23.07.2010
News
The question of whether goods and services tax (’GST’) is payable on a supply arises in every business transaction, ranging from the sale of a commercial building pursuant to an REIQ Commercial Land and Buildings Contract or the sale of business assets pursuant to a Contract Business Sale.
It is important for the parties to the transaction to establish from the outset whether:
(a) GST is payable on the purchase price for the supply by the seller to the buyer; or
(b) GST is included in the purchase price for the supply made by the seller to the buyer; or
(c) The going concern exemption is available to the parties to the transaction and therefore no GST will be payable.
If the parties form the view that the going concern exemption is available to them, below is a list of key issues that must exist.
What must exist for the going concern exemption to apply?
- The recipient of a supply must be registered for GST on or before the day of the supply being made by the supplier to the recipient.
- The supplier must supply to the recipient all things necessary for the continued operation of the enterprise. For example, if an agreement was entered into for the sale of a business, all things necessary, including but not limited to the plant and equipment, business name and intellectual property must be supplied to the buyer along with any assignment of lease of the premises (if the business is operated from a leased premises).
- The supplier must carry on the enterprise until the day of the supply. The enterprise must be active up to and including the date of supply. In the case of a restaurant for example, if it was not operating prior to the date of supply, and did not open again prior to the date of supply, the exemption would most likely not be available to the parties.
- The supply made by the supplier is for consideration, i.e. the purchase price contained in a sale contract as payable by the buyer to the seller.
- The supplier and recipient have agreed in writing that the supply is of a going concern. A contract entered into would provide for how the GST is to be treated.
All things necessary: What happens if “all things necessary” cannot be supplied to the recipient by the supplier?
Certain things cannot be supplied by a supplier to a transaction because of statutory or government restrictions, i.e. a food license for a restaurant cannot be transferred from a supplier to a recipient. A new food license must be applied for by the proposed purchaser of that particular restaurant. In these circumstances, the going concern exemption may still be available to the parties, as long as the following criteria are:
- These things are incapable of assignment because of statutory or legal reasons;
- The supplier must have made all reasonable efforts to supply such thing to the recipient;
- Commercial practice provides that the only way the supply can be made is by way of supply by a third party, i.e. government body and not the supplier; and
- This supply made by the third party must be made to the recipient.
What should you do?
If you become a party to a transaction where a supply is being made to you and it is the intention of the parties to apply the going concern exemption to the transaction, you should ensure that the prerequisites discussed above exist before executing any such agreement. We recommend that you should always consult with both your solicitor and accountant first.
For more information
Should you be interested in finding out more about this, please contact Lucas Hewlett at redchip lawyers on 07 38525055 or lucas@redchip.com.au
15.07.2010
News
In February 2010, redchip lawyers in this blog flagged proposed changes to body corporate contribution lot entitlements by Gold Coast MP, Mr Peter Lawlor.
The ministerial release of February 24, 2010[1] stated,
“… what this would mean is that an owner of a small one-bedroom place on a lower floor at the back of a unit complex, for example, would not be required to contribute as much towards common expenses as someone with a more expensive place, such as a four-bedroom, top floor apartment with views…Once passed in parliament, the new rules could be effective later on in 2010″.
It remains our view that the price an owner initially pays for their lot accounts for such differences. Once an owner is in possession of the residence or investment, the actual day to day body corporate running costs are identical between lots with only some slight differences. For example, if a lot has an additional balcony or balustrade length that requires painting. As a result the contributions should be equal unless specific circumstances exist for them not to be.
The proposal is ignoring this fact and instead focusing on merely seeking to regulate speculative purchasers, named as ‘astute buyers’ who purchase with an intention to seek a change to the entitlements to increase the market value of a lot brought by lower levies.
In a speech on June 10, 2010 Mr Lawlor MP still states the government’s intention to make the system more fair by having it unequal.
“The government doesn’t think the balance is right so we intend to make changes in the BCCM Act later this year. Changes we believe will make the system more fair. For community titles schemes which have been subject to contribution schedule lot entitlement adjustment orders, the Government will legislate for those schemes to be able to revert to their original method of dividing body corporate fees before the adjustments were made.”[2]
The Minister’s office advises that Cabinet and the Qld Law Society are requesting a wide and lengthy public consultation process to a draft bill later this year… the problem being that there are not that many sitting days of parliament remaining.
