Tax losses and CGT

Most taxpayers would be aware that capital losses can be offset against subsequent capital gains when calculating CGT liability.

However an important point to be aware of is that capital losses of an individual taxpayer are lost on that taxpayer’s death.

The effect of this is that the taxpayer’s estate, when it sells an investment property and makes a capital gain will not be entitled to offset the taxpayer’s previous capital losses.

People giving advice in relation to estate planning need to be conscious of this at all times. Where a taxpayer has significant tax losses, achieving the best tax effective result will be for the taxpayer to sell the income producing property while he or she is still alive, and reduce the capital gains tax by using up the available capital losses.

Collaborative law – resolving disputes respectfully

Collaborative Practice explained

Collaborative Practice is a fresh approach to resolving disputes without going to court. It helps separating and divorcing couples resolve your differences respectfully and in private.

The essence of Collaborative Practice is that both you and your spouse/partner focus on the future and the needs of the family unit. This helps ensure that the process is focussed on the future needs of your family and you have the peace of mind that your dispute will not go to court.

Collaborative Practice allows you to create a future that meets your unique needs and involves you consulting with inter disciplinary collaborative practitioners such as Family Dispute Resolution Practitioners and Mediators, Financial Specialists, and Parenting Specialists who all work together to help you negotiate a workable outcome that best suits your needs.

Dispute Resolution Practitioners and Mediators, Financial Specialists, and Parenting Specialists who all work together to help you negotiate a workable outcome that best suits your needs.

By its nature, it avoids the need for lengthy and expensive affidavits and other court documents to be prepared. Time frames are determined by the parties not by court lists and timetables.

Each party agrees to make and honest and open disclosure of all documents and information. This method of resolving a dispute invites parties to act respectfully towards each other.

The process

All negotiations are conducted in four-way meetings attended by the solicitors and the parties themselves. The Collaborative process follows the following steps:

  • identify what is important to each client (interests);
  • identify what questions the clients need to answer;
  • gather information;
  • create the maximum number of choices;
  • evaluate options and modify and refine them;
  • negotiate to an acceptable agreement; and
  • closure.

Collaborative Practice offers the prospect of a solution for your long term benefit that is cost-effective, flexible, confidential and non-adversarial.

What is collaborative law in family law?

Collaborative law is an effective process which allows separated couples to achieve a respectful and balanced outcome for parenting arrangements and financial matters. The collaborative process is fundamentally different to the traditional adversarial (Court based) process.

The collaborative process allows couples to explore issues which are important to each of them and to take responsibility for finding solutions. Each person is represented by their own lawyer and the couples, with their lawyers, engage in a series of meetings throughout the process, during which everyone works together to achieve acceptable outcomes.
Where necessary other collaborative practitioners are introduced to assist the couple to find solutions and work through the process. Such practitioners include financial advisors, accountants and psychologists.

The International Academy of Collaborative Professionals has prepared a useful table which sets out some of the key differences between the Collaborative Process and the traditional Court process (litigation). Click here to view the table.

If you would more information about the collaborative law process please contact a Best Practice Lawyer.

The value of post-exchange enquiries

In today’s fiercely competitive residential conveyancing market, the cost of a purchaser’s post-exchange statutory enquiries makes up a significant proportion of the overall legal spend. While it may be tempting for clients to cut costs by narrowing the range of enquiries, practitioners need to remind purchasers of the potential risks.

We recently acted for a couple purchasing a house. Contracts were exchanged with a cooling off period and the cooling off period duly expired without incident.

Immediately after expiry of the cooling off period, we ordered our firm’s usual set of purchaser’s enquiries. One of those is a certificate under Section 121ZP of the Environmental Planning and Assessment Act. This is commonly known as an “Outstanding Orders” certificate and it states whether or not there are any outstanding Notices or Orders issued by the Council in respect of the property, for example an Order to carry out demolition or other works to the improvements.

In our experience, it is unusual for such a certificate to reveal the existence of any outstanding Notice or Order, particularly where no Order or Notice is disclosed in the contract. Yet these were precisely the circumstances in this case. The certificate issued by the Council stated that there was an outstanding Order requiring the owner to:

  • Demolish the carport at the front of the dwelling;
  • Demolish the awning at the rear of the dwelling; and
  • Restore the room depicted as a “proposed hobby room” [on specified DA drawings] to the approved form as a garage. This will involve removal of internal linings on the external walls, removal of floor framing and re-instating a roller door or similar to allow a vehicle to enter the garage.

The Council’s reasons for issuing the Order were: the relevant alterations were carried out without approval; parts of the alterations encroached on to an easement affecting the property; and there was no evidence that the garage conversion complied with habitable construction requirements.

The contract for sale did not mention these matters. However it transpired that both the vendor and the vendor’s agent were aware that the relevant structures had earlier been found to be non-compliant. Two years ago, the agent had assisted the vendor to lodge “an application” with Council to remedy the non-compliance, which was presumably either an application for a building certificate or a DA. When questioned, the agent explained that when he subsequently marketed the property for sale, he simply assumed that the non-compliance had been remedied and he did not follow this up with the vendor.

We advised our clients that, if they would not have bought the property had they known of these matters, they were entitled to rescind the contract for breach of the purchaser’s statutory warranty, pursuant to Clause 16 of the Conveyancing (Sale of Land) Regulation 2010. Our clients assured us that they would not have bought the property had they known.
The vendor offered to delay settlement while he attempted to remedy the non-compliance, but it appeared likely that the issues with Council would take at least several months to resolve, and even then there was no guarantee of a satisfactory outcome.

Alternatively, the vendor offered to complete immediately, with part of the sale proceeds held aside on trust, to be used if necessary by our clients in attempting to remedy the non-compliance themselves.

Our client decided that neither alternative was satisfactory, and they elected to rescind the contract. The vendor did not dispute the rescission.

If we had not obtained the certificate for the purchasers, then our client would have completed the contract, only to later discover the Order had been issued. In those circumstances, our clients could perhaps have sought to sue the vendor, or more usefully the vendor’s agent, based on misleading or deceptive conduct. Although it is arguable that the relevant consumer protection legislation does not apply to a vendor in a private residential sale, it would no doubt apply to the vendor’s agent.

Just as likely however, would be a claim by our client against us, their solicitors, for failing to obtain the certificate.

This case highlights the risks involved, to purchasers and their legal representatives, in not ordering this particular post-exchange enquiry. This is something for purchasers and practitioners to keep in mind when clients query whether they need to incur the cost of the outstanding orders search.

Deeds of family arrangement

A deed is a type of legal document. A deed of family arrangement is simply a deed recording the distribution of an estate where the distribution is not made in accordance with a will or the laws of intestacy. The purpose of the deed is to record the agreed distribution for posterity, and to protect the personal representative from a subsequent claim.

Deeds of family arrangement may be used in the following circumstances:

  • Where there are doubts about the meaning of a will, the affected beneficiaries can reach an agreement about how the will is to be put into effect;
  • Where the beneficiaries wish to rearrange the distribution of the estate between themselves;
  • To compromise a claim against the estate such as a family provision claim; and
  • To create an estate proceeds trust under the taxation legislation.

Any arrangement that would reduce the entitlement of a disabled person, such as a minor or an intellectually disabled person, will require the Court’s approval.

Best Practice Lawyers can assist you in preparing a deed of family of arrangement or providing independent advice about its contents.