, the widow and children of the current relationship (if any) will stand favourably against the children of a former relationship. This is because the testator’s primary duty is perceived as being owed to his current family and the likelihood that the children of the former relationship may have already been provided for through child support payments. This of course is not always the case and each matter will turn on its own circumstances in consideration of a range of factors.

Determining the sufficiency of proper maintenance

The Courts have explained the difficulties of determining the meaning of ‘proper maintenance’. In Re Harris [1936] SASR 497 it was considered to be ‘…more than a provision to keep the wolf from the door – it should at least be sufficient to keep the wolf from pattering round the house or lurking in some outhouse in the back yard – it should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and health and strength gradually fail’.

Sometimes, widows are left a ‘right of residency’ in the testator’s property. This allows the widow to occupy the family home or other property of the deceased for his or her lifetime with the intention that the property will pass to a residuary beneficiary, such as the testator’s child or children from a former marriage, after the widow’s death.

A right of residency however is not always practical and may be considered insufficient to meet the moral duty expected of the testator. The widow may, due to age or health, need to vacate the residence, being left vulnerable and without security of a home.

The alternative approach to leaving the home to the widow may also be inappropriate – if the widow passes soon after the deceased, then the result may be a significant capital asset being inherited by the widow’s relatives, contrary to the wishes of the testator.

As can be seen there needs to be a balance between a tokenistic provision and the risk that a testator’s significant assets might inadvertently be inherited by an unintended beneficiary.

In Luciano v Rosenblum (1985) 2NSWLR 65 the Court gave some guidance as to the expectation of a widow after the death of a spouse:

‘Where the marriage of a deceased and his widow has been long and harmonious, where the widow has loyally supported her husband and assisted him to build up and maintain his estate, the duty which a deceased owes to his widow can be no less than to the extent to which his assets permit him to achieve that result…’

Conclusion

A testator owes a moral duty to provide for his or her spouse and, as a general rule, a spouse will have priority over other entitled beneficiaries in a Will contest. Having said that, every case is different and will turn on its own unique circumstances.

There are a range of factors a Court must consider when assessing the merits of a family provision claim. Your family circumstances should be assessed in light of these factors when preparing your Will to minimise the potential of a Will contest when you die.

Strict time limits apply with respect to making a claim for family provision. If you feel you have not been given adequate provision from the Will of a family member or 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 a Will Kit doesn’t do

There are various ‘Will Kits’ available on-line – most are cheap or ‘free’ and all you need to do is download them and fill in the blanks. Many websites boast that you can prepare your Will ‘without spending hundreds of dollars on legal fees’.

Simple, right? Not really.

Generating an on-line Will may seem easy, but the ‘hundreds of dollars’ that you might save will never make up for some of the possible pitfalls in preparing a Will without sound legal advice.

When you generate your own on-line Will, you don’t meet personally with the writer of the Will. This is the most significant issue with self-generated legal documents. You don’t have the opportunity to discuss your family and your circumstances, and a lawyer does not have the opportunity to identify issues unique to you, that could otherwise be addressed with careful planning.

A lawyer with an understanding of succession law will guide you through this process and create not just a Will, but an effective estate plan.

The following are some of the important considerations that an experienced lawyer will address, that a Will-Kit may not.

Your lawyer will prepare an estate plan, not just a Will

A lawyer will take a holistic approach and will consider all aspects relevant to your estate plan. Not only is it important to plan how your assets are distributed when you die, but you need to provide for contingencies such as appointing guardians and attorneys if you become incapacitated and are unable to manage your financial and personal affairs.

A lawyer will also consider how your assets are held – whether that is jointly or individually – as this can determine how and to whom those assets may be left. For example, when assets are held jointly with another person, the surviving person will automatically inherit the deceased person’s share when he or she dies. A contrary direction in a Will to leave that share to somebody other than the joint tenant will not override this legal principle. A lawyer will advise whether it is in your interests to sever the tenancy which will then enable you to leave your share to whomever you wish.

Your lawyer will also discuss your superannuation and death benefits which do not automatically form part of your estate. In most cases, your benefits will be paid directly to a superannuation dependant either at the discretion of the trustee or in accordance with a death benefit nomination.

Different categories of beneficiaries are taxed differently under taxation law and your lawyer can advise on these tax implications so you can make an informed decision.

Preventing a gift from failing

A common problem with do-it-yourself Wills is the risk that a gift to a beneficiary may fail. ‘Ademption’ occurs when specifically named property in a Will no longer exists at the time the Will-maker dies. Consequently, the intended beneficiary of that gift may lose out altogether. The ademption of a gift, can have a significant impact on the value of assets received by a beneficiary, particularly where the asset is significant such as real estate or a prestige motor vehicle.