At present if you don’t like the current unequal distribution in your scheme, you can make an application to change the contribution lot entitlements, but you will have to prove a case. This is usually by way of obtaining a supporting experts report that shows that the prevailing scheme is not equal. It will be open to others to oppose your application.
When the legislation will change, or if, is uncertain. What has not been released is the detail of any reversal process. Presumably this will be decided from the consultation process. It may be that any one lot owner in a scheme which has had contribution lot entitlement orders made, may have an as-of-right basis for having the original contribution scheme reinstated.
Whether you should seek an adjustment now, or wait upon the proposed changes depends upon your individual circumstances and we urge you to seek expert legal advice. What we do agree with and advise, is the statement by Mr Lawlor that intending purchasers of apartments and units conduct a proper and thorough due diligence prior to purchase.
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au
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[1] “Bligh Government to make body corporate fees fairer”
[2] http://www.peterlawlor.com.au
28.05.2010
News
Last year the state government introduced measures to implement sustainable building practices through the Building and Other Legislation Amendment Act 2009.
While the intent of the legislation should be applauded, many of the measures have attracted criticism from the industry, particularly the so called “ban the banners” provisions which rendered void many standard building covenants that are used to promote quality and consistent standards within planned communities and housing estates.
Among the amendments are prohibitions on covenants:
- prohibiting the use of a window that is energy efficient or the treatment of a window to ensure the window is energy efficient;
- prohibiting a person from occupying a building before particular landscaping, fencing, driveways or similar work associated with the construction of the building is completed;
- requiring a minimum floor area, number of bathrooms or bedrooms;
- requiring a minimum roof pitch; and
- requiring the construction of the building, or any landscaping, fencing, driveways or similar work associated with the construction of the building prior to occupation.
As a result of industry pressure, the government introduced the Building and Other Legislation Amendment Act (Assented on 23rd May 2010) which serves to amend some of the “ban the banners” provisions described above.
The Act will delete the current provisions relating to:
- prohibiting occupation of a building before particular landscaping, fencing and driveways or similar work are completed;
- prohibiting construction of a building within a particular timeframe;
- requiring a minimum roof pitch; and
- prohibiting the use of specific material or type of surface finish for the roof or external walls of a building.
We consider that the government is making steps in the right direction and the above moves will help to restore some confidence in a building and development industry that has been hit hard not only by prevailing economic conditions but numerous ill thought out (and probably mistimed) legislative initiatives introduced during the past year.
If you would like more information on this topic, please feel free to contact Rob Lalor of our office on (07) 3852 5055 or robert@redchip.com.au
Rob Lalor
Senior Associate
robert@redchip.com.au
19.05.2010
News
A body corporate, usually via its Committee, has an ongoing responsibility to conduct regular inspections of the common property.
What they didn’t do in the West…
A recent case heard in the Western Australian Court of Appeal, Drexel London(a firm) v Gove (Blackman)[1], affirmed the statutory duty to keep the common property in good and serviceable repair but stopped short of requiring regular inspection by specialist experts.
In that case a builder had substituted Jarrah wood for Oregon which subsequently rotted causing a balcony to collapse which seriously injured several people. The Court considered[2] whether the body corporate had conducted inspections of the common property from time to time in order to determine whether any repair, maintenance or replacement was required.
A body corporate must have a system in place for periodic monitoring of the maintenance and state of repair of the common property with particular regard to safety issues. Identification is the key to ‘maintaining’.
In consideration of a previous NSW case[3], the judge re-affirmed that the obligation to inspect does not require inspection by anyone more highly qualified than an experienced managing agent or a person with general building maintenance skills, unless the body corporate has reason to believe that inspection by a specialist is required.
[1] [2009] WASCA 181.
2 Ibid, at paras [193]-[241].
3 Ridis v Strata Plan 10308(2005) 63 NSWLR 449.
The situation in Queensland - a Higher Standard?
