ByLawyers News and Updates

Companies, Trusts and Partnerships – Special disability trusts

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By Lawyers has expanded our comprehensive Companies, Trusts and Partnerships guide to include commentary and precedents covering special disability trusts.

A special disability trust can be established to provide for the care and accommodation of a disabled family member and if compliant will allow the disabled beneficiary of the trust to retain their full entitlement to a Centrelink pension. There are also generous concessions for contributions to a compliant special disability trust.

The commentary covers everything a practitioner needs to know about establishing a special disability trust for their clients, including:

  • beneficiary eligibility requirements;
  • contribution and concession guidelines; and
  • the permitted use of special disability trust funds.

The By Lawyers Special Disability Trust Deed is provided and includes all of the mandatory clauses from the model trust deed for special disability trusts published by the Department of Social Services, as required to comply with the Social Security Act 1991 and the Social Security (Special Disability Trust) Guidelines 2011.

 

Self managed superannuation funds – Updated commentary and new precedents

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Our very popular Self Managed Superannuation Funds Guide has been updated to include some new commentary and precedents dealing with death benefits and reversionary pensions.

New or enhanced precedents include:

  • a detailed new Pension Payment Agreement between the trustee and the member setting out the terms upon which pensions are to be paid from the fund;
  • an updated Product Disclosure Statement, from the fund to its members, explaining the basis for establishing a pension and the procedure involved in paying pensions from the fund;
  • a letter to the client – i.e.: the trustee of the self managed superannuation fund – enclosing and explaining the documentation; and
  • comprehensive Nomination forms, for death benefits and reversionary pensions, giving the member maximum permissible choice and flexibility as to how their superannuation is handled after their death.

These changes clarify and streamline the process of setting up pensions in a self managed superannuation fund, making a death benefit nomination or reversionary beneficiary nomination, in accordance with legislative requirements and allow users to give their clients the best advice and assistance.

New Joint Ventures Guide

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Within the must have commercial publication ‘Companies, Trusts, Partnerships and Superannuation’ we have created a new guide focusing extensively on the topic of Joint Ventures.

The guide contains commentary and precedents that have been drafted to provide an end to end solution for the joint venture trading structure such as:

  • establishing a new joint venture and the joint venture agreement;
  • a project management agreement;
  • a joint venture agreement for property development projects;
  • methods for selling an interest in a joint venture; and
  • withdrawal and terminating a joint venture.

The commentary also discusses the taxation and property ownership implications of operating under a joint venture structure.

 

New Partnerships Guide

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Within the must have commercial publication Companies, Trusts, Partnerships and Superannuation we have created a new guide, commentary and precedents focusing extensively on the topic of Partnerships.

Partnerships covers all aspects of setting up and running a business using partnership trading structures including:

  • general partnerships;
  • limited partnerships; and
  • incorporated limited partnerships.

The commentary, guide and precedents provide an end to end solution for partnership businesses such as:

  • establishing a new partnership and the partnership agreement;
  • adding new partners or making changes to profit share structure of an existing partnership;
  • removing or expelling a partner; and
  • dissolving a partnership and business succession arrangements.

The commentary also discusses the taxation and property ownership implications of operating under a partnership structure.

The Companies, Trusts, Partnerships and Superannuation guides also provides detailed information about other business structures including companies, trusts and self-managed superannuation funds.

Companies – new precedents

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New precedents have been added to the publication Companies, Trusts, Partnerships and Superanuation

Put and call option agreement
Put and call option precedent for use by a private company allowing the vendor to grant the purchaser a call option over the shares and the purchaser to grant the vendor a put option over the same shares.

Company constitution
Adding to a comprehensive set of commercial incorporation tools for practitioners and their clients, the constitution is for company members who elect to use a constitution, instead of the replaceable rules to guide their internal governance.

The company constitution precedent includes the general rules governing the relationship between a company’s directors, secretary and shareholders and the activities of the company and can be easily customised to suit individual clients’ requirements.

Table of Replaceable Rules

For company members who elect to use the rules to guide their internal governance. The main advantage of the replaceable rules is that a company who uses them can ensure that they are always up to date with developments and changes in regulation.

Contract for Sale of Shares – Extensive

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A new precedent has been provided. The Contract for the Sale of Shares – Extensive covers many of the issues that may arise in complex transactions. It may be found in our Companies, Trusts and Partnership Guide in the Companies section within Deeds and agreements.

Companies, Trusts, Partnerships and Superannuation

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Companies, Trusts, Partnerships and Superannuation