Fortunately, the law has developed certain exceptions to the rules of ademption and a beneficiary may be saved from missing out on his or her inheritance. Having said that, a properly drafted Will can prevent the issue arising in the first place and is likely to avoid the potential for unwanted estate disputes.

Protecting your assets and tax planning

Your lawyer will advise on how to best structure your Will to protect your assets against distribution to an unintended beneficiary (such as a child’s estranged partner or the creditors of a bankrupt beneficiary).

A testamentary discretionary trust may be recommended. This is a trust created in your Will that comes into effect after you die. The trust is administered by a pre-appointed trustee who determines how and when estate assets are managed and distributed.

If properly managed, the flexibility of a discretionary trust allows beneficiaries to access favourable taxation treatment with respect to their inheritance and provides protection for vulnerable beneficiaries. With careful planning, the timing of transferring estate assets may also postpone or minimise capital gains tax liabilities.

An on-line Will Kit is unlikely to consider these matters and, in any event, cannot provide the legal advice necessary to decide whether this type of Will is appropriate in your circumstances.

Guarding against family provision claims

A successful family provision claim may result in the terms of your Will (despite your intentions) being amended to provide for an ‘eligible person’.

Family provision rules vary between jurisdictions however an eligible person generally includes a current or former spouse or de facto partner, a biological, adopted or step-child of any age, and certain dependent members of the deceased’s household.

An eligible person may make a claim against the estate of a deceased person if he or she believes they have been unfairly treated under the Will or the proposed distribution is unfair. Whilst warranted in some circumstances, such claims are usually an unwelcome interruption and will result in additional time, delay and cost in finalising the estate.

Your lawyer can identify potential claimants under the family provision rules relevant in your jurisdiction and, if necessary, advise on how to reduce the likelihood of such a claim.

Conclusion

Planning your estate and having your Will prepared by a lawyer is a smart move. Your lawyer will ensure your Will is valid, correctly signed and protects your assets and your beneficiaries. He or she will advise how future changes may affect your estate plan and will usually provide a friendly reminder to review your Will when your circumstances change.

Yes, you can prepare a valid Will on-line however, there is considerable risk that it will not be tailored to your unique circumstances, may not achieve exactly what you want, and may not take advantage of structures to protect assets and save tax.

Meeting with a lawyer to discuss your estate plans and finalise a well-considered Will that caters to your circumstances is money well spent.

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.

Faster Court processes for small family law property cases

Dividing property after separation can be challenging and, while avoiding court is the preferred approach to finalise a property settlement, this is not always possible. Court proceedings can exhaust time and money. When the pool of assets is quite modest, the impact of excessive legal and court costs can put a significant dent in the value of the property a couple has worked hard to obtain.

To target these issues, the Government has introduced a Small Claims Property Pilot program to help parties with small asset pools reach a fair division of assets with minimal cost and without extensive delay, as is often the case for family law matters. Known as the Discrete Property List, the program has been implemented by the Federal Court registries in Brisbane, Parramatta, Adelaide and Melbourne.

The program commenced in January 2020 and will run for two years. Afterwards, its success will be assessed with the possibility of expansion into other regions and on a more permanent basis.

If you are separated with a net joint asset pool of $500,000 or less, you may be eligible to access the program and have your matter dealt with more efficiently and cost effectively by the Federal Court.

The Discrete Property List

The program forms part of the $98.4 million Women’s Economic Security Package (WESP) to fund services and initiatives aimed at supporting victims of family violence and resolving family law disputes.

Traditionally, apart from urgent matters, family law property cases progress through the court in the same manner and within the same timeframe irrespective of the size of the asset pool or complexity of issues involved. This approach has contributed to an excessive backlog of cases which could potentially be lifted by fast tracking some of the smaller, simpler matters.

The program deals with property related matters only, which are referred to as Priority Property Pools under $500,000 (PPP500) cases. A PPP500 case is one where:

  • the parties’ net property (including superannuation) is $500,000 or less; and
  • there are no entities owned or controlled by either party that will require valuation or expert investigation (for example, a family trust, company or self-managed superannuation fund); and
  • neither party is seeking orders for parenting or child support.

The objectives of the program are to:

  • fast-track and finalise simple property matters involving small asset pools at minimal expense for the parties involved;
  • reduce the current backlog of cases within the family law system and the waiting time for other matters;
  • assign a Magistrate to deal with smaller, less-complex matters while freeing up Judges to deal with more complex matters and children’s matters.

Processes and timeframes

The Federal Circuit Court has issued practice directions for parties involved in a PPP500 case. Rather than waiting to be heard by a Judge, matters in the Discrete Property List will, in the first instance be assigned to and case-managed by a Registrar.

In most cases, the matter will be dealt with exclusively by the assigned Registrar with an outcome anticipated within 90 days or the matter referred to a Judge for case management or listed for hearing.