This duty exists also under Queensland law and requires that a body corporate control and manage the common property for the benefit of all lot owners. This has also been determined to include all persons who lawfully use the common property.[4]
However, while the duty in other states is to maintain common property in good and serviceable repair, the statutory duty in Queensland is to also maintain to ‘a structurally sound condition’. Does this suggest knowledge required to a higher standard, something akin to specialist experts inspecting the common property?
While committee members are not liable for their actions when acting in good faith and without negligence, a breach of a statutory duty may provide evidence of a breach of duty in an action for negligence. Alternatively, a breach of statutory duty may found an action for damages in which case negligence is irrelevant.
4 Seden v The Proprietors ‘Tyalla Court’ [1978] Qd R 53.
What you need to do…
All Committees must have in place a system of regular inspections of the common property and body corporate assets, and if in any doubt, organise for the appropriate specialist expert to further inspect, repair and maintain in good condition.
For further legal advice…
Each scheme has individual circumstances and this advice is provided as general advice only. As lawyers knowledgeable in body corporate law and experienced in representing bodies corporate, we are able to provide comprehensive advice in relation to these matters specific to your scheme.
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au .
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17.05.2010
News
Just as commercial real estate agents thought that “all things environmental” relating to property were only issues for residential real estate agents, the Building Energy Efficiency Disclosure Bill 2010 has been released to the public.
The legislation is rumoured to commence on 1 July 2010, however the obligations contained in the legislation are to commence on the implementation day to be determined by way of proclamation within 6 months of the commencement date.
What is the Building Energy Efficiency Disclosure Bill 2010?
In a nutshell, the bill outlines the obligation on owners of commercial buildings with a net lettable area of more than 2000m2 to prepare and make available a Building Energy Efficiency Certificate (”BEEC”) to a proposed purchaser or tenant wishing to lease space in the building. The purpose of the legislation is to provide information to a prospective purchaser or tenant on how “environmentally friendly” a property is.
This information is to be made available prior to the owner engaging in negotiations to sell or lease the property and it is also a requirement that all advertising material used to market a property for sale or lease must contain the BEEC.
Are there any exclusions?
These requirements do not apply to the sale of shares or units in an entity which owns a commercial property. The owner of a unit or share is not obligated to provide a BEEC to a purchaser of their unit or share, whatever the case may be.
Buildings which are used for security or police operations, newly built buildings and buildings that have had major refurbishments are excluded from complying with the legislation.
What must a BEEC contain?
The purpose of the BEEC is to provide the following important information to a prospective purchaser or tenant:
- the energy efficiency rating for the property;
- an assessment of the energy efficiency of the lighting that is expected to remain in the building; and
- guidance and assistance relating to the energy efficiency of the building and how it may be improved.
A BEEC will be valid for a period of 12 months period from the date that it is issued and the federal government will establish a register known as the Building Energy Efficiency Register which will retain the BEEC’s which will be available to the public to review online.
What if you fail to comply with the legislation?
In the event an owner or a tenant fails to comply with their obligations under the legislation, penalties such as fines and potential imprisonment may apply. It is proposed that a transitional period of 12 months from the implementation day apply which will enable all owners of commercial properties to comply with their obligations under the legislation.
For more information
Contact Lucas Hewlett at redchip lawyers on 07 3852 5055 or email lucash@redchip.com.au
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09.04.2010
News
This firm supports any initiative that allows our clients to conduct their businesses with greater clarity, certainty and expediency. That is why we support the passage of the Trade Practice Amendment (Australian Consumer Law) Bill 2009 (Cth) (the “Amendment”) through the federal parliament. The Amendment will create uniform consumer protection legislation, replacing the various state based regimes. The Amendment is now awaiting Royal Assent, and will come into effect in the second half of this year.
However, it is not all good news for businesses. The Amendment imposes fresh regulation of certain contracts, gives the Australian Competition and Consumer Commission (the “ACCC”) and the Australian Securities and Investments Commission (”ASIC”) greater powers and allows the courts to impose heftier fines.
