Why

Our mantra is ‘for friends’. Sharing the answers we give the adviser network aligns with this goal.

How

Each week we will share all the answers to questions raised by advisers with us in the table below.
The table can be searched via the find function. More detailed content is also available via the View blog, click here.

What

The answers relate to a range of technical questions raised in relation to areas such as trusts, companies, SMSFs, asset protection and estate planning. The standard lawyer disclaimer applies – the answers are general comments only and not legal advice. Specialist advice should always be obtained for any specific factual matrix

Commercial

Yes, please see the link to the document here.

Advisers can request any document be added to our list for a future launch on the NI platform.  Until the coding, automation and risk protection aspects for a new product are finalised, View can provide requested documents directly to advisers.

All assistance is provided on an upfront agreed scope of work and fixed pricing.  If common themes emerge over time then we also proactively look to release those products on the NI platform.

No, only deeds and agreements signed by individual trustees require witnessing.

Please contact us directly at solutions@viewlegal.com.au with a copy of the relevant document and we can confirm the process.

Our general preference is for initial enquiries to be directed to us via the client’s ongoing adviser, as most of the areas we specialise in require ongoing collaboration with the existing advice team, in order to achieve the best outcomes for the client.

There is a range of material available, including:

1. Technical books

2. Tailored in house education

3. Webinar program

4. Recorded webinars

5. Podcasts (including edited versions of previous webinars)

6. View University

7. View’s blog. To subscribe to the blog, please enter your email address in the subscription box in the right hand column on the landing page or alternatively, subscribe through your preferred RSS feed from your browser.

We are relaxed for you to use whatever you feel would be useful in whatever manner you wish.

No, as View is not a registered tax agent, we do not apply for TFNs or ABNs.

You will need to arrange the necessary registrations which, depending on the trust’s use, may include a tax file number, Australian Business Number and GST registration.

These registrations can also be completed through NowInfinity’s platform.

No. View has deliberately flipped the model on referral fees as, long before the 2018 Royal Commission, we believed this model to be broken.

Instead, View guarantees ‘wholesale’ pricing to each adviser on each matter to ensure the adviser can deliver a valuable fee for service solution to the client.

By flipping the traditional model, View ensures advisers have complete discretion as to how they price – without being forced to cap their fees by View’s pricing model.

View is recognised for its work in improving the pricing models for professional service firms, with director Matthew Burgess one of only a few Australian based Fellows of international pricing thinktank VeraSage.

View can assist advisers looking to develop their pricing skills through a range of education tools, see for example: Matthew Burgess and Business Model Iteration.

As the document being signed is a deed, the trust deed is signed in accordance with the Property Law Act in each jurisdiction (rather than the Corporations Act), which allow a company to execute a document by having it signed, sealed and delivered by two directors (or the sole director/secretary, where applicable).

That said, the directors also need to ensure the execution is consistent with any requirements imposed by the company’s constitution.

Ideally the incorrect name should be amended throughout the document wherever it appears and initialled by each party to the document.

If this was not done at the time the trust was established, the conservative approach is to prepare a deed of rectification.

One of the most significant pain points for advisers raised with NowInfinity is who is responsible for providing the legal advice when generating solutions on the platform.

Virtually all online providers of legal documents deliberately shift all risks to the adviser firm delivering the solution.

An example of typical exclusion wording is as follows:

By using our service agree that:

(a) we cannot, and do not, give you legal advice;

(b) the company that owns and operates this service is not a law firm;

(c) our service provides information to help you answer the questions and to order a product and that that information is information only, not advice;

(d) we cannot and do not warrant that a product you decide to order is appropriate or suits your needs;

(e) we cannot and do not warrant that your use of our service is appropriate or suits your needs;

(f) the documents you buy from us and the material on our website is only general; they are not prepared by us and we do not endorse them, rather we disclaim any responsibility for them.

… and the exclusions go on and on and on.

Some providers now do provide limited sign offs, however the key word is limited; for at least 3 reasons:

1. the law firms providing the sign off generally are related entities to the document provider and have no particular specialisation nor depth of experience in the required areas;

2. the sign offs are extremely narrow – and in most cases the exclusions to the sign offs are longer than the sign off itself;

3. the additional costs of the sign off make them increasingly prohibitive to access other than in isolated cases.

As another example of the game changing opportunities delivered by NowInfinity’s joint venture with View Legal, comprehensive legal sign off on all aspects of the platform is now available.

View Legal now provides complete support of NowInfinity documentation, providing legal signoff across 4 separate service levels, allowing advisers to tailor the solution that best meets the objectives of them and their clients.

The compliance certificate issued is one sentence, and provides along the following lines:

‘View Legal Pty Ltd confirms that the documentation is appropriate based on what we have been told and that we have provided a legal signoff on any specific issues raised with us.’

There are no footnotes or disclaimers.

The one sentence certificate is issued without qualification.

Simple, succinct and transparent. The exact opposite to heritage solutions.

While the legislation varies from state to state, the general position is that documents requiring witnessing, such as deeds, wills, and enduring powers of attorney are unable to be signed electronically.

This is obviously inconsistent with the way technology is evolving and the services offered by a range of providers, including Docusign.

With the development of new protocols such as electronic conveyancing, it is likely only a matter of time before the legislation is amended to expressly allow electronic signing in all jurisdictions.

In the meantime however, the conservative approach is that all trust deeds should be signed with ‘wet’ signatures and retain original copies.

In relation to trusts which have historically been established electronically, NI’s deed of ratification should be sufficient to satisfy third parties such as financiers regarding the validity of the trust (provided it is signed with a ‘wet’ signature), however there is a risk that further steps may be required if, for instance, the trust deed is required for Court proceedings.

While NowInfinity does allow the functionality of signing documents digitally, please note that documents executed by way of use of electronic signatures may not be accepted as being legally effective, including by financial institutions, statutory authorities and government departments. NowInfinity does not offer any advice as to whether any documents may be validly executed using electronic signatures.

All View documents adopt the permissive style of drafting approach for a number of reasons, including:

1. Minimising the length of documents by avoiding verbatim restating of legislation;

2. Reducing risk issues with verbatim restating of some parts of the legislation, but not other parts;

3. Minimising the risks with customers relying on invalid provisions (ie the only certainty in most revenue related areas of the law is change, verbatim restating of legislation at any moment in time creates an ever increasing risk issue as changes to the law are introduced).

A key component of the View Legal platform has been its dedication to early adoption of innovations that can help achieve the reason we built the platform – to create a firm ‘for friends’.

Like most businesses, our success essentially depends on a network of specialists. As a law firm, we have an agreement with each service provider that receives personal client information which requires that they comply with the Australian privacy legislation.

A summary of our virtual team currently (although it sometimes changes on a weekly basis) is as follows:

1. we have lawyers based in Melbourne, Sydney, Port Macquarie, Brisbane and the Gold Coast as well as the Philippines, India and South Africa. We are actively looking to have lawyers join the team in both Adelaide and Perth (and other cities), however our model and the skills required to be a good fit mean we ‘measure twice, cut once’ before committing.

2. our IT team has contributors in Sydney and Brisbane and various locations throughout India, together with cloud supported services throughout the USA and other confidential locations.

3. our marketing and collateral providers, particularly in relation to our book publishing business, are sourced from various locations throughout Europe, the USA, Canada, New Zealand, the Philippines and Australia. This said, we never outsource content creation, having trialled this on more than one occasion and failed spectacularly.

4. one of our favourite social media consultants is currently based in Sydney, other than when she is travelling in locations such as Buenos Aires, Spain, Italy, Greece, the UK, France and Germany.

5. one of our research consultants currently works out of Argentina.

6. we have copy editors based in New South Wales, Victoria, the US and the UK.

7. we have administrative and accounting support from assistants in the Philippines, New Zealand, Canada, Pakistan and Sweden.

8. our primary word processing provider (with us since 2008), who has been a critical part of our success, even in the years prior to View Legal launching, is based in India. As the popularity of platforms such as upwork and fiverr (that we have used extensively from their launch) continues to grow, we suspect the only certainty for our business is that our international footprint will also continue to grow.

This said, the growth of our international team has been matched by the growth of our Australian based team, and we take great pride in the fact that all staff enjoy flexibility around their work arrangements, and work remotely with access to physical office space on a needs basis only – arguably not surprising given the founders of View also founded what was regarded at the time as Australia’s first virtual law firm (elawyer).

Advisers can request any document be added to our list for a future launch on the NI platform. Until the coding, automation and risk protection aspects for a new product are finalised, View can provide requested documents directly to advisers. nnAll assistance is provided on an upfront agreed scope of work and fixed pricing. If common themes emerge over time then we also proactively look to release those products on the NI platform.

Unfortunately, we are unable to provide these certificates for a range of reasons, including because they require the relevant lawyer to provide statements regarding the specific factual circumstances which are outside our knowledge.
Due to the style of, and amount, of work involved, it is generally significantly more cost effective and time efficient for the bank’s in house legal team (or one of the bank’s panel lawyers) to provide the certification.

Companies

For many years companies were regulated by a memorandum and articles of association.

Broadly the memorandum set out the objectives of the company.  A company was only able to act in accordance with the objects set out in its memorandum.  In many respects a memorandum was analogous to a trust deed for a trust.

The articles of a company are set out the internal governance rules of the company.

Since the late 1990s companies no longer need to have either a memorandum nor articles.