The program fosters early dispute resolution and features intensive monitoring for compliance and exchange of documentation between the parties. To improve the potential outcome using these processes, there is close involvement to ensure cases are properly prepared before alternative dispute resolution takes place.

A PPP500 case will typically take the following path:

  • Proceedings are commenced by the parties filing an Initiating Application and a Financial Summary. Prior to the first court date, the case will be confirmed as a PPP500 and preliminary directions made by the Registrar in chambers for financial disclosure and the exchange of relevant documents, such as valuations and expert reports, between the parties.
  • On the first court date before the Registrar, and assuming the parties have exchanged the required financial information, a ‘balance sheet’ is settled and the parties may be referred to private mediation, a conciliation conference or Legal Aid conference.
  • Alternative Dispute Resolution may take place with a Registrar, external mediator or at a Legal Aid conference. Following, the parties may be in a position to settle the matter by consent, and in such cases, legally binding orders can be made.
  • If the matter does not settle, a second court date is arranged – factual issues are identified, the balance sheet is re-checked and settled, and the Registrar’s involvement comes to an end. The case is then referred to a Judge.
  • A procedural hearing is convened where issues are identified, and directions made for a final hearing. Parties may have the option to consent to a less adversarial hearing on the papers. If a traditional hearing is preferred, the parties should identify the issues in dispute and relevant evidence in support of their respective positions.
  • Final hearing takes place.

Conclusion

Legal and other costs for small property cases can be grossly disproportionate to the actual value of the asset pool. With cases taking up to two years to reach a final hearing, parties endure expenses in addition to legal and court costs such as maintaining and insuring assets pending their potential sale, storage fees and short-term accommodation costs. The parties must also contend with the emotional impact of court proceedings and the feeling of being ‘in limbo’ until a property division is finalised.

It is anticipated that PPP500 cases will proceed more expeditiously through to settlement, alleviating some of the emotional and financial stress to those with modest asset pools and freeing up the Court to deal with more complex family law matters.

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.

Family Law and co-parenting in difficult times

The coronavirus (COVID-19) has brought additional stress and uncertainty to many families involved in co-parenting which, by its nature, can be stressful enough.

School closures, state and territory border closures, additional pressure on healthcare workers and providers of essential services, job loss and isolation all pose significant challenges to those families with shared parenting arrangements. This is a time to put conflict aside and take a practical and sensible approach to co-parenting.

If you or your children are in danger, please contact your local police immediately.

Parenting orders – managing in difficult circumstances

  • As always, the safety, welfare and best interests of the children should remain a priority. If court orders are in place, it is expected that they be complied with which includes facilitating time spent by the children with each parent pursuant to those orders.
  • Where strict compliance is not possible, or compliance puts the safety of the child at risk, the parties should wherever possible, communicate to identify practical and reasonable solutions.
  • Ideally, an agreement to vary the arrangements of existing orders should be in writing, whether by text message, email or other app.
  • Parents and caregivers can facilitate negotiations through their lawyers and applications to vary consent orders may be filed electronically with the Court.
  • Where an agreement cannot be reached, one party may seek leave of the court electronically to vary the orders.

 Co-parenting arrangements generally – practical tips and considerations

  • Be proactive – although agreed parenting arrangements may not have changed dramatically yet, anticipate that they may need to, and communicate now to put a plan in place. Obstacles to consider include school closures or extended school holidays, different changeover venues (with some venues now closed), potential lockdowns and additional demands on one or both parents such as health care workers and essential services employees.
  • Traditional work arrangements between parents may in fact reverse as full-time employees find themselves out of work and part-time and casual workers, for example nurses, become more in demand.
  • Compromise is key – accept that parenting arrangements will likely need to change during these circumstances, at least for the short or medium term. Having said that, parties should not manipulate the current crisis to leverage additional time spent with children when this is clearly not necessary.
  • With many travel plans cancelled, parents and caregivers may need to re-think planned activities with children. There are numerous resources online providing creative ways to keep little minds occupied during these times.
  • If one parent or caregiver is missing out on scheduled time with a child due to the current crisis, be generous in facilitating communication between that parent and the child – consider using apps such as FaceTime, Skype or Zoom, in addition to the usual phone contact.
  • Talk to your children about the current situation and try to remain calm and positive. How you explain what is happening to your children will depend on their age, level of maturity and the individual circumstances.
  • Be creative and resourceful but try to maintain, as far as practicable, regular routines such as personal hygiene, healthy meals and bedtimes.

Family Court arrangements

The Family and Federal Circuit Courts continue to operate but have made significant changes to their processes. How the Courts continue to function may no doubt change as the situation evolves.

Presently, only urgent matters will be conducted through face to face hearings for which strict in-court protocol to manage risk will be maintained.