The Australian Consumer Law
Each Australian jurisdiction has consumer protection legislation that regulates the sale of goods and services to consumers. In May 2008, the Council of Australian Governments agreed to improve the consumer protection framework by drastically overhauling the legislative regime. The Amendment is the first of a two-stage process to amend the Trade Practices Act 1974 (Cth) (the “TPA”) in order to create a universal consumer law (the “Australian Consumer Law”) that will apply to all consumer transactions throughout all of Australia’s jurisdictions.
Unfair Consumer Contracts
Like all consumer protection legislation, the Amendment acknowledges the power imbalance that often exists between sellers and consumers. In particular, the Amendment recognises the propensity for businesses to transfer risk, sometimes unfairly and unnecessarily, to consumers. The Amendment will introduce a new regime voiding “unfair” terms of particular contracts.
A term will be void if:
- the term is unfair;
- it is contained in a consumer contract; and
- it is contained in a standard form contract.
A term of a consumer contract will be unfair if:
- it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
- it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term.
There is a presumption that a term is not necessary to protect the legitimate interests of a business, unless that business is able to demonstrate that, on the balance of probabilities, it has legitimate interests protected by the term that outweigh the detriment caused to consumers.
The following are some of the examples of the kinds of terms that may be considered unfair:
- a term that permits the business (but not the consumer) to avoid or limit performance of the contract;
- a term that permits the business (but not the consumer) to terminate the contract;
- a term that penalises the consumer (but not the business) for a breach or termination of the contract;
- a term that permits the business (but not the consumer) to vary the terms of the contract;
- a term that permits the business (but not the consumer) to renew or not renew the contract; and
- a term that permits the business to vary the upfront price payable under the contract without the right of the consumer to terminate the contract.
A contract will be a consumer contract if it is for the supply of goods or service or the sale of an interest in land to an individual for predominately personal, domestic or household use.
A contract will usually be a standard form contract if it is one that has been prepared by one party alone before any discussion relating to the transaction has occurred and where that party has all or most of the bargaining power relating to the transaction.
Similar provisions will be inserted into the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth) for financial product and service providers.
Enforcing the Australian Consumer Law: the ACCC
The Amendment introduces new penalties for corporations and individuals who breach the TPA. For breaching certain provisions within the Australian Consumer Law (like false or misleading representations), the court may levy individuals with a $200,000 pecuniary penalty and corporations with a $1,100,000 pecuniary penalty payable to the federal government.
This new civil penalty will drastically alter the government’s ability to enforce the Australian Consumer Law. Previously, only the Commonwealth Director of Public Prosecutions could pursue breaches of the TPA, which the Director had to prove “beyond a reasonable doubt”, and then only for criminal fines. The new civil penalty regime will lower the onus of proof to “balance of probabilities” and will allow the ACCC to commence court actions.
Businesses can expect to see a significant increase in enforcement actions brought by the ACCC, particularly for misleading or deceptive conduct.
The ACCC, and ASIC, will also enjoy new enforcement powers. The regulators will be able to:
- obtain a court order banning a person for certain breach of the Australian Consumer Law;
- obtain a court order forcing a transgressor of the Australian Consumer Law to redress loss or damage to consumers by its conduct;
- issue a “substantiation notice” requiring a person or entity making a representation to consumers to provide information and/or documents which substantiate those representations;
- issue a “infringement notice” allowing alleged transgressors of the Australian Consumer Law to voluntarily pay a financial penalty, in order to avoid the regulator commencing court proceedings; and
- issue a “warning notice” to the public regarding Australian Consumer Law issues in certain circumstances.
What’s Next: The Second Amendment
The Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) has already been introduced into parliament. This second stage of the consumer law reform process will allow the Australian Consumer Law to deal with:
- statutory consumer guarantees;
- unsolicited sales practices;
- lay-by agreements;
- product safety; and
- manufacturer liability.
If passed, the bill will change the name of the TPA to the Competition and Consumer Act 2010 (Cth).
The Way Forward
The reform of the consumer protection regime is vitally important to businesses. All businesses should review their agreements in light of the Amendment and the proposed second stage of reform. A business’s consumer agreements, standard form terms, and document retention policies and procedures all may be being used in breach of the TPA.