In particular, the Corporations Act:

  1. sets out a set of standard rules that regulate the internal governance for all companies that do not otherwise have a constitution (known as ‘replaceable rules’).  Where a company has a constitution it will generally set out the governance rules that apply (often to the exclusion of any of the replaceable rules);
  1. confirms that where a company still has a memorandum and articles of association (ie from 1998 or earlier), these documents are still valid; and
  1. makes it clear that there is no need for a company to set out any objectives in its constitution because a company has the legal capacity and powers of an individual.  These powers specifically include an array of specific actions and anything that is authorised by any other law.

The conservative view is that any company that still operates under a memorandum and articles should generally take steps to update to a new constitution, given the radical changes in company laws since 1998.

Yes, subject to ASIC’s requirements below:

A proprietary company must have at least one director. That director must live in Australia. If there is more than one director, at least one must live in Australia.

If the company has crowd-sourced funded shareholders, it must have at least two directors. A majority of these directors must live in Australia.

A proprietary company is not required to have a secretary. If it does, they must live in Australia.

The document contained in our package is a Resolution of Directors, as opposed to Minutes of a Meeting.

A minute requires generally a notice of meeting, quorum of directors who attend the meeting, and the chairman to sign the minutes.

A resolution is done as a circulating resolution, and requires all directors to sign, however, it can be circulated around. No meeting is required and the directors can each sign in counterpart in their own time.  The signature of all directors are required for the resolution to be valid.

There an array of tax, corporations law and commercial issues relevant in relation to share options.

This said, yes the NI constitution confirms there is the ability (amongst other arrangements) to create share options as follows:

Subject to the Act and any rights previously conferred on the holders of any existing share the Directors may issue shares with any other rights and terms they determine in their absolute discretion.

Exactly what will happen depends on the structure of the relevant company.

For example, if it is a sole director and sole shareholder company there is a section of the Corporations Act that provides a pathway (extracted below, section 201F).

Similarly, if it is a sole director and not a sole shareholder company, generally it is the case that the shareholders will have the ability to appoint new directors pursuant to another section of the Corporations Act (again extracted below, section 201G).

There are additional issues to be aware of where the company acts as trustee of a trust (for example, any appointor powers) or trustee of a SMSF (for example, the requirements under the superannuation laws);

Having said the above, the conservative approach would be to create powers of attorney now for each company, although this approach does obviously involve additional costs and complexity for each company and ongoing compliance issues.

+++++++++++++++++++++++++

Section 201F

If a person who is the only director and the only shareholder of a proprietary company:

(a)  dies; or

(b)  cannot manage the company because of the person’s mental incapacity;

and a personal representative or trustee is appointed to administer the person’s estate or property, the personal representative or trustee may appoint a person as the director of the company.

Section 201G

A company may appoint a person as a director by resolution passed in general meeting.

Enquiries should be made of all third parties who may have held a copy of the constitution at any stage. For instance, the company’s accountant, bank, solicitor and potentially ASIC should be contacted to request a copy.

If a copy is unable to be located, a replacement constitution can be adopted however the issues flagged in the FAQ post titled ‘What are the alternatives if the share rights for a company are uncertain?’ must be considered.

Yes a number of words are restricted and can only be used with ASIC’s prior approval (which will only be provided in limited circumstances). The restricted words include ‘building society’, ‘trust’, ‘university’ and ‘chamber of commerce’. A full list of the restricted names is available at the following link:

https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company/company-name-availability/

No, however rule 20.7 allows the directors to appoint a company secretary. For some years now it has not been mandatory under the Corporations Act for a company to appoint a secretary.

The appointment of a public officer is addressed in the suite of incorporation documents included with each company incorporation package, rather than the constitution itself and reflects best practice from a Tax Act perspective.

The constitution is designed to be appropriate for almost all circumstances and therefore does not contain provisions around issues such as rights of pre-emption or the ‘fair price’ of shares.

These types of clauses should be considered on a case by case basis and included as part of a properly crafted shareholders agreement.

The shareholders agreement should address a range of directly related issues to ensure unintended consequences are not triggered. In other words, the shareholders agreement should be tailored to meet the specific circumstances of the client.

Release of a comprehensive shareholders agreement is already in the planning for the NowInfinity platform. In the meantime, View can provide shareholders agreements (and related documents such as insurance funded buy sell deeds) with up front scopes of work and fixed pricing.

Memorandum and articles of association are the precursor to a company constitution and were used by companies prior to the introduction of the Corporations Act 2001 to govern the functioning of the company.

Given any company which is still operating under a memorandum and articles of association will be using a document which is many years out of date, it is generally prudent to update the document to replace it with a modern constitution.

This can be done by using the ‘Constitution update’ produced on NowInfinity’s platform.

Discretionary dividend access or dividend only shares (DOS) were historically not a standard feature of the NI constitution.

Based on adviser feedback however a DOS, with the rights set out at the end of this FAQ entry will be included in all constitutions from 1 July 2018.

We recommend that specialist tax advice about the appropriateness of a DOS in the context of each specific factual matrix should be obtained. This is because there are a range of often complex tax (for example, value shifting, the debt/equity regime and anti-avoidance provisions) and Corporations Act ramifications of utilising DOS’s.

The Australian Tax Office (ATO) has made numerous public statements outlining concerns with allotting and paying dividends to the holder of a DOS. We are also aware of high audit activity by the ATO for accounting practices which may have historically assisted clients with implementing a DOS arrangement.

The risks of ATO focus and potential audit have heighten in the area of DOS’s in recent years due to increasingly sophisticated data matching between the ATO and the ASIC.

View can provide a proposed scope of work and fixed pricing to assist, where requested.

The rights of the H class DOS are as follows:

1.1 Holders of H shares have the following rights and are also subject to the following restrictions:

(a) regardless of any provision contained in this document, the right to receive dividends as paid from time to time by and at the sole discretion of the Directors determined to be payable only to the holders of H shares, with the discretion independent of the exercise of discretion in relation to any other class of shares;

 

(b) H shares do not have the right:

(i) to any entitlement to, interest in, or right in respect of any dividend that the Directors determine to be payable or that may be declared from time to time in respect of a H share until that dividend is actually paid to the holder of the H share, or their nominee;

(ii) to receive notice of, attend and vote at a General Meeting of the Company;

(iii) in a winding up or reduction of capital of the Company to repayment of the capital paid up on that share; or

(iv) in a winding up or reduction of capital of the Company to participate in the distribution of the surplus assets of the Company;

 

(c) H shares are redeemable at the option of the holder or the Company;

(d) the Company must give at least five Business Days prior written notice to the holder of a H share of the Directors’ intention to redeem the H share;

(e) the holder of a H share must give at least 20 Business Days prior written notice to the Company of their intention to have their H share redeemed by the Company; and

(f) where a H share is redeemed, the amount payable by the Company on redemption will be any amount less than the issue price determined at the sole discretion of the Directors.

If the share rights are uncertain, there are two broad approaches that can be adopted:

(a) Rather than replacing the entire constitution, we may simply be able to amend the relevant rules. For instance, if the constitution is only being updated to address a specific issue (such as creating a new class of shares), we can simply insert a new clause addressing that issue can be inserted, rather than replacing the entire document.

(b) If a complete replacement is needed, the document can be prepared with assumptions made in relation to the rights attaching to ordinary shares (in particular that the ordinary shares have always had the right to receive dividends, to the repayment of capital and to participate in the distribution of surplus assets on a winding up of the company). There are however a number of potential tax, stamp duty and Corporations Law issues that could apply when making assumptions about the rights that attach to a particular class of shares and specialist advice should be sought in relation to this approach, before it is adopted.

Corrections to company documents (via an ASIC form 492) can be made directly through the NI platform.

The process for removing a director will depend on the provisions of the company’s constitution (which would generally provide the shareholders with the right to remove directors by ordinary or special resolution). If there is no company constitution in place, section 203C of the Corporations Act is a replaceable rule which allows the shareholders to remove directors by ordinary resolution.

There is no requirement in the Corporations Act for a director to be notified of their removal, however the prudent approach is to ensure the director is informed in writing so they are on notice that they no longer hold the position or have authority to act on behalf of the company.

The standard share rights can be downloaded here.

Where the rights match another class of share set out in the constitution, we generally recommend a correction is lodged with ASIC to ensure the share classes on issue are consistent with the constitution.

If tailored share class rights are required, View can provide a proposed scope of work and fixed pricing to draft the required rights as part of a bespoke constitution update.

The NI constitution allows the directors to issue shares with any rights they think fit (not just the classes specifically listed in the constitution).

If a new class of shares is to be allotted, the directors would need to pass a resolution specifying what rights attach to those shares and would ideally obtain legal advice regarding the resolution, including in relation to any potential revenue consequences.

Alternatively, the constitution could be updated to incorporate the new class of shares, prior to the allotment.

NI’s constitution does not prohibit shares from being held on trust, the relevant clause simply provides that the company is only required to recognise and deal with the registered legal owner. For example, the company is only required to provide the legal owner with notices of meetings and only the legal owner can attend meetings and vote.

The clause is commercially best practice for a number of reasons, including significant practical issues that arise with any other approach.

A shareholder can own shares in its capacity as trustee for a bare trust, family trust or any other type of trust and the rights between the trustee and beneficiaries are not affected by the provision in the constitution.

ASIC will allow a company to be incorporated with a company name identical to a cancelled business name provided that at least 6 months has lapsed since the date of the business name cancellation.

Discretionary Trusts

While including subtrusts are on the development wishlist for NowInfinity and View, they are a relatively low priority currently, due primarily to the (admittedly already over due) rollout of the Board of Taxation changes to Division 7A.