Most other court hearings and events will be by telephone or video conferencing with some non-urgent matters to be postponed.

Documents will be filed electronically with registry services to be provided remotely by telephone or online.

We are here to help

The coronavirus pandemic is an evolving situation with a number of health and business orders issued at federal, state and territory levels. Government directions, advice and laws have, and will likely continue to change as new information and developments arise. It is important to stay informed of these updates through reliable sources.

Effective co-parenting means putting differences aside and working together to make decisions and care arrangements for children that are in their best interests.

We understand that this is a difficult and distressing time for many. Our firm infrastructure facilitates remote working conditions to serve our clients and assist them through these difficult circumstances. We will continue to provide advice and assistance through telephone and video conferencing across all areas of family law.

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.

GST and residential property transactions

The responsibility for remitting Goods and Services Tax (GST) to the Australian Taxation Office (ATO) generally falls on the party making the ‘supply’. In a property transaction, this has traditionally meant the vendor or developer (supplier), unless the contract provides otherwise.

From 1 July 2018 purchasers of ‘new’ residential property must deduct the GST from the purchase price of the property and remit this directly to the ATO on or prior to completion.

These reforms are designed to strengthen compliance with GST obligations and specifically address concerns involving some property developers making taxable supplies and failing to remit the GST collected on those sales to the ATO.

The changes are implemented through the Taxation Administration Act 1953 (Cth) which operates Australia-wide and therefore potentially affects all purchasers, vendors / developers of residential property.

What types of transactions are affected?

The reforms apply to ‘new residential premises’ or ‘potential residential land’. Property that is ‘new residential premises’ means property that:

  • has not previously been sold as residential premises; or
  • has been created through substantial renovation of a building; or
  • has been built to replace demolished premises.

‘Potential residential land’ is land that is permissible to be used for residential premises but does not contain any buildings that are residential premises (i.e. houses or strata units). Inclusion of the term ‘permissible’ means that if the local government zoning allows a mixture of residential and commercial use, then that land is still considered ‘potential residential land’.

For the most part, the reforms essentially apply to all off-the-plan residential property purchases and vacant land in a new subdivision.

The changes commenced on 1 July 2018 and affect all relevant contracts, however contracts entered before 1 July 2018 are excluded if the purchase price is paid before 1 July 2020.

What do purchasers of new residential property need to do?

If you have entered or enter a contract for new residential property which is caught by the provisions you will need to withhold and pay the relevant GST from the contract price to the ATO on or before ‘supply’ (which in most cases will be the settlement date). Generally, the GST amount will be:

  • 1/11th of the contract price; or
  • 7% of the contract price if the margin scheme applies.

Vendors / developers will need to provide written notice of their GST obligations and, if GST is payable, this component must be withheld from the contract price and remitted to the ATO. The contract price does not include settlement adjustments such as council and water rates.

Submitting GST withholding payments

Two ATO on-line forms are used to facilitate the remittance process:

  • Form 1 – GST property settlement withholding notification
  • Form 2 – GST property settlement date confirmation

Each form provides details of the contact person, the property, the GST withholding amount and the parties to the transaction (purchaser and vendor / developer).

Purchasers are responsible for submitting these forms which can be completed by their conveyancer or lawyer who will make the necessary adjustments in the settlement statement and remit the amount to the ATO on behalf of the purchaser at settlement.

Forms are submitted after the contract has been entered into and a supplier gives written notification to the purchaser that a GST amount must be withheld from the contract price. The first form advises the ATO of the transaction and pending GST requirement and generates a unique payment reference number. The second form confirms the settlement date and is submitted at the time of settlement when payment has been made to the ATO.

What do vendors / developers need to do?

Vendors / developers must not sell residential premises or potential residential land without written notification to a purchaser about the requirement to withhold and remit GST from the contract price. If there is no requirement to withhold GST this must be clearly stated on the notice.

If a GST amount is required to be held, the notice must include the supplier’s ABN details, the correct entity for payment of the GST, the settlement date and the amount payable.

The notification may form part of the contract for sale or be provided separately.

The GST is paid direct to the ATO by the purchaser on settlement and applied as a credit towards the supplier’s GST account.

The supplier then reports the GST withheld on its next Business Activity Statement (BAS) and will be entitled to a refund if the amount paid exceeds the actual GST liability for the relevant period.

Consequences for vendors / developers

The regime has significant implications on vendors / developers who should ensure processes are in place to deal with the changes.

