Which structure is right for me? Business advantages and disadvantages for sole traders.
Sole traders opt to operate their businesses as individuals, without any business structuring. Sole traders often trade under their personal name, while others will register a Business Name with the Australian Securities and Investment Commission.
Flexibility
Being a sole trader provides you with ultimate control over your business and its operations. However, a downside to operating your business as an individual means that there is no division between personal and business assets. This means that personal assets can be utilised to make payment of business debts, which can assist with liquidity and maintenance of the business, but also puts your personal assets at risk of creditors.
A sole trader can easily incorporate a company or establish another business structure at a later date or as the company expands. The flexibility afforded to a sole trader can allow the company to grow and develop without any pre-established restrictions. This can allow a sole trader to gauge the success and potential direction of a business venture once it is established.
Cost
Operating as a sole trader is, for obvious reasons, the cheapest option for running a business. It is also the easiest to administer, as it does not require any reporting (other than that relating to normal income tax requirements) and is not subject to onerous regulations (such as those found within the Corporations Act).
Further, unless a sole trader employs individuals when expanding the business, a sole trader is not considered to be an ‘employee’, and thus a sole trader is exempt from PAYG withholding, superannuation and WorkCover. It is highly recommended that a sole trader take out insurance to ensure that the business can be sustained in the event the sole trader is sick or injured. In addition, sole traders are often required to invest significant amounts of their own time to ensure the smooth running of the business (where there is no expense of support staff) and are not considered employees so have no entitlement to annual leave or similar benefits.
There are little to no costs associated with establishing a business as a sole trader. There are costs associated with registration of an Australian Business Name, if the sole trader decides to do so. There may also be costs associated with obtaining software for the management of the business, including accounting and invoicing software for the purpose of keeping financial records.
Taxation benefits
Losses associated with the running of the business can be offset against other personal income, as the business is treated as personal income for reporting purposes. Additionally, any income is taxed at personal income tax rates.
Funding
A sole trader may find it more difficult to obtain financial funding as there is less likely to be a large sum of capital available. This means that a sole trader may have to rely on the provision of credit, which can be risky especially where the success of a business may be yet to be determined. However, as stated above, personal income and assets can be utilised to fund the business and this flexibility can be useful in situations where the business requires more funding.
Summary
Starting a business as a sole trader is very popular, as it is cost effective, there are taxation benefits and significant advantages relating to the flexibility of the business. However, there is also a substantial amount of personal risk that is involved where you enter into business transactions (including overdraft accounts and credit facilities). You should always seek professional legal advice before starting your business to determine whether a sole trading structure is best for you.
Nautilus Law Group can help you weigh the the risks and benefits of starting your business as a sole trader, and can provide advice on the best structure for your start-up. We welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
Whilst Australia has a widely recognised ageing population, the term ‘elder’ for the purposes of Elder Law is not defined at common law or in statute. In fact, the term ‘elder’ has no real legal meaning at all. Socially, the definition can also be difficult given the significant increase in average life span and the steadily increasing retirement age.
These obscurities aside, Elder Law is a recognised practice area that is rapidly developing within Australia. As such, it is important to understand who could be defined as an elder at law. To assist in defining the term ‘elder’, the Queensland Law Society has identified a number of State and Federal legislative provisions that are age-specific. The United Nations Population Fund Reports and general governmental policy documents on Australia’s ageing population can also be useful. These are outlined briefly below.
Pension Age
Firstly, regard can certainly be given to the pension age as provided by section 43 of the Social Security Act 1991 (Cth). For men, the pension age is 65 years and over whilst for women it is between the ages of 60 and 65, conditional on birth year. For women born before 1 July 1935 the pension age is 60 and for women born after 1 January 1949 it is 65. Notably, pension age is also five years earlier for veterans.
If you are of pension age, then Elder Law can apply to you. Upon retirement and access of the Aged Pension, there are significant decisions to be made that require forward planning. This includes potentially downsizing from your existing home and revising existing estate planning documents for your future.
Preservation Age
Secondly, regard can be given to a person’s superannuation age. This is known as ones preservation age. The preserved component of superannuation can generally only be accessed for people over the ages of 55 to 60. Again, this depends on the year of birth.
If you are of preservation age, Elder Law can certainly apply. Again, once reaching preservation age there are significant decisions to be made, such as asset protection, and indeed asset preservation. This can come within the ambit of Elder Law and lawyers and financial planners can offer considerable services in this area.