Subject to what the deed and current legislation provides, a resolution (or minute) is generally required in situations where a beneficiary is entitled to trust income and/or entitled to trust capital gains.

So long as the underlying deed contains the requisite power, then it does not need to be specifically mentioned in the deed.

Generally, a bare trust deed only requires updating where a third party (for example a financier) requests specific changes.

No, assets from trusts with a common trustee are generally not available (however, creditors would often try to access these funds).

Generally, the same corporate trustee can be used for multiple trusts.

However, consideration should be given to whether this would achieve clients’ specific objectives.

In most jurisdictions it is possible to legitimately avoid stamp duty by ensuring the settlement sum is a nominal amount of cash eg $10.  In some jurisdictions however particularly NSW and VIC, even if the settlement sum is a nominal amount of cash, stamp duty is still payable (in VIC in the amount of $200 and in NSW the amount of $500).  For customers based in NSW and VIC the only way to avoid stamp duty is to establish the trust in a different jurisdiction and ensuring that both the settlor and trustee are physically in that jurisdiction when signing the deed.

Yes, subject to the terms of the relevant trust deed, taxable capital gains can generally be offset against revenue losses (conversely, revenue profits can only be offset against revenue losses and cannot be applied against capital losses).

Generally speaking, a discretionary trust deed should be updated when:

1. there is a change in the law surrounding discretionary trusts relevant to the trust (for example the 2018/2019 changes concerning foreign beneficiaries);

2. there is a change in the client circumstances warranting review and amendment of the deed; or

3. significant time has lapsed since the deed was established or last varied. If the deed predates the High Court decision in Bamford from 2009, then the deed should generally be updated to include the significant changes to the laws relating to income streaming.

We have a number of standard checklists available through our Checklist Manifesto Platform, including one for discretionary trusts, which can be found here (you will need to be logged in to view this page). Completing this checklist can also help identify if a trust deed should be updated for the Bamford changes.

Where a single trust needs to be updated, this can be done through the NowInfinity platform. If bulk updates are required (e.g. more than 10 deeds) please contact us directly.

Alternatively, if you would like us to complete a review of the trust deed in the context of any specific concerns or issues you have identified, we can provide a suggested scope of work and fixed pricing upon request.

Yes, however specialist advice is required in relation to the tax and stamp duty implications of the change, before any documentation can be prepared.

There are various ways in which a beneficiary can be added or removed from a trust (including by disclaimer, renunciation, variation and resolution) and a review of the underlying trust instrument is required to ensure the most appropriate path is adopted.

The addition or removal of a beneficiary can also trigger substantial tax or stamp duty costs. For instance, in some instances a change of beneficiary may raise capital gains tax resettlement issues. In addition, a number of jurisdictions impose stamp duty on changes of beneficiaries based on the unencumbered dutiable value of the underlying assets of the trust.

As always, View can provide an upfront scope of work and guaranteed fixed price to assist, upon request.

The distributable income of the trust includes, whether derived directly or indirectly (including by entitlement through other trusts) all capital gains (including any discount capital gain under subdivision 115-A Income Tax Assessment Act 1997 (Cth)) received by the trust during the relevant period and that capital gains can be identified as a separate category of income.

We recommend the any distribution resolution is crafted to ensure that distributable income includes gross capital gains, not the discount gains or alternatively that a capital distribution for the discount amount is included in the resolution (if the gain is to be streamed). For this to be effective, the trust accounts must be consistent with the resolution (i.e. including the gross gain in the distributed amount).

Template distribution resolutions are included with each new trust establishment on the NI platform.

Provided the errors are identified before the trust undertakes any substantive activities (for example nothing more than establishing a bank account), the trust should be vested and a new trust with the correct terms established. This approach will generally be far simpler and more cost effective than attempting to rectify the error in the existing trust instrument and will simplify future dealings with third parties such as financiers.

If the trust has acquired assets or undertaken activities, please contact us and we can provide a suggested scope of work and fixed pricing to assist.

Broadly the position here is the same as where an SMSF deed has been lost (see previous FAQ entry). However preparing a deed of variation and ratification will generally be fundamentally more problematic for other types of trusts as it is almost certain there will be significant tax, stamp duty and trust law consequences.

There are also a number of different approaches that can be adopted in order to rectify the situation.

We recommend that the potential consequences and options are addressed and discussed with one of our specialist lawyers before considering what (if any) documentation should be prepared, and provide a proposed scope of work and guaranteed fixed pricing to assist, where requested.

When a new trust is established on our platform, one of the interview options allows the user to request that a foreign beneficiary exclusion is inserted into the deed.

This option needs to be selected if the trustee wishes to avoid any foreign trust land tax surcharges or foreign acquirer duty surcharges (which apply in most states).

Where it is selected, additional provisions are inserted to exclude any foreign beneficiaries from the trust, to satisfy the requirements of the relevant State Revenue Office.

This approach should be used with care as the foreign beneficiary exclusion is irrevocable and cannot subsequently be amended or removed from the deed.

The platform also includes a deed of variation product to insert the foreign beneficiary exclusion into an existing trust deed.

The ‘foreign purchaser’ rules across Australian mean many discretionary (or family) trust deeds need to be updated to ensure they will not be liable for additional stamp duty or land tax, when they acquire property.

These additional surcharges can be significant – for instance, in New South Wales, the foreign acquirer duty surcharge is 8% of the market value of the property being acquired and the land tax surcharge is 2% of the land value. These costs are in addition to existing government charges such as land transfer duty.

NowInfinity’s foreign beneficiary deed of variation is intended to ensure the trust being updated will not be a ‘foreign person’ or ‘foreign purchaser’ for the purposes of foreign acquirer duty (in Queensland, NSW, Victoria, Tasmania, Western Australia and South Australia) and land tax surcharges (in Queensland and NSW). The deed of variation will also be effective in other jurisdictions as equivalent legislation is implemented.

All variations can be implemented leveraging the NowInfinity platform by both subscription and PAYG customers.

The variation can also weave in other required provisions, for example to manage the Tax Office rules in relation to income streaming and effectively managing unpaid present entitlements.

Unfortunately, the new rules do have some additional complications in certain situations. For example, each jurisdiction imposes separate requirements and the deed of variation does not address the following issues, which should be considered on a case by case basis (with specialist advice sought where appropriate):

  1. the NSW rules include a requirement that any named beneficiaries who are foreign residents are expressly removed as named beneficiaries. While the deed of variation automatically removes foreign residents as a class, it does not expressly remove any named beneficiaries;
  2. the Queensland provisions require that any non-resident default beneficiaries are excluded from the Trust. The removal of default beneficiaries is a dutiable transaction in Queensland and the deed of variation should not be used unless the duty consequences have been first confirmed; and
  3. in Queensland, the Stamps Office retains the ability to both exempt a trust otherwise caught by the rules, and reassess a trust which had otherwise not been previously caught (within certain timeframes).

Please also see the FAQ entries titled ‘Do foreign purchaser rules apply to SMSFs?’ and ‘Do unit or fixed trusts require any provisions in the trust deed to manage the ‘foreign purchaser’ rules that are in place across Australian?’

Historically, our approach has been to deliberately limit the spouse definition only to lawfully married spouses on the basis that:

1. If a client is in a de facto relationship and wants that de facto to benefit, then they can include the spouse as a named beneficiary on establishment of the trust or if the trust has already been established, by exercising the power to nominate a new beneficiary;

2. Given the difficulty in ascertaining whether the de facto relationship qualifies under section 4AA of the Family Law Act, and that this determination relies on a question of fact which could change over time, our preference is to limit spouses to lawfully married spouses as it is the only objective criteria by which it is possible to ascertain at a particular point in time whether or not a person was in fact a spouse (i.e. the date of marriage or divorce); and

3. We also include the ability to nominate additional beneficiaries under the deed so a de facto spouse can be nominated as a beneficiary in the future if desired.

The approach outlined here is directly as result of our extensive experience being engaged by family law firms across the country to provide strategic advice in relation to trusts and family law issues.

This said, inspired by user feedback, from 15.6.18, advisers will have the choice in the establishment interview of whether to include de factos as eligible beneficiaries.

Division 7A

Care must be taken in relation to using the drawdown acknowledgement provided with the Division 7A agreement that forms part of the company constitution.

This is because the template provided assumes the borrower is a single individual (not acting in their capacity as trustee).

The template is set up in this manner as there is no way of knowing who the borrowing party will be at the date of adopting the constitution.  Therefore, practically, there is no way to easily automate the signing provisions that will be required to make the document valid.

Care also needs to be taken with reference to the Tax Office’s Taxation Determination 2008/8, given that the example profiled there of loans made pursuant to the terms of a constitution only references loans by a company to an individual shareholder.

More appropriately, the Division 7A Drawdown Acknowledgement package on the NowInfinity website can be used for this purpose, assuming there is already a compliant Division 7A Loan Agreement in place between the relevant parties.

Given the total amounts advanced in any period will often be unknown, the NI Division 7A agreements are structured to allow flexibility.

In particular, the agreements confirm that any entries in the lender’s general ledger of advances made are conclusive proof of the dates and amounts that the lender has lent to the borrower.

There is also the option for the parties to sign a formal drawdown notice to confirm any advances made from time to time.  A template drawdown notice is provided by NI in a schedule to the Division 7A Loan Agreement and in a schedule to the Constitution.