DECEMBER
  • New Precedent – Hybrid Trust Deed – A hybrid trust is one that combines the efficiency of a fixed trust with the flexibility of a discretionary trust.
NOVEMBER
  • New precedent – Discretionary trust deed – No appointor
  • Costs Agreements – Reference to interstate costs laws added and updated interest clauses
  • ‘Further Information’ options added
  • Self Managed Superannuation Funds commentary – Updated information regarding non-lapsing binding nominations and stamp duty
OCTOBER
  • Costs Agreements
    • WA and SA – added client and firm fields company execution clause trust account details solicitor’s lien.
    • WA – added clause on scale fees.
    • NSW/VIC – included reference to time limit for bringing costs assessment included total estimate of legal costs section with provision for variables and included authority to receive money into trust.
    • Disputes section improved, fields for client and firm details added, trust account details added, solicitor’s lien added, execution clauses for individuals and corporations added and general formatting and grammatical improvements.
  • Commentary – Update income tax – corporate beneficiary Div 7A loan
SEPTEMBER 
  • Amended tax amount where necessary to $175,000
AUGUST
  • Costs agreements have been added for Tasmania and Northern Territory.
JULY
  • Companies, Trusts, and Partnerships Commentary – The land tax sections of the comparative business structures table have been updated to include the foreign purchaser surcharge in NSW and the increase in absentee owner surcharge in VIC.
  • Self Managed Superannuation Funds Commentary – The commentary was amended to expand the definition of a dependent for the purposes of determining superannuation death benefit recipients.
JUNE
  • Self Managed Superannuation Funds Commentary – updates regarding amendments to superannuation fund balance caps introduced by the 2016 – 17 Federal Budget and updates for lender requirements in limited recourse borrowing arrangements also applied bringing commentary into alignment with arm’s length principles discussed in ATO practical compliance guideline 2016/5.
MAY 
  • Commentary added on discussing foreign resident capital gains withholding payments.
APRIL
  • File Cover Sheets for all publications have been completely re-formatted for a better look.
MARCH
  • Superannuation commentary now discusses replacement assets.
  • New precedents added:
  1. Custodian Deed
  2. Resolution of the directors – Act as custodian – Bank limited recourse borrowing arrangement
  3. Resolution of director as trustee – Limited recourse borrowing arrangement
  4. Resolutions for sole director – Limited recourse borrowing arrangement
  5. Limited recourse borrowing deed
FEBRUARY
  • A general minutes precedent has been added to the companies trusts and partnerships guide.
  • Making life a little easier for practitioners – look out for Blank Deed, Agreement and Execution Clauses folder in the matter plan at the end of each Getting the Matter Underway.
JANUARY
  • Considered the forthcoming amendments to the Associations Incorporation Act 2009 and the regulations planned for later in this year.
  • Added a new Combined Shareholder and Unitholder agreement precedent into Companies, Trusts and Partnerships Guide.

The Impact of Bamford on Trust Deeds and Trust Resolutions

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Subscribers to our Companies, Trusts, Partnerships and Superannuation product, and LEAP Office users, will be acquainted with the content written by Greg Vale, a By Lawyers author.

Following the Bamford decision Greg circulated a letter to his clients, which is reproduced below for your information.

Our trusts take into account this decision.

Getting it right – the impact of bamford on trust deeds and trust resolutions

On 30 March 2010 the High Court handed down its much awaited decision in Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation [2010] HCA 10.

In response to Bamford on 2 June 2010 the ATO released a Decision Impact Statement (‘DIS’) and Practice Statement Law Administration PS LA 2010/1, which outlines how the ATO will treat the determination of trust income.

The High Court decision and ATO response are significant and affect every trust in Australia. In particular they affect how trust deeds and income distribution resolutions must be drafted to obtain the optimum tax outcome.

The significance of the High Court’s reasoning in Bamford is that it confirms that it is possible to define and modify ‘trust income’ through the drafting of one’s trust deed. The advantage of being able to define and modify trust income is that it can create circumstances which remove adverse tax consequences or even allow more beneficial tax outcomes to be achieved.

Articles Whilst written for Federal practitioners this article has interest and relevance for practitioners in all states.

Although the ATO accepts that Bamford means that trust deed clauses can be used to define trust income and can thus influence how the net income of a trust will be taxed, it provides a series of caveats, including the potential application of the general anti-avoidance rule or trust stripping rules in circumstances involving a deliberate mismatch between income entitlements and tax outcomes.

Great care is required in the drafting of the yearly income distribution resolutions. Following Bamford, there is a clear benefit in ensuring that one’s trust deed confers sufficient powers to allow a trustee to determine trust income in each income year. Accordingly, in relation to the 2009/2010 income year and onwards, we consider that all trustees should undertake the following steps in light of Bamford.

Step 1 – Trust deed review

Trustees should review the trust deed in conjunction with their tax and legal advisors to determine whether: 1. The trust deed defines trust income and if so, how the definition operates to determine its capacity to minimise adverse tax consequences going forward; 2. The trust deed provides the trustee with adequate powers to modify trust income, including the power to reclassify items as income or capital and vice versa and allocate expenses and losses as appropriate; 3. There are appropriate streaming provisions and whether they are adequate going forward.

Step 2 – Consider amending the trust deed

Where the trust deed does not contain an adequate definition of trust income or powers to enable the trustee to stream or modify what constitutes trust income, then trustees should consider whether it is beneficial to amend the trust deed to resolve these deficiencies. Tax and legal advice should be sought prior to amending the trust deed so as to avoid any adverse tax consequences. For example, the ATO have already flagged the issue of trust resettlements in this context.

Step 3 – Review the drafting of the trustee resolutions

Trustees should review how they draft their distribution resolutions to ensure that an appropriate tax outcome will be achieved. Binetter Vale Lawyers can carry out the necessary review of your client’s trust deeds and provide advice as to the appropriate amendments in the wake of the decision in Bamford and considerations to take into account when drafting income distribution resolutions for a total of $250 (unless advised otherwise in advance). Separately, for an additional charge to be advised as part of the trust deed review, we are able draft the relevant deeds of amendment and provide tax and legal advice on the issue of resettlement as appropriate.

Further, any deeds of amendment will be accompanied with advice as to the types of resolutions appropriate for that deed.

*This article has interest and relevance for practitioners in all states.

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