Businesses must consider all of the potential uses for their goods and services, not just the primary one. Businesses will be captured by the unfair term provisions if a consumer uses their good or service principally for domestic use, even where the primary purpose of the good or service is industrial or non-domestic use.
Further, given the increased powers given to the ACCC, businesses must be certain they are not inadvertently in breach of the TPA. The consequences of such breaches can be dire.
If you have any questions about the Australian Consumer Law, please contact Gavin Barnes or Christopher Perkins on 07 3852 5055, gavin@redchip.com.au or chris@redchip.com.au.
06.04.2010
News
redchip Lawyers is pleased to announce its sponsorship of Creative3, a three day event being held in Brisbane between 14 and 16 April 2010, an initiative of QUT Creative Enterprise Australia.
The purpose of the three day event is to provide creative enterprises with some of the skills and learnings essential for them to harness the power of three, being creativity, investment and enterprise to enable them to build successful and sustainable creative businesses.
redchip has been involved with CEA since its inception as a mentor to start up creative companies, providing strategic intellectual property protection advice, deal structuring and capital raising.
We have four (4) complementary conference registrations each valued at over $700.00 available to our clients and anybody within our network who would like to attend the conference and dinner – first in best dressed!
If you are interested or know of anybody who might be interested, please forward them this email and have them contact our marketing co-ordinator – Rachael Henaway on 07 3852 5055 or reception@redchip.com.au.
Registrations close on 9 April so the sooner the better.
The creative 3 website provides more information and detail in relation to the event which includes a pitching contest for creative businesses in Australia offering a prize valued at more than $100,000.00.
For more information please visit www.creative3.com.au.

09.03.2010
News
Tenants are enjoying attractive lease proposals from landlords desperate to have their premises occupied during these tough economic times. Landlords are offering various incentives in both monetary and non-monetary forms.
Fit-out incentives are increasingly common. So how do they work and what are the tax implications?.
What is a fit-out incentive?
A fit-out incentive is a landlord contributing to the whole or portion of a tenant’s costs in fitting out premises in readiness for occupation of the premises by the tenant. Premises may already have a suitable fit-out in place when the tenant takes possession. However if not, a tenant will require a suitable fit-out to suit his business needs. Fit-out works are carried out subject to the consent of the landlord.
What are the tax benefits?
Treatments of tax benefits vary according to who ultimately owns the fit-out when the fit-out is completed.
If the fit-out exists at the time the tenant takes possession and the fit-out is the property of the landlord, there is no immediate tax deduction available to the landlord for the existing fit-out. However, a landlord may claim depreciation on the capital works over the life of the fit-out. For the tenant, obviously there will be no tax benefit as it has not paid for the fit-out, nor does it own the fit-out.
In relation to GST, as the landlord owns the fit-out, there are no GST consequences as the supply of the fit-out is part of the supply of the premises by the landlord to the tenant.
If the landlord makes a cash contribution to the tenant’s fit-out and the tenant is the owner of the fit-out, then the landlord is entitled to claim the cash contribution made to the tenant’s fit-out as a tax deductable expense The tenant may claim depreciation on the fit-out capital works over the life of the fit-out because the tenant is the owner of that fit-out.
There are some GST consequences in these circumstances. Where a landlord provides a cash contribution to fit-out works, the tenant will be making a taxable supply by entering into the lease which contains the provision for a cash contribution and therefore the GST component of that cash contribution must be remitted by the tenant to the Australian Taxation Office. In those circumstances, the landlord is entitled to claim an input credit for that GST.
How to ensure you get the benefits?
The landlord and tenant must ensure that the legal agreement to lease or the fit-out agreement properly reflects the intentions of the parties in order to achieve the desired tax outcome. The key issues to consider will be determining who pays for the fit-out and who will own the fit-out once it is completed.
Before entering into any such agreements, the parties should each seek taxation advice from their accountants. The documentation can then be structured to achieve the desired tax and GST outcome.
For more information
Contact Lucas Hewlett at redchip lawyers on 07 3852 5055 or email lucash@redchip.com.au
24.02.2010
News
In February 2009 an angry lot owner fired a bullet at a Gold Coast penthouse amid a bitter body corporate fee feud that is dividing bodies corporate across Queensland. As a result, the State Government presented a discussion paper of the controversial legislation.