If the Drawdown Acknowledgement template that is contained in the Constitutions is used, then care must however be taken when using it, because the template provided assumes the borrower is a single individual (not acting in their capacity as trustee).

If the borrower is not a single individual, specific amendments will be required.

The Division 7A Drawdown Acknowledgement package on the NowInfinity website can be used for arrangements where the borrower is not a single individual, assuming there is already a compliant Division 7A Loan Agreement in place between the relevant parties.

We are unable to prepare subdivision EA agreements under the wholesale platform due to the changes announced in the 2018 Federal Budget.

In this regard, it was announced that there would be a number of integrity changes introduced, effective 1 July 2019, to clarify and streamline the operation of Division 7A.  If passed, the proposed changes would mean (amongst other things) that UPEs are regulated under Division 7A. More information in relation to these changes can be found on the ATO website at this link – https://www.ato.gov.au/General/New-legislation/In-detail/Other-topics/Targeted-amendments-to-Division-7A/

We understand that the most common scenario where an agreement is required is where there is a loan from a family trust to an individual and there is also an existing UPE owed by the trust to a company where the individual borrower is a shareholder/associate.

While we can assist with strategic subdivision EA advice, a suggested scope of work and fixed pricing would need to be provided once we understood what was required.  This said, until the 2018 Federal Budget changes become law, the utility of any strategic advice is likely limited.

From February 2018 NI company constitutions contain a Division 7A loan agreement which applies to loans between the Lender and its shareholders who are individuals. There are also stand alone Division 7A loan agreements.

Pursuant to these documents, a Lender may make advances to a Borrower and any advances will be subject to the terms and conditions of the Loan Agreement.

Each drawdown should be confirmed in writing and the Division 7A Drawdown Acknowledgement package on the NowInfinity website can be used for this purpose, assuming there is already a compliant Division 7A Loan Agreement in place between the relevant parties.

Yes, however the obligations imposed by Division 7A (including the consequences of non-compliance) apply to each borrower separately (in relation to their proportion of the loan amount) so best practice is generally to have a separate loan agreement for each borrower.

While NI’s platform includes the ability to generate a 25-year loan agreement, the agreement will only satisfy the requirements of the Tax Act if it is accompanied by a registered mortgage over land.

NI does not currently generate or assist with registration of mortgages, so additional specialist advice and documentation is required where a 25-year loan agreement is intended to be created.

The constitution contains a schedule making provision for seven year loans by the company to members, which we believe satisfies the requirements set out in Tax Determination 2004/86 (which has been withdrawn, notwithstanding that the Tax Office’s views in the area remain largely unchanged) and TD2008/8 for compliance with Division 7A Income Tax Assessment Act 1936 (Cth).

For completeness, the provisions in the schedule only apply to loans made by the company in its own capacity (i.e. not in its capacity as trustee of a trust) and the Tax Office’s view in TD2008/8 is that the shareholder and the company are still required to agree in writing that the provisions of schedule will apply to the shareholder loan (for instance, by exchange of correspondence).

We recommend that you obtain specialist advice if loans are to be made by the company other than to members, as the tax consequences of these arrangements can be complex. Similarly, if you are in any doubt as to the implications of the company making a loan to a member we recommend that advice is obtained, ideally before the loan is made.

Estate Planning

The Estate Planning module is available on the NowInfinity application under ‘Menu’ and then ‘Estate Planning’.

If this is not visible to you, please check that your account administrator has set your access for the module to ‘Full’. Watch this video for how to do that.

If you have just registered with NowInfinity, your access to the Estate Planning module will be set up as part of the onboarding process as an account setting change – if you do not have access within 2 business days of registration, please let us know.

It is well understood that a willmaker’s will is their property.

Therefore a lawyer holding the will should never release the will to anyone, other than the client, without specific written instructions.

An issue with an ageing population that is becoming increasingly prevalent however is who has the right to access a willmaker’s will if the willmaker has lost capacity.  In particular, assuming the willmaker has an enduring attorney, does that person have the right to obtain a copy?

Generally the position appears to be that unless the willmaker has expressly given the lawyer who drafted the will instructions that an attorney has the right to access the will then access should be denied.

While these instructions can be included in the attorney document, we generally recommend only including a statement along the following lines in a memo of directions by the willmaker:

‘I confirm that View Legal may in its absolute discretion disclose the contents of my will to anyone validly appointed as my enduring attorney.’

This said, an enduring attorney may apply to the relevant state based administrative tribunal to obtain access to a donor’s will.

The administrative tribunals in each state also have the ability to ‘open’ wills of an incapacitated person.  This power is often exercised where an attorney is needing to make decisions in relation to the administration of the willmaker’s assets.

Finally, as profiled in a number of previous posts on the View Legal blog, where a person has lost capacity, it is also possible for a statutory or court ordered will to be made on their behalf.

In most states (South Australia is one key exception) an attorney cannot accept their appointment until a valid enduring power of attorney (EPA) has been executed by the principal who is granting the power in the first place.

Thus any purported acceptance by an attorney before a principal signs the EPA will be invalid.

This said, there is case law to support that a prior invalid acceptance can be remedied by the attorney simply re-executing the document to confirm acceptance of appointment.  This approach is possible even where the principal has already lost capacity.

Generally we recommend that attorneys do not sign to accept their appointment until they actually need to rely on the document.

Given attorney documents may never be required, this approach minimises risks with having a fully executed document in existence.

Again, there is case law confirming that an attorney may accept their appointment at any time after a principal has validly executed an EPA, even if the principal has since lost capacity.  This is because an EPA is not revoked by a principal’s later loss of capacity.

The reasons here are explained in the following flyer.

Where life spouses wish to prepare wills not on mirror terms, individual packages will be required.

The adviser must facilitate all aspects of the process, including:

  1. fully complete and submit all instructions;
  2. conduct preliminary discussions with client in relation to the key aspects of estate planning;
  3. locate and submit to View Legal all requested documentation;
  4. generally attend the web-based meetings, at least to make introductions or chair the meeting; and
  5. signing and witnessing of the documents.

View can however also assist in situations where the adviser does not choose to facilitate the process, see the FAQ: Does View provide estate planning solutions for situations that are too complex for the adviser facilitated platform?

If assistance outside the parameters of the selected package is required, we will provide a recommendation for either:

  1. an upgrade to the appropriate package level; or
  2. a suggested scope of work appropriate for the situation and guaranteed fixed pricing for approval before proceeding.

Yes, View specialises in all forms of estate planning advice, including very complex situations.

Simply submit a free review and we will review the information provided for free and then provide a suggested scope and guaranteed fixed pricing for approval before proceeding.

See also the FAQ entry ‘How do I submit a free review’.

Having completed a detailed audit of the key risk areas in estate planning, we have seen a significant increase in situations where minor, inconsequential requested changes have seen delays in documentation being signed, in some instances, for extended periods. In other instances, clients have actually suffered an incapacity event or death before signing updated documents.

Examples of the types of changes include adding middle names, address details, phone numbers, dates of birth or occupations.

Particularly in relation to inserting missing address details, phone numbers or occupations, not only does this create immediate risk, it also creates a situation where the customer is potentially at risk in the future when the relevant person (inevitably) moves address, changes contact details or occupation.

These details are unnecessary to ensure validity of documents, however if included, do cause difficulties if they are not subsequently updated.

Our recommendation therefore is that these line items should be left blank, unless completed entirely accurately in the initial data submission.  Your attorneys and guardians can complete the details by hand at any time after signing.

Navigate to the Collaboration page for the particular estate planning matter.  If the meeting is open for booking, there will be a blue ribbon across the top of the page reminding you to book your meeting. You do this under ‘Integrations’ by clicking on ‘Book a Strategy Meeting’ or ‘Book a Review Meeting’ (depending on which meeting is relevant for the estate plan and workflow status).

This meeting should be booked via View Legal’s website, www.viewlegal.com.au (follow the links to book the meeting after you have logged in).

This process will be phased out in due course, and new estate planning jobs will only be able to be submitted via the NowInfinity website.

The workflow in the NowInfinity collaboration page is designed so as to allow you to book a meeting at the appropriate time.

The Strategy Meeting (which applies in Concierge and Comprehensive will packages) can be booked immediately after submitting initial instructions.

For the Review Meeting (which applies to all packages) can be booked immediately after View Legal delivers draft documents to you.

You cannot book a meeting for adviser facilitated estate planning prior to submitting instructions.

The workflow in the NowInfinity collaboration page is designed so as to allow you to book a meeting at the appropriate time.

The Strategy Meeting (which applies in Concierge and Comprehensive will packages) can be booked immediately after submitting initial instructions.

For the Review Meeting (which applies to all packages) can be booked immediately after View Legal delivers draft documents to you.

You cannot book a meeting for adviser facilitated estate planning prior to submitting instructions.

Largely, all package options and service levels remain the same. Pricing has been changed for most packages and is current as from 1 June 2019. As with all View solutions, the pricing is upfront, fixed and service guaranteed.

If you are unsure which estate planning package is right for your client, you can submit a Free Review for guidance from View Legal.

Select ‘New Estate Plan’ from the NowInfinity menu, and on the ‘Create New Estate’ page at the top of the screen there is a link to the Free Review form.  Once completed, this will submit directly to View Legal who will contact you by email with their free guidance.

The Spouse form only appears if you have chosen the ‘Couple’ package.  The ‘Couple’ package is for 2 people whose documents are to be prepared on mirror terms, which means that the will and/or attorney documents for each Willmaker are identical or substantially identical.  If there are key differences between a couple’s estate plans (meaning that they will not be mirrored), then two ‘Single’ packages should be completed.