  • Existing contracts should be reviewed to determine if they will fall within the provisions and therefore require the appropriate notification (for example, contracts that are already on foot but will not settle until after 1 July 2020).
  • New and pro-forma contracts should be reviewed and amended in line with the provisions and, where relevant, include positive obligations for purchasers to remit the GST to the ATO, noting that credits will not be able to be claimed unless / until the GST component has been remitted.
  • Failure to notify a purchaser in accordance with the regime is a strict liability offence and developers face penalties of up to (currently) $21,000 for individuals and $105,000 for corporations. Consequently, systems should be updated to ensure the inclusion of the appropriate notices for the supply of residential land.
  • The provisions effectively prevent developers from interim access to the GST component of a settled contract, which was previously available until the BAS was lodged and assessed for the relevant period. This could impact available working capital and developers may need to review their cashflow requirements to manage the provisions.

Conclusion

The reforms are aimed at improving the integrity of the property development industry and ensuring suppliers comply with their tax obligations. They add additional steps to the conveyancing process for residential property transactions, however can be managed through appropriate processes and systems.

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.

Where do the kids live after separating? The concept of shared parental responsibility

Many couples are able to agree on arrangements for the ongoing care of their children after they separate. These arrangements can be documented through parenting plans or formalised in consent orders without the need to attend Court.

Generally, parents are required to make reasonable attempts to resolve disputes about their children and, where agreement cannot be reached, must attend compulsory dispute resolution.

The Family Law Act 1975 (Cth) (the ‘Act’) provides a presumption of shared parental responsibility when considering the future arrangements for children. This concept however is sometimes misinterpreted as meaning that the children will spend the same amount of time with each parent.

This article provides an overview of how children’s matters are decided and explains the concept of shared parental responsibility.

How are children’s cases decided?

When negotiating children’s matters, the parties should take into consideration the way the Family Court would determine such matters should parenting issues not be resolved.

The overriding principles considered by the Court are that the best interests of the child are paramount. Essentially, this means that:

  • children should know and have the benefit of a meaningful relationship with both parents;
  • children should be protected from physical and psychological harm and harm resulting from them being subject to family violence;
  • children should receive parenting that allows them to reach their full potential;
  • parents should cooperate in determining what is best for the children;
  • unless a child is at risk, parental responsibility should be equally shared and children should have the right to spend time on a regular basis with both parents and other people significant in their lives.

What is shared parental responsibility?

The presumption of equal shared parental responsibility comes from ss 61DA and 65DAA of the Act. Section 61DA provides that ‘when making a parenting order in relation to a child, the court must apply a presumption that it is in the best interests of the child for the child’s parents to have equal shared parental responsibility for the child’. The presumption is subject to exceptions such as where there are issues of family violence or abuse.

Equal shared parental responsibility means that each parent should be jointly and equally responsible for significant long-term matters concerning their children such as making decisions about their health, welfare, religious and cultural upbringing and education.

The principle of shared parental responsibility has often been misconceived with separating couples believing that it is a ‘given’ that a child or children will spend equal time living with each parent after separation. This is not the case – living arrangements are decided with the main objective of the best interests for the child and a practical approach to what is realistic in light of the family dynamics, work commitments and other responsibilities.

Section 61DA specifically states that the presumption of shared parental responsibility ‘…relates solely to the allocation of parent responsibility [and not] the amount of time the child spends with each of the parents.’

How are living arrangements determined?

The amount of time a child spends with each parent will depend on a number of factors.

In considering whether a child should spend equal time with each parent, the Court must be satisfied that it is in the best interests of the child to do so and that such arrangements would be reasonably practical. If equal time living arrangements are not appropriate, then the Court will consider the child spending substantial and significant time with each parent.

In addition to the matters already outlined above, the following will be relevant in determining the best interests of the child:

  • any views expressed by the child;
  • the nature of the existing relations between the child and his or her parents as well as any other significant people such as grandparents and other relatives;
  • the extent to which each parent has already participated in the child’s life;
  • the likely effect on the child or any significant change in circumstances;
  • the age and maturity of the child;
  • any cultural matters that should be considered.

Factors taken into consideration regarding the practicalities of an equal time arrangement include:

  • how far apart the parents live;
  • the proximity of each residence to the child’s education centre or child care;
  • the parents’ capacity to implement equal time arrangements;
  • the parents’ willingness and ability to communicate, resolve conflict and deal with any issues that may arise;
  • the availability of the parents both physically and emotionally with consideration to work commitments, commitments to other family members and before and after school care options.

Conclusion

Shared parental responsibility means working with your ex-partner to make important decisions about your child’s life.

The Family Court has significant discretion and will take a comprehensive approach to determine what is in a child’s best interests when deciding living and other arrangements.

Court proceedings should be a last resort to determine children’s matters and separated couples should be cooperative and flexible to ensure that the children’s best interest are the paramount consideration.

By resolving disputes through mediation, separating couples can avoid the cost and anguish of attending Court in circumstances that are usually already fuelled with emotion.

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.

Can I be sacked for breaching company policies?

The circumstances unique to each case must be considered in determining whether it is lawful to terminate an employee for conduct that contravenes company policy.