The Current Law
Under the provisions of section 48(6) of the Body Corporate and Community Management Act 1997 when an application for adjustment of lot contributions is made, the Queensland Civil and Administrative Tribunal (QCAT) is required to adjust the respective lot entitlements of a body corporate so that all lots equally contribute to the costs of the Body Corporate unless it is just and equitable for the entitlements not to be equal.
The Supreme Court of Queensland in Fischer v Body Corporate for Centrepoint CTS 7779[1] has given consideration to the statutory requirement for equality of lot entitlements. In that case Chesterman J noted that the preferable view is that a contribution schedule should provide for equal contributions by lot owners except insofar as some lots can be shown to give rise to particular costs to the Body Corporate which other lots do not. For example, evidence of the cost of maintenance or painting on the exterior structure.
Whether a schedule should be adjusted is to be answered with regard to the demand made on the services and amenities provided by a Body Corporate to the respective lots or to their contribution to the costs incurred by the Body Corporate. When the starting point is equality, any departure from that position is allowable only where it is just and equitable to recognise inequality.
Robin Hood Arrives…
While some say that the legislation enables millionaire penthouse owners to slash their body corporate levies at the expense of other unit owners, others say they are paying 10 times more in body corporate fees than lower-floor residents to use the same facilities.
Gold Coast MP Peter Lawlor who has been driving the reversion to the previous situation, made a media statement on Friday 19 February 2010, stating,
“The present law means that in setting or adjusting body corporate contribution lot entitlements all lot entitlements should be equal, except to the extent that is just and equitable in the circumstances for them not to be equal. We’re putting a stop to this and changing the law so it’s fairer for everyone all round…The Queensland Government will allow those buildings and complexes which had lot entitlement adjustments made, to revert to their original method of dividing body corporate fees when the plan was registered.”[2]
What you need to do…
As lawyers knowledgeable in body corporate law and experienced in levy collection, we are able to provide comprehensive advice in relation to these matters. Whether you should seek an adjustment now, or wait upon the proposed changes depends upon your individual circumstances and we urge you to seek expert advice sooner rather than later.
For more information…
Contact Stuart Harrigan at redchip lawyers on 07 3852 5055 or stuarth@redchip.com.au .
[1] [2004] QCA214.
[2] http://statements.cabinet.qld.gov.au/MMS/StatementDisplaySingle.aspx?id=68549
16.12.2009
News
If you are currently leasing commercial premises you may be unaware of what you need to do if your lease contains an option to renew provision and you wish to exercise that option.
What is an option to renew a lease?
An option to renew a lease, if properly exercised, allows you as the tenant to continue to occupy the premises after the initial term of your lease expires. Tenants have no automatic entitlement to renewal of a lease. That is, your rights only exist if a specific ‘option to renew’ clause is contained in the lease.
What do you need to do?
- You must ensure that you exercise the option in the timeframe as specified in the lease. For example, a lease may specify that the option to renew must be exercised no more than 6 nor less than 3 months from the expiration date of the lease. It is during this time frame that you must exercise your option to renew your lease.
- You must comply with your obligations under the lease during the term of the lease. A landlord may reject your notice to renew the lease on the grounds that during the term of the lease you had not complied with your obligations, for example, committing an act of default under your lease.
How do you give notice?
You must ensure that:
- the notice to exercise the option to renew your lease is in writing; and
- the notice is served in accordance with the lease. The clause of the lease which outlines what is required of you when exercising your option may specify on whom the notice must be served. If it does not, the notice clause will specify how notice is given under the lease.
What happens if you do not exercise your option properly?
In the event you fail to comply with your requirements to correctly exercise an option to renew your lease, it may result in your losing your rights to occupy the premises. Therefore, you may be required to vacate the premises at the end of your original lease - which may prove to be inconvenient and expensive.
For more information…
Leases and option to renew clauses are serious commercial matters - where experienced legal advice is always beneficial. For more information, contact Lucas Hewlett of our office on (07) 3852 5055 or lucas@redchip.com.au.