The ‘Spouse’ form in the ‘Couple’ package has the majority of fields locked for editing, because those fields need to be identical as between the two will makers.  Sections which are not locked and may be different are the ‘Calamity’ and ‘Attorney/Guardian’ sections.

Addresses do not yet have ‘smarts’ applied to them to allow a user to simply re-select a previously entered address.  However, we recommend that if an address needs to be re-entered, that you copy and paste it, to ensure typographical errors are kept to a minimum.

When you have entered a name once, the interview remembers that name and allows you to select it from a dropdown menu later into the interview if you need to use that name again (for example, the Spouse may be named again in the executor or attorney sections).

If a name does not appear, it is likely to be because it is the spouse or a child of the Willmaker, and not all of the mandatory questions about that spouse or child have yet been answered and thus validated by the system.  Once all mandatory questions have been completed, the name should appear in the later dropdown menu.

If this doesn’t work, you can always retype the name, although this should be a last resort in order to ensure typographical errors are kept to a minimum.

Crypto currency has no actual registered ownership in a traditional legal sense.

Rather, there is a ‘private key’ (which is a number) or a ‘wallet’ (that is a sequence of letters and numbers).  The key or wallet is essentially a password via which the crypto currency is accessed.   In some respects the value of a key is analogous to physical traditional cash in hand – whomever physically has it enjoys the right to use it.

It should be noted that due to the importance of keeping keys or wallets secret, they are often encrypted.   Adopting this approach means that a further password is required when decrypting the encoded key.

For estate planning purposes, the critical aspect is to ensure succession of the key passes to the intended recipient in a confidential manner.  The transfer of this information should therefore not be set out in any detail in the will as the will, particularly if probate is obtained, essentially becomes a public document.

Without access to the key, wallet and any password the crypto currency will be unable to be accessed.  It is therefore critical that all data is kept up to date at any point and can be accessed by the intended recipient.

Generally we recommend that the necessary crypto currency information is shared via a memo of directions (explained in more detail here).

There are risks for anyone holding the confidential information – for example if a professional service firm agrees to hold the passwords in secure storage, however the client is later hacked they may seek to allege their information was not held securely with the firm.

Another approach therefore is to keep the confidential information segregated in, say, halves, with each part in a different location.  This means that 2 or more people must connect to gain access.

A specific example in this regard is that often software wallets (eg Exodus) and hardware wallets (eg Ledger) have around 20 random words as their pass phrase to restore a wallet if a password is lost.

By splitting the list of words in 2, half can be held via the law firm’s secure storage and the other half at a location chosen by the client and known to the executor. The lawyer and executor would then need to connect to access the key or wallet.

Other solutions are also emerging that trigger sharing of certain information on death (eg Email from Death) which can assist with the segregation of confidential information.

As usual however, the consequences of incapacity, as opposed to death, also need to be considered in relation to all of the abovementioned situations.

 

NI and View have partnered with myprosperity, Australia’s leading personal wealth portal to provide free, standard wills (that is, wills that do not include testamentary trusts).

This press release provides more context to the offering.

The product is designed to provide an effective and immediate solution for accountants and advisers wanting to ensure their clients have a basic level of will (but not power of attorney) documentation in place.

The full process is explained via the myprosperity portal, including the risk related issues that advisers and clients need to be aware of.

There are also tools available to help advisers deliver tailored estate planning solutions that, for example, include testamentary trusts. The legal aspects of these solutions can be delivered on a wholesale basis and are designed to allow advisers to facilitate the process, on a fee for service basis.

As the free standard wills product is available exclusively via the myprosperity portal, the starting point for advisers interested in the solution should be directly with myprosperity.

Yes, the View platform has had this functionality since it was launched.

The best process is to simply lodge a free review.

We will then loop back with the suggested next steps, depending on what is required.

If you or the client do not have access to the interview summary for the existing documents, simply request that via the free review initially – we can email that to you and then you can confirm any required changes, again via the free review service.

View carries the legal risk.

In particular:

1. View has the legal relationship with the end user client. View’s material makes it clear that the costs agreement is with end user client, not the adviser. The cost agreement is on View’s website and can be downloaded at any time, see under the ‘other helpful links’ in the bottom right hand corner of the following page: https://viewlegal.com.au/resources/

2. To the extent an adviser charges a facilitation fee in addition to View’s fixed pricing (which we fully support), it will be up to the adviser (in conjunction with their licensee) as to how this is disclosed to the client.

3. Our experience is that some dealer groups mandate that View’s invoice be provided ‘as is’ to the end client and that a separate invoice is created by the adviser.

4. Other dealer groups charge a total unbundled fee (often structured as an annual fee that includes a range of services), to the client.

5. Others adopt a hybrid approach of a total fee with each component listed on the adviser’s invoice, however the View Legal invoice is not itself physically provided to the client.

6. Included in each of View’s estate planning packages is an online meeting with the adviser (if they choose to attend), the client and one of View’s specialist lawyers to explain the estate planning documentation. After the online meeting, View issues an independent advice certificate confirming that View Legal has provided all legal advice to the client in relation to the estate planning documents. As such, all liability for the legal advice rests with View Legal and not the adviser.

7. The independent advice certificate approach has been signed off by dozens of compliance teams across the country, including 3 of the 5 largest financial institutions and the inhouse legal teams of those firms.

For completeness, we do see some licensees focus heavily on whether advisers are bundling fees (and therefore not disclosing View’s pricing), due to a concern that the approach somehow makes what the adviser is doing legal advice. While View disagrees with this conclusion, advisers must follow their licensee’s requirements.

View works with existing advisers and clients to provide strategic commercial advice where issues are in contention. This advice is generally themed around one sentence – that is ‘do whatever you can to keep this away from the lawyers and courts’.

However if the commercial approach will not work, View actively avoids any litigation work as our belief is the system is gamed to create significant upside for lawyers to be generating fees, at the direct expense of the financial and emotional wellbeing of the client. An outcome which is entirely contrary to View’s ‘why’ which is provide legal solutions that are for friends.

In other words, if we are not part of the solution, we are part of the problem.

We can however provide some suggestions as to lawyers who may be able to assist. These leads would be with the standard lawyer disclaimers that:

1. While we are not personally aware of any problems encountered with these lawyers in the past, we obviously cannot guarantee their work;

2. We cannot take any responsibility for the work of the other lawyers;

3. Rarely (if ever) are clients happy with the value delivered by their litigation lawyers.

In all circumstances our recommendations are the same for estate plans – get the model commercially right for now, and (ideally) retain sufficient flexibility for the future – knowing that the only certainty is change to the revenue rules.

In this regard, our experience is that the use of testamentary trusts gives the maximum level of flexibility that can be achieved, notwithstanding that the exact methods for restructuring the ownership of those assets over time will inevitably change.

As advisers would be acutely aware, the proposed future changes to the taxation of trusts raised multiple times since the late 1990s (such as taxing trusts as companies) are radical – to give but one example.

Conversely, with the gradual abolition of the various heads of stamp duty in various jurisdictions across Australia since 2000, a number of restructuring strategies which would have been prohibitive from a stamp duty perspective historically are now available.

For many years View has offered its free review service. Our experience is that this combined with passionate pursuit of ensuring every structure is as robust and flexible as possible at the date of implementation provides the only responsible approach.

No, the terms of the testamentary trust are generally set out in the deceased’s will.

That said, best practice is to prepare a separate ‘bank pack’ which isolates the terms of the trust from the other provisions of the will, to assist with dealing with third parties such as banks and be the sole ‘source of truth’ for the term of the trust.

SMSF

As with many areas of potential conflict in the SMSF space, the starting point for an answer to this question will be the terms of the trust deed and pension documents.

The default position under the NI SMSF deed is that a valid reversionary pension takes priority over any purported BDBN.

There are a number of reasons for this; not least of which being that a valid reversionary pension creates a contractual right for the beneficiary. In other words, the pension assets can not form part of a death benefit distribution.

This said, if implemented as part of a comprehensive estate plan the opposite outcome may be able to be achieved.

Ultimately however, it is important to be aware that the Tax Office’s position appears to align with the NI SMSF deed, as confirmed via a National Tax Liaison Group (Superannuation Technical Sub-group) in March 2010.

The minutes confirm as follows:

‘There are no SIS Act or SISR provisions that are relevant to determining which nomination an SMSF trustee is to give precedence where a deceased pension member had both a valid reversionary nomination and a valid BDBN in existence at the same time of the member’s death.

While section 59 of the SIS Act and Regulation 6.17A of the SISR place restrictions on superannuation entity trustees accepting BDBNs from a member, as explained in SMSF Determination SMSFD 2008/3, the Commissioner is of the view that those provisions do not have any application to SMSFs.

It must also be remembered that section 59 of the SIS Act and regulation 6.17A of the SISR are necessary because of the general trust law principle that beneficiaries cannot direct trustees in the performance of their trust.

The ATO’s view is that a pension that is a genuine reversionary pension, that is, one which under the terms and conditions established at the commencement of the pension reverts to a nominated (or determinable) beneficiary must be paid to the reversioner.

It is only where a trustee may exercise its discretion as to which beneficiary is paid the deceased member’s benefits and/or the form in which the benefits are payable that a death benefit nomination is relevant.’

No, the attorney’s trusteeship does not end on the member’s death.