Elder Abuse as Serious Assault
Thirdly, an assault committed against a person aged 60 years and older constitutes a serious assault if committed against a person over 60 years of age as provided by section 340(1)(g) of the Criminal Code 1899 (Qld). This can relate specifically to Elder Abuse claims and the provision has significant implications for sentencing the offender.
Intergovernmental and Governmental Documents
Finally, given the international ageing population, there is also a plethora of governmental and intergovernmental policy documents and reports on ageing. Firstly, the United Nations has long recognised that there is an ageing population globally. In monitoring the ageing population, the Population Fund Reports generally assess the international ageing population from as low as 60 years of age and increasing incrementally to 80 years and over.
Secondly, the Australian Government has also produced extensive documentation on Australia’s ageing population, such as the Intergenerational Report. This Report projects that within the next 40 years the proportion of Australia’s population aged over 65 years will almost double to approximately 25 percent. This is in line generally with the Australian pension age criteria.
Conclusion
Overall, whilst relatively ambiguous there are a number legislative provisions, policy documents and reports that indicate that at approximately 60 years of age one could be considered an elder for the purposes of Elder Law. If you are nearing retirement age or are making decisions about your superannuation, Elder Law could be relevant and it is important to seek advice accordingly.
How can Nautilus assist?
Nautilus practices in Elder Law and has a team with significant experience in this area. If you would like more information on this area of law or have a specific concern, we welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
Age is a natural and unstoppable process that obviously presents a wide variety of enhanced health-care needs. However, many fail to realise that age also brings a multitude of specific legal needs. This specifically surrounds issues of capacity, aged care and end of life decisions. Because of these specific legal needs, the practice area of Elder Law has developed. A very general outline of what Elder Law can comprise is outlined below. Each of these topics will be explored in greater detail in subsequent articles.
ESTATE PLANNING AND PROPER PREPARATION OF WILLS
Firstly, comprehensive estate planning through the preparation of a will or trust agreement is vital. A comprehensive estate plan will ensure that the elder’s wishes for the distribution of their estate are executed, whilst also ensuring that their assets are protected. This includes protection against challengers to the will and a myriad of potential taxation consequences. It is important that a will is drafted at a time when the elder has full capacity, and that the regularly updated to meet any changing circumstances.
RESPONDING TO SUPERANNUATION DISPUTES
Superannuation disputes have increased dramatically in recent years. Given Superannuation is often a primary source of income for elders, it is important that any disputes are resolved efficiently. There are two key instances of superannuation disputes. The first is a dispute between the superannuation fund and the elder over entitlements. The second relates to elder abuse which is discussed in more detail below. A person may persuade an elder to make a Binding Death Benefit Nomination for their superannuation benefit. This ensures the superannuation does not pass through the estate upon death but directly to the recipient. This may not be what the elder intended and can have a significant impact on the administration of the estate.
PROVIDING ADVICE ON AGED CARE ACCOMMODATION CONTRACTS
Elders must make many lifestyle decisions, be it simple downsizing from the family home to entering aged care facilities. Moving into aged care is a significant lifestyle decision and there are a number of factors to consider. Firstly, there are a number of living arrangements for the elderly, spanning from independent living, community living to assisted living. It is important that the right choice is made on what type of aged care accommodation is suitable. It is also important that this is planned for properly and that the elder’s family are aware of the elder’s wishes.
Secondly, the transition from the elder’s current home to accommodation involves a myriad of important issues. This is particularly due to the significant cost of attending aged care accommodation. It is important that both your personal interests and your estate are protected throughout this transition. As a result, legal and financial advice is integral.
CONTRACTUAL DISPUTES WITH VARIOUS SERVICE PROVIDERS
You may engage a significant number of service provides to assist you with your daily needs. Whilst it can often be overlooked, a number of disputes with service providers can be resolved through contract law. It is important when engaging a service provider that you are aware of the rights and obligations of each party to the contract. If a dispute arises, seeking advice from a lawyer is advisable.
APPOINTING ALTERNATE DECISION-MAKERS
Capacity is at the core of Elder Law. In Australia, there is a presumption of capacity for all persons over the age of 18, the age of majority. However, if capacity is questioned and this presumption is rebutted, the people important to the elder must rely on pre-prepared planning instruments to implement the elder’s wishes. There are a few key ways this can be achieved.