Generally, however, if a breach of policy results in unlawful conduct such as bullying, harassment or discrimination, then the decision to terminate the offending employee may be justified.

Having in place well drafted policies and codes of conduct and adopting a systematic and fair approach to investigating workplace complaints is essential for employers.

These were important factors in recent Fair Work Commission proceedings in the case of Peter Carroll v Karingal Inc (2016) FWC 3709 when a breach of workplace policy as grounds for termination was affirmed.

The facts of the case

Mr Carroll worked at Karingal as an audit and risk manager supervising several other employees, two of whom made complaints against him.

The allegations were that Mr Carroll was controlling, ‘micromanaged’ the workplace and belittled his employees (particularly with respect to the complainants’ inferior English skills). He was often aggressive towards his employees with a stifling approach to supervision.

Mr Carroll also introduced various spreadsheets requiring his employees to record detailed activities. These were considered excessive, unwarranted and encroached upon the employees’ already limited time to perform their duties.

Upon receiving the complaints, Karingal requested an independent enquiry and arranged for Mr Carroll to work from home whilst investigations took place. Throughout the course of investigations, Mr Carroll had the opportunity to read and comment in detail on the report presented by the investigator.

The report found that the cumulative effect of Mr Carroll’s behaviour towards the complainants constituted a breach of Karingal’s code of conduct, work, health and safety policies and bullying and harassment policy.

Mr Carroll was terminated and consequently made application to the Fair Work Commission for unfair dismissal.

Unfair dismissal claim

The employer / employee relationship is largely governed by the Fair Work Act 2009 (Cth) which sets out minimum standards of employment and, amongst other things, provides protection to employees against discrimination and unfair dismissal.

Section 385 of the Act provides that a dismissal is unfair if:

  • the dismissal was harsh, unjust or unreasonable; and
  • the dismissal was not consistent with the Small Business Fair Dismissal Code (if relevant); and
  • the dismissal was not a case of genuine redundancy.

Significant to this case, was whether the dismissal was ‘harsh, unjust or unreasonable’. In such matters the Court will need to consider (amongst other things):

  • whether there was a valid reason for the dismissal related to the person’s capacity or conduct (including its effect on the safety and welfare of other employees); and
  • whether the person was notified of that reason; and
  • whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and
  • any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal; and
  • if the dismissal related to unsatisfactory performance by the person – whether the person had been warned about that unsatisfactory performance before the dismissal…

As there was no argument about Mr Carroll’s performance, Karingal relied on Mr Carroll’s conduct as justifying the dismissal, claiming that he engaged in ‘serious and sustained bullying of staff under his management and supervision, which adversely affected their health, safety and welfare.’

This conduct was in breach of Karingal’s ‘Code of Conduct, its Work, Health and Safety Policy and its Bullying and Harassment Policy’.

The Code of Conduct was said to establish the required standards of its employees with an onus on ‘managers to ensure that they maintain a positive environment free of bullying, harassment and other forms of discrimination.’

Mr Carroll acknowledged that he was aware of these documents which provided that breaches would be ‘addressed either informally, through counselling methods, or formally’.

The Commission’s determination

The complainants provided evidence, and the Commission accepted, that Mr Carroll’s behaviour made them feel threatened and intimidated, causing stress and anxiety and having an effect on their safety and welfare.

The Commission found that the complainants and Mr Carroll were all credible witnesses and that Mr Carroll was ‘well-intentioned’ and believed ‘he was doing his best by his employer and his staff’. Notwithstanding, the Court found that Mr Carroll’s conduct did in fact constitute bullying in breach of Karingal’s Code of Conduct and, as a consequence, his termination was lawful.

Key take outs from the case

It is important for employers to have well-written policies which may be used as models for appropriate behaviour in the workplace. Codes of conduct and workplace safety policies (which include protocols for bullying and harassment) are important documents and may be critical in evidencing the required conduct of employees.

It is difficult to sustain the lawful termination of an employee for behaviour of which he or she was unaware. Accordingly, all policies and codes of conduct must be made available to employees. Ideally, this should occur on or before induction and whenever updates are made.

Obtaining the employee’s acknowledgement of having received the document (for example by requesting the employee sign acceptance of the document) is a wise way to confirm the document was brought to the attention of the employee.

Employers must ensure that policies are reasonable and implemented in a manner that protects employees from treatment that might be considered harsh, unjust or discriminative.

Karingal’s documented policy and codes of conduct supported its defence against the unfair dismissal of Mr Carroll. These documents set out the required standards of behaviour from employees, including managers, and the implications (informal or formal) they would face for breach.

Given Mr Carroll’s acknowledgement that he was aware of the policy, it might also be assumed that Karingal had in place an effective system to ensure employees received such documents.

