Land Tax Discount for Build-to-Rent Projects Across NSW

The NSW Government has announced that it will be introducing a land tax discount for all new build-to-rent projects across the states. It also announced that it will grant build-to-rent developers an exemption from foreign investor surcharges. The Land Tax discount will apply to build-to-rent projects from 1 July 2020 until 2040 and will be equal to a reduction of at least 50% calculated by reference to the unimproved land value. The full eligibility criteria has not yet been released, however, it has been noted that metropolitan developments must consist of a minimum of 50 units. We will keep you updated with developments in relation to this discount over the coming weeks.

NSW Foreign Duty and Land Tax Surcharge – Deadline Extended

As previously discussed in February this year, discretionary trusts that own residential property in NSW or hold an interest in a company or unit trust that owns residential property in NSW, must amend their trust deeds to explicitly exclude foreign persons as beneficiaries, otherwise foreign land tax and duty surcharges would apply. The deadline to make these amendments has been extended from 21 December 2019 to 31 December 2020.  NSW will automatically deem discretionary trusts to be foreign persons unless the trust deed is amended before midnight on 31 December 2020 to:

  • Exclude all foreign persons as eligible beneficiaries
  • Prevent any amendment to the exclusion of foreign persons as beneficiaries, so that the exclusion is permanent.

If you require your trust deed to be review and/or updated, please contact us.

NSW Amendments to COVID-19 Leasing Code Regulations

In a previous article we discussed the NSW governments regulations which gave effect to the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles. The NSW Parliament has now passed further legislation, being the Retail and Other Commercial Lease (COVID-19) Amendment Regulation 2020 (Amendment) which seeks to clarify some of the uncertainties in the initial regulations.  The amendment became effective on 3 July 2020, and has introduced changes to the initial regulations which:

  • Clarify that the obligations to renegotiate rent and other lease terms in good faith before taking prescribed action applies to impacted leases only;
  • Require a lessee to establish that they are an impacted lessee by giving the lessor;
    • A statement to the effect that the lessee is an “impacted lessee”; and
    • Evidence that the lessee is an impacted lessee
  • Clarify that the regulation which deems there to be no breach of a lease due to an act or omission of a lessee required by the law in response to the COVID-19 pandemic applies to “impacted lessees” only.

Introduction of Director Identification Numbers

After much public discussion and consultation, Directors in Australia will now be required to be registered and assigned with a Director Identification Number (DIN). This requirement was created by the Treasury Law Amendment (Registries Modernisation and Other Measures) Act 2020 (CTH) and is expected to have a number of implications in relation to corporate governance. The DIN has been introduced with the aim to increase positive corporate conduct and reduce illegal phoenixing activity.

What are my obligations as a Director?

There are four key obligations for directors under this new scheme. Persons must:

  1. Apply for a DIN prior to being appointed a director or within a prescribed period of being directed to do so by the registrar
  2. Not knowingly apply for multiple DINs
  3. Not deliberately provide false identity information to the registrar; and
  4. Not misrepresent a DIN to a government body or registered body

For persons who are already directors, there will be a 12-month transitional period during which they must apply for a DIN within a period yet to be specified. This regime will automatically commence on 23 June 2022, or such earlier date as proclaimed by the Governor General. Companies and directors should stay up to date on this new regime as there criminal and civil penalties will apply to those found to be in breach of their obligations. B+a will continue to keep you updated in relation to developments of this regime.

Executing documents during COVID-19

An issue that has arisen in the face of the Covid-19 pandemic is the execution of documents in cases were the signatories are working remotely or are prohibited from doing so due to social distancing requirements. Below is a summary of the ways different documents may be executed, including the temporary measures that have been enacted to facilitate electronic signing during the pandemic

Contracts

Standard contract can generally be electronically executed, at any time and can bind parties. In cases where a contract is being executed by an individual in their personal capacity, personal electronic signatures suffice. For companies, the rules are less clear. At common law, standard contracts can be in electronic form and executed electronically, however the law under s127 of the Corporations Act remains unsettled. At the very least, parties must be able to demonstrate that there is a clear intention to be bound by the contract and that they had the requisite authority to do so.

Deeds

At common law a deed must be written on paper, parchment or vellum, signed, sealed and delivered. Recent legislative changes in NSW have allowed deeds to be made in electronic form with electronic signatures (s38A Conveyancing Act 1919). However, a witness must be physically present and must execute the same document at the same time as the signatory.

NSW Covid-19 Regulations

Under the Electronic Transactions Amendment (COVID-19 Witnessing of Documents) Regulation 2020, witnessing can occur remotely via audiovisual links like Zoom, Skype or Microsoft Teams, insofar as the witness sees the signatory sign the document in real time, attests the signature was witnessed by signing the document or a copy, is reasonably satisfied that the document the witness signs is the actual or copy of the document and endorses the document with a statement verifying the method used to witness the signature and that is was witnessed in accordance with the regulation.