Firstly, an advanced health directive is a document that outlines what an elder intends if they become unable to make decisions during their lifetime. This often relates specifically to how an elder would like their health care needs met. However, including these details within enduring power of attorney documentation is an advisable alternative.
The appointment of a power of attorney or an enduring power of attorney is a legal document that authorises another person to act on the elder’s behalf and assists them with financial and health-care decisions. Actively appointing a power of attorney ensures that a trusted person or a trustee organisation can make these decisions on the elder’s behalf. Importantly, this appointment can only occur when the elder has capacity. It is therefore important to ensure that steps are actively taken to make any appointments.
RESPONDING TO CLAIMS OF ELDER DISCRIMINATION OR ELDER ABUSE
Elder discrimination and elder abuse are delicate topics that many people find difficult to discuss. However, it is important to that people know their rights as an elder.
Firstly, instances of discrimination may occur against an elder. Australia’s anti-discrimination regime is governed by a broad range of legislation, including the Age Discrimination Act 2004, the Australian Human Rights Commission Act 1986, the Disability Discrimination Act 1992, the Racial Discrimination Act 1975 and the Sex Discrimination Act 1984. It is important that all instances of discrimination are reported so that there can be recourse under the relevant legislation. To do this, legal assistance and the assistance of an advocate is often required to ensure an elder’s rights are protected.
Secondly, elder abuse occurs when there is a relationship of trust between a person and an elder, and this trust is compromised, resulting in harm to the elder. This harm could be physical, emotional or financial and could be perpetrated by a family member or friend, a service provider, or otherwise. When elder abuse occurs, public liability personal injury claims in Queensland is governed by the Personal Injuries Proceedings Act 2002 and the Civil Liability Act 2003. Criminal liability may also be apparent if the elder is a victim of a crime. The regime that governs criminal liability includes the Criminal Code Act 1899 and the Penalties and Sentences Act 1992 (Qld).
It is vital that when abuse occurs, or is suspected by a friend or family member, that it is reported and the appropriate remedies are pursued. In this instance it is important to remember that all accredited aged care providers must have an internal complaints process pursuant to the Aged Care Act 1997 (Cth). Assistance from a lawyer and an advocate is often vital.
HOW CAN NAUTILUS ASSIST?
Nautilus specialises in Elder Law and has a team with significant experience in this area. If you would like more information on this area of law or have a specific concern, we welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
Most directors are aware of the importance of compliance with PAYG withholding and superannuation guarantee charge obligations. However, what happens when the company is unable to meet these obligations and you receive a Penalty Notice from the ATO? What are the consequences for the directors?
Since 1993 the Australian Taxation Office (ATO) has had the power to recover company liabilities through the director’s penalty regime. These new policies were aimed at ensuring that directors realise that they have a responsibility to ensure that the company meets its tax obligations. Further, if these tax obligations could not be met, directors would be compelled to immediately place the company into voluntary administration or liquidation. Directors were encouraged to comply with these obligations through the threat of personal liability for a penalty in the same amount as the outstanding tax liability.
The Commissioner of Taxation is able to commence proceedings against a director for payment of a penalty 21 days after issuing a ‘Directors Penalty Notice’. A DPN essentially gives the director notice of the outstanding liability, and provides them with time to arrange for the company to make full payment of the debt amount, enter into an installment arrangement, or place the liable company into voluntary administration or liquidation.
The ATO can make estimates of the amount of the tax liability where a company has failed to make lodgments. The Director’s Penalty Notice is then issued on the basis of this estimate.
What do the June 2012 amendments mean?
Further restrictions were put in place as a result of the amendments made to the Taxation Administration Act 1953 (Cth). Firstly, the director’s penalty regime extended to superannuation guarantee obligations in addition to PAYG withholding obligations.
Further, the changes restricted a director’s ability to evade personal liability through placing the liable company into liquidation or voluntary administration. The changes put forward in June 2012 divide tax obligations owed into two categories:
Obligations that are unpaid and unreported for more than three months beyond the due date for reporting; and
Obligations that are unpaid by the due date but are reported in Business Activity Statements (BAS) and Superannuation Guarantee Charge (SGC) Statements within the three month period of the due date for reporting.
In the first situation, unpaid and unreported obligations become a penalty imposed personally upon a director when the DPN is issued. However, a director cannot escape personal liability by placing the company into voluntary administration or liquidation. The only way to remove the penalty is for the director or the company to make payment of the debt in full.