When a legal personal representative (LPR), for example, an attorney under an enduring power of attorney (EPA), is appointed as a trustee of an SMSF, they act in their personal capacity as trustee pursuant to their appointment as trustee, rather than as an attorney or agent for the member.

This means that the appointment does not end and is in no way dependent on the document (eg the EPA) that originally created the person’s role as the member’s LPR.

The above conclusions are subject to the terms of the trust deed for the SMSF.  The View SMSF trust deed reflects the above position and provides that trustees appointed because they are the LPR of a member who is unable to act are appointed in their personal capacity.

That is, the terms of the deed do not limit the LPR’s appointment as trustee of the SMSF in any way, nor do they mandate termination of trusteeship if (for example) the member dies and the role of acting as the member’s attorney therefore ends.

The decision in Dawson v Dawson [2019] NSWSC 826 also confirms the above points.

It is not a requirement for all members of the SMSF to be directors of the corporate trustee for the bare trust.

The standard loan agreement available on the platform would be suitable for this purpose.

This is a deliberate approach in the design of the platform to help ensure advisers carefully consider whether the requisite power to vary is contained in the existing deed. 

To minimise the risk of data entry errors however, this information is not populated in the deed as naming the specific clause is not a legal requirement for the deed of variation to be valid. 

No. While changes may certainly be required for a trust in light of the foreign purchaser rules, we do not see how any amendment would advance the position for an SMSF given any member would have to be removed from the fund if they were considered a non-resident.

The deed update available via NowInfinity will not affect any existing pensions.

All investment strategy templates are designed to be a starting point for the trustee to review and ensure it is appropriate for the circumstances of the fund and its members.  An investment strategy should also be reviewed in light of any feedback from the fund’s auditor. It is always recommended that the template investment strategy is tailored as the trustee determines is appropriate from time to time.

The trustee should be changed, simultaneously with the member resignation.

We recommend that the deed update be signed the following day after the change of trustee and the member resignation.

The NI template BDBNs only permit lump sum payment directions.

If the form of payment also needs to be mandated then the recommendation is that a tailored SMSF Will is prepared – see the separate FAQ in relation to SMSF Wills.

The reason an SMSF Will is recommended is due to the complex interplay between superannuation and estate planning rules and the fact that SMSF Wills are always subject to the terms of the trust deed for the SMSF.

Generally speaking, a self-managed superannuation fund (SMSF) trust deed should be updated when:

1. there is a change in the law surrounding SMSFs;

2. there is a change in the client circumstances warranting review and amendment of the SMSF trust deed; or

3. significant time has lapsed since the deed was established or last varied. In this regard, if the deed predates the July 2017 superannuation reforms, it would generally be prudent to update the deed at this juncture.

Our summary in relation to the July 2017 superannuation reforms can be found here (you will need to be logged in to view this page).

Where a single SMSF trust deed needs to be updated, this can be done through the NowInfinity platform. If bulk updates are required (e.g. more than 10 deeds) please contact us directly.

Alternatively, if you would like us to complete a review of an SMSF trust deed in the context of any specific concerns or issues you have identified, we can provide a suggested scope of work and fixed pricing upon request.

No, this is not an approach that View believes is appropriate. From a trust law perspective such consents are unlikely to be enforceable and may indeed make the prospect of dispute even more likely.

Where a company with a NowInfinity special purpose constitution is trustee for an SMSF (regulated by a NowInfinity trust deed), the Proportionate Voting Rule applies unless the directors resolve (by a proportionate vote) to apply a different voting mechanism under rule 4.2.

The default quorum for director meetings is two directors. While this can be amended on a case by case basis if there are specific concerns in the context of a particular client situation, given the liability of directors under the Corporations Act, Tax Act and SIS Act, our usual recommendation is that this provision is retained.

Ultimately the Proportionate Voting Rule is designed to provide a pragmatic ‘tie-breaker’ for decision-making where there is still a level of communication and respect between the parties.

Where the relationship between members has irretrievably broken down it is inappropriate on many levels for either party to have the ability to mandate removal of a director where that outcome is disputed by the other member. Allowing the Proportionate Voting Rule to apply in this type of situation also causes significant additional financial costs – usually to the benefit of the legal industry.

No, the SMSF deed only specifies that any limit under the SIS Act or SISR applies.  As a result, assuming the announcement from the May 2018 budget increasing the member limit for SMSFS from 4 to 6 is passed, the NI SMSF deed will allow each fund to have 6 members.

Yes.  Some minor amendments have been made to remove the requirement for SMSFs to be audited annually and to incorporate the ability for the trustee to prepare a retirement income strategy, in anticipation of upcoming legislative amendments.  The ancillary documents (such as user notes) have also been updated to note the proposed increase in the maximum number of members of an SMSF from 4 to 6.

Yes, the default position is that the proportionate voting rule applies for all NI SMSF deeds, however this can be adjusted as requested.

Note however that the proportionate voting rule only applies where the SMSF has individual trustees.

Where the SMSF has a corporate trustee, the voting mechanisms in the constitution for the trustee company will prevail. Where NI’s special purpose company constitution has been adopted, a proportionate voting rule applies to the directors.

Yes, the QROPS provisions are automatically included in all NI SMSF deed. It is important to note however that generally a deed needs to be approved by the relevant foreign regulatory authority before a QROPS rollover can proceed.

Yes, however it should be noted that the Tax Office has expressed reservations regarding the effectiveness of nominating or changing reversionary beneficiaries after a pension has commenced.

Yes the floating account and reserve have create a similar result. Both are both included based on user feedback, given earlier iterations of the product. Care must be taken whenever using any reserving account however given the Tax Office’s publicly stated views.

An SMSF Will is a written direction of the Member, which prescribes the binding terms of a payment of their Superannuation Interests following the Member’s death. In contrast, an SMSF Living Will (see separate FAQ entry) only operates in relation to a member’s incapacity.

An SMSF Will is non-lapsing and generally used in cases where there is complexity in relation to the proposed distributions which a standard BDBN does not sufficiently accommodate (for instance, multiple ‘levels’ of distribution depending on which family members survive).

SMSF Wills can be crafted as a standalone document, or ‘hardwired’ into the trust deed of an SMSF.

An SMSF Will should only be implemented as part of a comprehensive estate plan.

While SMSF Wills are not currently available through the NI platform, View works with advisers to identify what they were trying to achieve and can produce the appropriate documents accordingly. All assistance is provided on an upfront agreed scope of work and fixed pricing. If common themes emerge over time then we will look to release this product on the NI platform.

An SMSF Living Will can be an effective tool for lifetime planning. In contrast, an SMSF Will (see separate FAQ entry) only operates in relation on the death of a member.

An SMSF Living Will can be put in place by a member to provide directions in respect to their member benefits in the event of their temporary incapacity, permanent incapacity or terminal illness.

The trustee may accept some or all of the member’s request under an SMSF Living Will.

Generally it is recommended that an SMSF Living Will only be implemented as part of a comprehensive estate plan.

While SMSF Living Wills are not currently available through the NI platform, View works with advisers to identify what they were trying to achieve and can produce the appropriate documents accordingly. All assistance is provided on an upfront agreed scope of work and fixed pricing. If common themes emerge over time then we will look to release this product on the NI platform.

This said, as there is no prescribed form for an SMSF Living Will, trustees of SMSFs can in their discretion accept directions from a member in any format mutually agreed (for example by way of letter from the member to the trustee).

The alternate decision maker role is addressed by the individual member appointing an attorney pursuant to an enduring power of attorney (either a general enduring power of attorney, or a document specifically in relation to the SMSF).

The NI SMSF trust deed allows the individual’s attorney to exercise their rights as an individual trustee or director of the corporate trustee. The approach adopted by the NI SMSF deed is in accordance with the views expressed by the Tax Office in this area and is also best practice from an estate planning perspective.

No not currently, for a range of reasons, included the arguably minimal utility of the approach.

This said, the concept is on our list for future development releases, subject to user feedback.

Yes, the NI SMSF deed anticipates access to a stamp duty exemption which is currently available in NSW, Victoria, Tasmania, SA and WA. Unfortunately there is no equivalent exemption in other states at this stage. The NI deed is crafted so that the specific asset being segregated does not need to be mentioned.

The SMSF will is a deed which, in essence, is a more sophisticated form of binding death benefit nomination (BDBN). It allows the member to deal with broader range of issues than a typical BDBN, such as segregating particular assets for specific beneficiaries, mandating the payment method (eg lump sum or pension) and outlining multiple levels of ‘giftover’ if a particular beneficiary fails to survive. All assistance with SMSF Wills is provided on an upfront agreed scope of work and fixed pricing. If common themes emerge over time then we also proactively look to release those products on the NI platform.

Yes there is a standard BDBN which applies to the NI SMSF deed, and potentially for other SMSF deeds. A template BDBN is provided with all new deeds and deed upgrades and custom BDBNs can also be ordered through the platform. These are included as part of the overall platform subscription.

Member guardian provisions are generally rules set out in an SMSF trust deed that allow a member to appoint a representative to make decisions on their behalf in the event of incapacity or death.

The NI SMSF trust deed deliberately does not contemplate member guardian arrangements for a range of reasons including:

(a) the issues potentially addressed by a member guardian in relation to a member’s benefits are replicating solutions available via use of an SMSF Living Will (for incapacity) or a BDBN or SMSF Will (on death). Having an additional separate process for appointing a member guardian creates a significant, and unnecessary, risk for dispute to arise as to what document takes priority.