Engaging an independent investigator, providing Mr Carroll opportunity to comment on the reports and following a fair process during the enquiry also weighed in Karingal’s favour.

Conclusion

A serious breach of company policy, particularly when the conduct results in behaviour that is unlawful, can be grounds for termination.

Employers should ensure that they have well-written policies and codes of conduct so that employees understand what is expected of them in the workplace. These should be brought to the employee’s attention and reviewed regularly.

Employers should also adopt fair and consistent procedures for dealing with workplace complaints and incidents to ensure employees have the benefit of an impartial hearing if allegations are made against them.

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.

De facto relationships and Will contests

All jurisdictions in Australia provide statutory rights for eligible persons to contest an unfair Will if they can show that they have been left without adequate provision by the testator.

In Queensland, an eligible person includes:

  • a spouse of the deceased;
  • a de facto partner (whether same or opposite sex) who had been in a continuous relationship with the deceased for at least two years at the time of death;
  • a former spouse who was maintained by the deceased and not remarried, or is the parent of a minor child of the deceased and dependent at the date of death;
  • a child, stepchild or adopted child of the deceased;
  • a parent who was dependent on the deceased or the parent of a surviving child under the age of 18 years of the deceased, or other person under the age of 18 years who was wholly or substantially dependent on the deceased.

If a family provision claim is successful, the Court can order an adjustment to the terms of the Will to satisfy the claim.

When contesting a Will, a de facto partner must first establish the existence of the de facto relationship with the deceased, then show that he or she has been left without adequate provision. Claims are assessed based on a range of factors and the unique circumstances relevant to each case.

What is a de facto relationship?

It is generally expected that testators have a moral duty to provide for the proper maintenance and support of their spouse or de facto partner.

A de facto relationship exists where a couple of the same or opposite sex and who are not legally married or related by family, live together in a genuine domestic relationship.

Factors considered in establishing a ‘genuine domestic relationship’ include the length of the relationship, the care and support of children, the nature and extent of a common residence, the existence of a sexual relationship, financial interdependence, property acquisition and ownership, and the public perception of the relationship.

What must an applicant prove in a family provision claim?

An applicant must prove that, at the time of considering the application, he or she has been left without adequate provision for his or her proper maintenance, education and advancement in life. A claim may be made because the applicant was completely left out of the Will or that, in light of the applicant’s financial needs, the inheritance proposed is insufficient to support those needs.

The deceased’s moral obligation to provide for the applicant, the value of the estate and the competing financial needs of other entitled persons are all considerations.

Family provision claims often involve the contested interests between a de facto partner and the deceased’s child or children from a former relationship. Every case is different, however the typical matters that a Court considers in such claims include:

  • the length of the de facto relationship;
  • the respective financial and non-financial contributions of the applicant and the deceased to the estate assets;
  • the personal circumstances of the applicant such as his or her education, employment, age, health and special needs;
  • the financial position and financial needs of the applicant;
  • the personal circumstances, financial position and financial needs of the deceased’s children or other beneficiaries or applicants;
  • whether there were joint assets that already transferred to the applicant after the deceased’s death;
  • whether the applicant received any benefit from the deceased’s life insurance or superannuation payments.

Case study                                                        

Lawrence v Martin [2014] NSWSC 1506 considered a claim by a de facto partner who had been left out of the deceased’s Will. Although their relationship had lasted for 16 years, the deceased had not updated his Will since divorcing his former spouse in 1999. The Will left his entire estate to his (then) spouse, and then to his two sons of that marriage. The effect of the divorce was that the wife was precluded from benefiting under the Will. Consequently, his estate worth around $1.6 million, was left equally to his sons.

On the testator’s death, the applicant received a life insurance benefit of $229,000 and the interest in their jointly held family home was transferred into her sole name. The home was worth around $1.5 million with a mortgage of $78,000.

The applicant claimed provision of $660,000 from the estate and the Court took account of the following:

  • that the applicant had already received a substantial life insurance benefit and the transfer of the family home into her name;
  • that the applicant had made substantial financial contributions to the family home and assets of the deceased;
  • that the applicant and the deceased were interdependent financially;
  • that the relationship was genuine and long lasting with the applicant making substantial contributions towards the deceased’s welfare;
  • that the applicant, aged 60, would likely cease work over the ensuing years resulting in a substantial reduction in income;
  • although in reasonable health, the applicant suffered some limitations due to neck, back and shoulder issues;
  • the intentions of the deceased which declared a desire to leave each of his sons a house;
  • the financial position and needs of each son, one of whom suffered a bipolar condition making it difficult to sustain long-term employment, as well as other health issues.

In balancing the competing needs between the applicant and the sons and in consideration of all the circumstances, the applicant was awarded $350,000.