 

Sony charged with misleading and deceptive conduct under Australian Consumer Law

In a recent case, the Federal Court of Australia ordered Sony Interactive Entertainment Network Europe Limited (Sony) to pay a $3.5 million penalty and $100,000 of the ACCC’s legal costs after they admitted that they had breached the Australian Consumer Law (ACL). The Court ruled that Sony had engaged in misleading and deceptive conduct and had made false and misleading representations in relation to consumer guarantees. Such conduct occurred when customers called Sony customer service representatives after experiencing difficulties when downloading and playing games from the online PlayStation store. On multiple occasions, the customer service representatives told the customers that Sony was not required to refund the games, if more than 14 days had passed since purchase or if it had already been downloaded. Further, Sony was found to have misled customers as to their rights pursuant to ACL in its Terms of Service. In their Terms, Sony had implied that the users of the PlayStation network, did not have consumers guarantees in relation to the quality and performance of digital games. This case demonstrates that Companies must be aware of their obligations under ACL, or risk facing heavy and detrimental penalties.

Shadow-Director faces imprisonment for insolvent trading

Earlier this year, a former director of the Kleenmaid Group became the first person to be sentenced to imprisonment for insolvent trading as a shadow director. The case centered around Kleenmaid Group a whitegoods company that had a chain of stores and franchises across Australia. In 2006 the Group was placed into voluntary administration. ASIC then commenced investigations into the Group’s affairs and the conduct of the directors and referred the matter to the CTH DPP. The DPP prosecuted Andrew Young, the founder and previous director of the Group, for insolvent trading, even though Mr Young was not a Company Director. Under the Corporations Act the duties owed by directors also extend to persons in accordance with whose instructions or wishes the directors of the company are accustomed to (shadow directors). Ultimately, Mr Young was charged with multiple counts of insolvent trading and fraud on the basis that he was shadow director of the Group. The jury found Mr Young guilty of 19 charges and Judge Devereaux sentenced Mr Young to 9 years imprisonment with respect to the fraud charges, and 3 years imprisonment with respect to the 17 charges of insolvent trading. This case illustrates that individuals who give instructions to the directors of a company, but are not formally appointed as directors themselves, should be aware that they may nonetheless be held to the same duties as directors by virtue of their role as shadow directors.

Will COVID-19 affect my property settlement?

COVID-19 has resulted in the Government’s enforcement of a number of restrictions. This has resulted in parties involved in conveyancing transactions, questioning whether their property settlements are able to proceed. Due to the widespread adoption of technology throughout the conveyancing process, and the implementation of online technologies such as PEXA, State Revenue Office Duties Online and DocuSign, means that all documents that are required for property settlement can be prepared, signed and lodged electronically, without the requirement of parties to sign copies physically. Furthermore, settlement monies are able to be electronically dispersed to the receiving party (via PEXA) which removes the need of a party to attend a bank to deposit settlement cheques. As a result, property settlements can continue to be conducted seamlessly despite the existence of COVID-19

Federal Government HomeBuilder Scheme – Are you eligible?

The Federal Government has introduced a $680 million HomeBuilder scheme in order to stimulate the building and construction industries. From now until 31 December 2020, eligible home owners/occupiers, not just first home builders, will have the opportunity to access a $25,000 tax-free grant to build a new home, or substantially renovate their existing home. To be eligible, applicants must:

  • If single, have earned less than $125,000 per annum based on 2018-19 tax return or later, or, if a couple, earned less than $200,000 per annum based on 2018-19 tax return or later.
  • Enter into a building contract between 4 June 2020 and 31 December 2020, with construction commencing within 3 months of the contract date.
  • Either build a new home as the main residence, where the property value must not exceed $750,000 OR substantially renovate their existing home where the renovation contract must be valued between $150,000 and $750,000 and the value of the home prior to renovations must not be worth more than $1.5 million.

Changes to NSW building certification legislation

Since the Opal Tower disaster in 2018, a raft of legislative changes have been introduced to dramatically alter the building certification industry. On 1 December 2019, new provisions in the Environmental Planning and Assessment came into effect introducing new powers and responsibilities of certifying authorities.  Further, from 1 July 2020, the new Building and Development Certifiers Act 2018 and the corresponding Building and Development Certifiers Regulation 2020 will both come into effect. This new legislation will abolish the Building Professionals Board and will move the regulation of building certifiers under the control of NSW Fair Trading. Certifiers will no longer be accredited, and instead will be registered, and will be subject to provisions which prohibit them from providing services with respect to design and compliance in cases where they are also acting as the principal certifier. The legislation also introduces a code of conduct for certifiers, where a failure to comply could result in a certifier being fined a maximum penalty of $11,000 per offence. Such changes may result in private certifiers increasing their costs in order to balance the risk of increased liability. This will likely impact developers, especially those with impending large-scale developments who may have not factored this possible increased price into their project feasibilities.