(b) similarly, in relation to day to day decision making, delegating the authority to a member’s legal personal representative (being an attorney under an enduring power of attorney or executor under a will) is the approach anticipated by the law.

(c) having multiple potential documents purporting to regulate the same issues also adds a significant layer of unnecessary complexity to the estate planning process. One simple example in this regard is the right to update a BDBN – who has that right and under what conditions as between an attorney and a member guardian?

(d) we are aware of situations where 3rd parties have refused to acknowledge the purported rights of a member guardian, due to the existence of (say) an enduing power of attorney leading to significant unnecessary costs (both emotional and financial).

(e) even where a member guardian document and enduring power of attorney expressly contemplate the rights under each document (which we have found is the exception rather than the rule), third parties will invariably want to explore the validity of both documents and often refuse to accept either (or both) – at a point in time where the ability to amend either document is either unavailable or significantly costly.

(f) while all of the above problems are bad outcomes for members and their SMSF advisers, they create significant upside for lawyers to be generating fees – an outcome which is entirely contrary to View’s ‘why’ which is provide legal solutions that are for friends. In other words, if we are not part of the solution, we are part of the problem.

While for the above reasons member guardian provisions are not currently available through the NI platform, View works with advisers to identify what they were trying to achieve and can produce the appropriate documents accordingly – that is (for example) valid, SMSF aligned, estate planning documents. All assistance is provided on an upfront agreed scope of work and fixed pricing.

No, the NI SMSF trust deed does not impose any obligations in relation to a member’s estate plan. While View is passionate about everyone having comprehensive estate plans in place, mandating this under a trust deed as part of establishing an SMSF is something we strongly discourage for a range of reasons including:

(a) who defines what is satisfactory – and does it give aggrieved beneficiaries under the estate a right to sue for a failure to discharge the requirement.

(b) it is setting the members up to fail mandating a requirement that in our experience few if any will pay any significant attention to.

(c) it creates the impression that estate planning is only important at one specific point in time (i.e. joining the fund) when the opposite is true.

(d) it is not required by the superannuation laws.

The SMSF deed allows a pension to be commenced and provides that the pension must be dealt with in accordance with the terms of the pension agreement.

Where the member wishes to have a TRIS ‘auto convert’ to an ABP, this can be achieved by under the terms of the pension agreement rather than the SMSF deed.

That said, the ATO has concerns with this approach and specialist advice should be obtained before relying on the strategy.

As a starting point, it is important to firstly check the following locations for the original, or any copies of the, fund deed:

1. All current and previous accountants, lawyers and financial planners who have had any involvement with the SMSF;

2. The SMSF’s financial institutions – for instance, anywhere a bank account has ever been opened for the SMSF;

3. The Titles Office, if the SMSF has ever owned real property in jurisdictions that allow a trust to be disclosed on title; and

4. The law firm or provider who established the SMSF.

If all avenues to try and locate the original fund deed are exhausted, a deed of variation and ratification can be prepared to ratify and provide replacement rules for the fund, however this approach can have potentially significant tax, stamp duty, trust law and SIS Act ramifications.

The alternative approach to apply to Court for a reconstruction of the terms of the SMSF.

As a starting point, we recommend the clients contact the firm who prepared the current deed and request their comments on the procedure to be followed to update the document, given the failure to have a power for the trustee to vary the deed would appear to be a significant oversight.

Subject to any feedback from that firm, View can provide a proposed scope of work and fixed pricing to advise on the steps that may be able to be taken to rectify the issue.

Under an NI constitution, if there is at least one remaining director, that person can exercise their power under the constitution to appoint a replacement director (being the legal personal representative of the incapacitated director).

If the incapacitated director was the sole director, then the shareholders would need to pass a resolution to appoint the new director, again being the incapacitated director’s legal personal representative. If the incapacitated person was a shareholder of the trustee company, their attorneys would vote on their behalf in appointing the replacement director pursuant to the enduring power of attorney.

Generally a review of the whole deed is required to confirm whether there are any other provisions outlining the process for specifying the ‘approved form’.

This said, generally where the wording ‘in a form approved by the trustee’ is used, our experience is that the form of the document is approved either on establishment of the fund, or (more often) at the time of preparing a BDBN.

The approval of the form by the trustee would be by either providing members with (say) a template issued to the trustee on establishment of the fund, the trustee resolving to approve a form and circulating that template or by resolving to approve a completed BDBN submitted by a member.

This means that even if a template form was created on establishment of the fund, this of itself will be unlikely to be sufficient to comply with the deed, unless the trustee took steps to formally approve it.

Where the members are spouses involved in finalising a property settlement, there may still be merit in producing and signing a BDBN now and submitting it to the trustee – in theory the interest of both spouses should be aligned about the ability to update all aspects of their respective estate plans (i.e. including a BDBN), despite their relationship breakdown.

Alternatively, steps could be taken to adopt a replacement deed which removes the wording around the BDBN needing to be in an approved form and simply requires the trustee to accept any BDBN provided by a member. This approach would still require the trustees to agree on updating the deed however.

Trustees of SMSFs are required to keep the money and other assets of the fund separate from any money and assets that are held by the trustee personally, with a failure to do so potentially leading to fines and other penalties (see Regulation 4.09A).

The Tax Office generally considers this requirement means trustees of SMSFs should ensure that both the trustee and the fund be disclosed on title, and best practice is to adopt this approach.

However in many cases, disclosure of the trust relationship is not possible. For example, most cryto-currency exchanges only record legal ownership, not beneficial ownership.

Generally the Tax Office’s preferred position in these cases appears to be to have an SMSF document the fund’s ownership of an asset by using one of the following:

1. a caveat;

2. signing a ‘declaration of trust’;

3. implementing a ‘legal instrument’.

Each of these approaches have potential issues, for example:

1. An owner of a property may be prevented from registering a caveat where they are already registered on the title;

2. In many states there is a potential stamp duty risk in signing a declaration of trust – and in any event, the trustee will not in fact be declaring a trust over the asset;

3. The ‘legal instrument’ approach is unclear.

Practically, we see some SMSFs sign a short form document titled an ‘Acknowledgement of Trust’, which simply confirms formally that the trustee is the registered owner of the property, holding it on trust for the fund, despite this fact not otherwise being recorded by the asset register.

While the document arguably does nothing that the trustee minutes on acquisition and other evidence that would normally exist confirms, it does provide self-serving (and hopefully contemporaneous) evidence to the SMSF’s auditor, the Tax Office and any trustee in bankruptcy.

Structuring

In our experience, as long as it is documented correctly in the books of account, a partner can be paid a wage by the partnership, without any specific wording required in the partnership agreement.

As there are no risk issues attached to being a settlor of a trust, our general recommendation is that the adviser ordering the trust provide the settlor. This helps provide a direct point of contact for the client in the future as well as minimising the delays in establishing the trust. In particular, the trust can be ordered and created almost instantaneously adopting this approach.

In saying this, VL can also provide a settlor as required and has created a special purpose company for the sole purpose of settling trusts.

There are additional steps and separate fixed pricing which applies in this regard, and for those interested, please contact VL directly.

As trust deeds will be required to be physically sent when VL is the settlor, there are also delays in establishing trusts where VL is the settlor due to the postage time involved.

Please note that if the intention is to avoid paying stamp duty on creation of the trust (for example for NSW or Victorian based clients) by having VL act as settlor it is necessary to ensure that the:

1. jurisdiction of the trust is a state that does not impose duty on trust establishment;

2. trustee will physically sign the deed in the same jurisdiction as the trust is established.

Unfortunately employee share schemes are outside our areas of specialisation.

Upon request however, we may be able to provide you with the names of some firms who may be able to assist.

Unfortunately assignments of intellectual property are outside our areas of specialisation.

Upon request however, we may be able to provide you with the names of some firms who may be able to assist.

Yes, from time to time we have seen certain banks mandate that a form of LRBA trust deed is used which allows multiple trusts to be established under a single trust instrument.

While this approach is arguably effective from a trust and superannuation law perspective, our view is that it unnecessarily over-complicates the arrangements when dealing with third parties (such as the Titles Office and for stamp duty relief purposes) and any cost savings are marginal at best. There are also potential asset protection issues created by the approach.

Our general recommendation is to have a separate deed is used to establish each new LRBA borrowing arrangement.

Generally, all of the advantages of a trust owned arrangement are the same as self owned insurance policies, although the insurance provider should be asked to confirm whether an exiting owner (for reasons other than an insurable event) can in fact take their policy. Often this is only in fact possible with a self-owned policy.

Other than this, the main disadvantages of a trust owned arrangement tend to be the initial cost of establishment, the ongoing costs and complexities of management of the structure. Also, generally, all of the advantages of an insurance trust arrangement can be achieved via self owned policies, using a ‘hybrid’ buy sell deed (see page 2 of the flyer attached).

The main disadvantage of a self owned arrangement is the inability to have the policies managed centrally.

The insurance trust itself is established as part of the buy sell deed itself, in parallel to the insurance being written.

Ideally any shareholder, unitholder or partnership agreement should interact seamlessly with the buy sell deed.

In these circumstances, it will generally be far more cost effective and risk appropriate to establish a new entity.

Our approach is usually to prepare a separate deed of change of trustee and deed of variation, rather than amalgamating the two changes into a single document.

This is for a number of reasons, including:

1. The parties to each change and the power under the trust deed being relied on for the changes will usually be different for each type of change being made;

2. As the deed of variation will generally be the document referenced more regularly in the future by 3rd parties, it minimises confusion having the new trustee the party signing the document; and

3. The processing requirements for each document will usually be different (for instance, the deed of change of trustee will usually need to be stamped while the deed of variation may not require stamping).