This case illustrates the factors unique to each claim that must be considered when balancing the competing needs of the applicant and other beneficiaries.

What if there is no Will?

When a person dies intestate (without leaving a Will), the estate is distributed according to a statutory formula set out in legislation. The distribution follows the deceased person’s next of kin and the priority is generally the spouse and children (if any). A ‘spouse’ includes a married or domestic partner. Accordingly, the non-existence of a Will does not prevent a de facto partner claiming provision from an intestate estate.

Conclusion

A de facto partner may make a family provision claim if the proposed distribution under a Will or intestate estate does not make adequate provision. Strict time limits apply for bringing such claims and it is wise to obtain early legal advice.

Most family provision claims can be settled between the legal representatives of the applicant and estate which will avoid costly Court proceedings.

To reduce the possibility of a family provision claim it is important to obtain good legal advice when preparing your Will and to ensure that your Will is regularly reviewed.

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.

Mortgage stress – when you can’t pay your home loan

Life throws us obstacles now and then and it’s not uncommon for some of these to challenge our financial security.

Mortgage stress – when we struggle to meet our home loan repayments, probably affects more people than you think.

A mortgage is essentially a ‘statutory charge’ in favour of a lender over property held in the borrower’s name. The mortgage secures the repayment of the money loaned and the associated loan contract gives the lender the right to repossess and sell the property if repayments are not made.

Missing a mortgage payment however does not necessarily mean you will lose your home. A mortgage is a long-term commitment and your lender will generally work with you to remedy the situation.

This article provides guidance on what to do when you can’t meet your loan repayments and an overview of your rights and your lender’s responsibilities if a solution cannot be found and repayments remain unpaid.

I’ve missed a loan payment, what do I do?

Let your lender know. This is the most important first step. Contact your lender and let them know you are aware of the situation and plan to fix it. Better still, if you know in advance that you will not be able to make a payment when it is due, be proactive.

Banks and building societies have specific areas that deal with loan defaults. As it is in both parties’ interests to get things back on track, they are generally happy to assist. The quicker you act, the more likely you will be offered a solution and the more options you will have.

Most lenders have hardship programs in place to assist borrowers facing financial difficulties.

If your financial problems are short-term and you are genuine in your attempts to repay the loan, you may be able to arrange to temporarily defer payments, take a repayment holiday, extend the term of the loan, or refinance. Each case is assessed on its own merits and your lender will usually assist you provided the usual checks are in place to ensure you (and they) are not likely to be financially worse off.

 

Your lender may require a statement of financial position to assess whether you will be able to come to a suitable arrangement for repaying your loan.

Don’t panic and talk to your lender before you consider short-term, high risk alternatives such as using credit cards, taking out personal loans or borrowing from friends.

What rights does the lender have when I can’t pay my mortgage?

By holding a registered mortgage over your property, a lender (mortgagee) has a statutory right to take certain action if you default in your loan repayments. A power of sale is generally written into the loan contract and allows the mortgagee to sell the property to recover the mortgage debt and associated costs.

The loan contract sets out additional matters such as the right to charge a higher rate of interest when the account is in arrears (default interest), the right to charge additional fees and to be reimbursed for the costs of chasing you for loan payments.

If you can no longer comply with the terms and conditions of the loan the lender can:

  • exercise power of sale, take possession of the property and / or foreclose on the property, selling it to recover the debt together with interest and associated costs such as agent’s fees, legal fees and any costs of insuring and maintaining the property;
  • if the proceeds of sale do not cover the debt due, sue each of the borrowers personally for the balance.

What are my rights?

A mortgagee will usually exercise its power of sale rights after a default continues for a period of one month (unless some other time is stated in the mortgage). The mortgagee must ensure due process is taken before exercising these rights.

All borrowers (mortgagors) must be given formal written notice and allowed 30 days to remedy a default before action is taken. Notices must be correctly served on each defaulting mortgagor to the addresses specified in the mortgage documents.

The mortgagee must act in good faith towards the mortgagor. This means that the mortgagee must take reasonable steps to sell the property at market value or for the best price reasonably possible in the circumstances.

The value of the property should not be sacrificed and a mortgagee may be liable for loss suffered due to the mortgagee acting recklessly or carelessly during the selling process.

When the property is sold the proceeds of sale are distributed in a specific order of priority.

Conclusion

If you are experiencing financial difficulty, particularly with paying your mortgage, it is important to be proactive and up-front. Contact your lender, be frank, and try to make a workable plan to get things back on track.

If you have received a default notice from your lender you should seek legal advice immediately. Your lawyer can explain the process and ensure your rights have been properly protected and may also be able to liaise with the lender on your behalf to assist in formulating a resolution.

If you believe you have been unfairly treated by your lender or have not been given due process, you can lodge a dispute with the Financial Ombudsman Service.

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.