The approach adopted is to retire all of the current trustees and appoint new trustees in their place (including re-appointing any continuing trustees). The rationale for this approach is that:

a) the conservative view is that the role of trustee is an office made up of all persons acting from time to time;

b) this means that even if there are ‘continuing’ individual trustees, they should be retired and reappointed as part of any change of trustee process;

c) many third parties require this approach in order to register asset transfers to the new trustee, even though it might be arguable at law that it is unnecessary; and

d) in particular, most Land Title Offices mandate that change of trustee deeds be consistent with any asset transfers which are required as a result of the change of trustee. That is, the transfers must be made by all previous trustees as transferors to all new trustees as transferees (regardless of whether some of them are continuing).

Unit Trust

No. The unitholder may also be a trustee, however they cannot be the sole trustee and sole unitholder.

The ‘foreign purchaser’ rules across Australian mean many discretionary (or family) trust deeds need to be updated to ensure they will not be liable for additional stamp duty or land tax, when they acquire property by excluding foreign beneficiaries as potential beneficiaries.

No changes need to be made nor provisions included in unit trusts or fixed trust deeds however.  This is because the ‘foreign purchaser’ rules operate simply on a question of fact as to whether a beneficial interest above a set percentage in the units (and therefore in turn the capital of the trust property) is held by one or more foreign persons.

Please also see the FAQ entries titled ‘Do foreign purchaser rules apply to SMSFs?’ and ‘Do trust deeds need to be updated for the foreign beneficiary rules?’

Generally, we only recommend updating a unit trust deed where one or more of the following issues are applicable:

  1.  there is a need for the trust to be a fixed trust for tax purposes;
  2. there is a need for the trust to be a fixed trust for land tax purposes;
  3. a third party (for example a financier) requires specific changes;
  4. there are certain arrangements that are to be documented between the unitholders (generally we recommend these issues be addressed in a unitholders agreement); or
  5. the deed does not ensure the unitholders are protected from being liable to the trustee (if the assets of the trust are insufficient to cover the trustee’s right of indemnity).

In relation to distribution of income or capital provisions, the issues in this regard can be managed by crafting the distribution resolution in the relevant income year.

For completeness, while it is often best practice to update discretionary trusts for the High Court decision in Bamford, this is not the case in relation to unit trusts, as unit trusts do not have the flexibility to stream income.

No, assets from trusts with a common trustee are generally not available (however, creditors would often try to access these funds).

Generally, the same corporate trustee can be used for multiple trusts.

However, consideration should be given to whether this would achieve clients’ specific objectives.

Unit trust

The unit trust deed provides each unitholder with an entitlement to an agreed percentage of the trust’s income and capital (based on their percentage unitholdings), however the trust is not a ‘fixed trust’ under the Tax Act and does not satisfy the requirements to be a ‘fixed trust’ for NSW land tax purposes either. The deed provides a reasonable degree of flexibility for allowing the structure to be changed in the future as required (for instance, a broad power for the trustee to vary the provisions of the deed).

Fixed trust

This deed is designed to satisfy the Tax Office requirements to be a ‘fixed trust’ under the Tax Act. This is relevant in relation to issues such as determining which tax loss rules apply to the trust under the Tax Act and ensuring the income on any distributions paid to a unitholder which is an SMSF is not treated as non-arm’s length income. However, you should note that the current views of the courts and the Australian Taxation Office suggest that it is very difficult, and may be impossible, to satisfy the definition of a fixed trust for tax purposes. In an attempt to satisfy the strict requirements of a fixed trust, the trustee has limited flexibility in relation to the unitholder entitlements in the trust.

NSW land tax fixed trust

The NSW land tax fixed trust satisfies the relevant criteria to be a ‘fixed trust’ under the NSW land tax rules, and would generally only be used if the trust is acquiring land in NSW in order to access concessional land tax rates. The deed has been approved by the NSW Office of State Revenue and again, contains limited flexibility in relation to the unitholder entitlements in the trust. This deed is also designed to ensure the trust should be a ‘fixed trust’ for tax purposes.

The amendments set out in the deeds of variation we prepare generally should not amount to a tax resettlement of the underlying trust for tax purposes given the current approach of the Tax Office, as the variations are usually largely administrative in nature.

When more fundamental terms of the trust deed are amended, such as altering classes of beneficiaries, this may be more problematic from a tax resettlement perspective and specific advice should be obtained, before proceeding.

There may be other relevant factors for any specific trust we amend which may change the above comments and we can provide a proposed scope of work and fixed price to provide more detailed advice on a case by case basis, if requested.

The stamp duty consequences of any variation must also be considered, with different rules apply in each state.

NI’s hybrid unit trust is a non-fixed unit trust for tax purposes. A hybrid unit trust is a type of trust where units are issued to certain key beneficiaries to represent their interest in the trust. A hybrid trust effectively blends characteristics of unit trusts and discretionary trusts into one arrangement.

The hybrid unit trust gives the unitholders a fixed entitlement to capital, but allows income to be distributed to a range of potential beneficiaries. In particular, the trustee has a discretion to distribute income to other ‘Related Beneficiaries’ of each named unitholder (at the request of that unitholder) rather than distributing the income to the unitholder themselves.

This structure is generally only used in tightly held groups or family investment activities.

While there can be complications arising where trust deeds distinguish between income and capital entitlements (explored in other FAQ posts), those complications are largely circumvented in NI’s hybrid trust deed as any decision to allocate income to a beneficiary other than a unitholder requires the prior consent of that unitholder.

There are also a number of potential tax and commercial issues that can turn on whether a trust is a fixed or non-fixed trust and the nature of the rights of each unitholder. We recommend specialist advice is therefore obtained before a deed is established.

View, through the NI platform, works with advisers to identify what they were trying to achieve with hybrid trusts and can tailor the deeds accordingly. All assistance is provided on an upfront agreed scope of work and fixed pricing.

The NSW OSR generally does not have any discretion to refund amounts for prior year assessments if the trust did not satisfy the fixed trust requirements at the point in time of the assessment. Therefore lodging submissions in relation to an amended trust deed usually only ensure concessional treatment in future year assessments.

The process for having a trust deed assessed as a fixed trust for land tax purposes primarily consists of lodging a copy of the amended deed with the NSW OSR for their review.

We confirm that under our trust deed, a unitholder’s liability is limited to the issue price for their units and unitholders are not required to indemnify the trustee for the debts of the trust.

The relevant clause in the deed reads:

Notwithstanding any other provision of this document, no Unitholder is under any obligation to indemnify the Trustee or any creditor of the Trustee for any of the liabilities of the Trustee in relation to or arising in connection with the Trust Fund and any alleged right of indemnity (whether by way of subrogation or otherwise) is expressly excluded.

Yes, our unit trust precedent allows additional units to be issued by the trustee to new unitholders at any point in time and sets out the terms on which this may occur. As usual, advice should be obtained about the tax and stamp duty consequences of any allotment.

The products currently available are as follows:

1. A unit trust deed – this is not a fixed trust for tax purposes or NSW land tax purposes;

2. A fixed unit trust deed – this is a fixed trust for tax purposes but not for NSW land tax purposes;

3. A NSW land tax fixed trust – this is a fixed trust for both tax and NSW land tax purposes;

4. SUIT trust, 13.22C trust and hybrid trust – these are neither fixed trusts for tax purposes or NSW land tax purposes.

Please note that in order to satisfy the requirements of the NSW State Revenue Office, the NSW land tax fixed trust contains restrictive provisions which are unable to be subsequently amended or removed from the deed, so this product should be used with care.

The issues in relation to hybrid trusts, or unit trusts with special classes of units are complex and the subject of focus by the Tax Office. View can assist with establishing hybrid trusts and unit trusts with special unit classes, however the starting point is always to understand what the objectives of the client are. Some of the factors that need to be considered include the:

1. fixed trust rules (including with reference to capital gains tax event E4 and the trust loss rules);

2. land tax rules, particularly in NSW;

3. approach of the Tax Office to hybrid trusts post the Twiggy Forrest decision;

4. NALI (ie non arm’s length income) provisions where SMSFs are unitholders.

In addition, the objectives intended to be achieved by many of the ‘hybrid’ unit trust structures View has been asked to assist with historically can be satisfied by establishing a unit trust with the units owned by discretionary trusts, without needing to implement a tailored ‘hybrid’ trust deed.

The creation of trusts with different classes of income and capital rights is also problematic due to the fluid nature of the distinction between ‘income’ and ‘capital’ under trust law. For instance, most deeds provide the trustee with discretion to determine whether amounts are treated as income or capital in order to ensure they can deal with taxable amounts such as capital gains in an effective manner. While these issues do not arise in the context of income and capital rights that may be allocated to shares in a company, they can create significant complexities where there is a desire to create a unit trust with different classes of income and capital units.

These arrangements can also trigger a number of other adverse taxation consequences that should be considered on a case by case basis, such as the operation of the value shifting rules under the Tax Act.

View, through the NI platform, works with advisers to identify what they were trying to achieve with hybrid and special class unit trusts and tailor the deeds accordingly. All assistance is provided on an upfront agreed scope of work and fixed pricing. If common themes emerge over time then we will look to release products on the NI platform.

Yes.

The letter is available at the following link.


The information in this FAQ is of a general nature, not intended to be specific professional advice.

Please seek the opinion of a professional to advise you for your situation.