In the second situation, a director can negate personal liability for unpaid but otherwise correctly reported obligations by placing the company into voluntary administration or liquidation.
These changes encourage directors to further adhere to reporting and tax obligations. The imposition of personal liability on a director that cannot be waived other than by transparent reporting in compliance with ATO requirements or full payment of the tax obligation.
What defences are available?
If a director can establish that the director was not involved in management of the company at the time the liability was incurred for the reason that the director was ill (or for some other good reason) and it would be considered unreasonable for the director to take place in the management of the company during this time, then the director can escape personal liability for the obligation.
Alternatively, a director can escape personal liability for any outstanding tax obligations if the director took all reasonable steps to:
Cause the company to meet its tax obligation in full;
Cause the company to appoint an administrator; or
Place the company into liquidation.
What should I do when I receive a Director’s Penalty Notice?
You should seek legal advice immediately if you receive a DPN. You must remember that you have 21 days to take action from the date of the DPN before the ATO can/may take action against you to recover the penalty amount.
Where the DPN is received where PAYG withholding or SGC obligations are unpaid and unreported within 3 months of the due date, then we can consider options such as:
Making payment of the debt in full;
Entering into an installment arrangement with the ATO to make payments; or
Place the company into liquidation or voluntary administration.
Where the liabilities are unpaid or unreported for 3 months after the due date, then the options are restricted to:
Making payment of the debt in full; or
Entering into an installment arrangement with the ATO to make payments.
Nautilus Law Group can assist you to reduce your liability to the extent possible where you have received a DPN. We can liaise with your accountant and the ATO where required to attempt to reduce your personal liability for payment of the tax obligations.
If you need advice, or would like further information, we welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
Submitted by: Katrina E. Brown BA JD ATIA TEP SSA
This article is intended only to provide a summary and general overview of matters of interest and the law. It is not intended to be comprehensive and it does not constitute legal advice. While we take all necessary steps to ensure that the information is current or accurate, we cannot guarantee its accuracy or currency. You should always seek legal or other professional advice before relying or acting upon any of the above content or information.
Simply put, Probate is the proving of a Will and in the process of “proving” the Will an “executor” or “executors” are appointed to act as representatives for the Estate of the deceased person. In Queensland, probate is issued by the Supreme Court.
When do you apply for probate?
Probate is usually required in Estates with assets held by financial institutions and/or in shares. Some Estates can be administered where the assets of the Estate do not require a Court Appointed Executor (such as furniture and vehicles), but banks, share registries and some land title offices require Probate before the Exector is permitted to deal with the Estate assets.
If the “Estate assets” are jointly held or of a superannuation death benefit type, the “Estate” may not require Probate, as jointly held assets and superannuation death benefits are disposed of without reference to a “Will” in usual course. Jointly held assets pass to the survivor of the title holders, and superannuation death benefits can be distributed at the discretion of the Superannuation Trustee (which is not your Executor).
Who applies for Probate?
The nominated Executor(s) can apply to the Supreme Court for a “Grant of Probate”. The lodgment protocol relative to proofs and publication are specific. An error at any stage can result in a costly rectification of the entire process.
How to apply for Probate?
The Courts have specific procedures that must be followed when applying for probate:
The first step is to advertise the Application in the Queensland Law Reporter and the Public Notices section of the local daily newspaper in the area the deceased lived. You must also forward a copy of the advertisement to the Office of the Public Trustee.
The next step following advertisement, is to lodge the Application. If a claim is made against the Estate following advertisement, the Estate will be subject to a “Caveat”, pending the resolution of the claim; and
Your Application must attach: Original Will, Application for Probate, Affidavit of Publication and Service including copies of the advertisements, Affidavit Supporting Probate Application, and the original Death Certificate.
If the Estate is based on a “DIY” Will Kit, or handwritten by a party, additional compliance is usually required, such as further affidavits. Such “home made wills” are often subject to Requisitions, requiring further works for proving.
There are many aspects of the Application process which may be complicated due to extraneous factors, such as excluded beneficiaries, inappropriate or failed provisions and/or deceased beneficiaries.
The Nautilus Estate Team offers probate and administration services in Queensland and New South Wales. If have an issue outside of this jurisdiction, we may be able to assist with providing a referral to practitioners in the other Australian States. Further, our Practice Director, is a former United States Lawyer with experience in Estate Planning and Distribution in foreign jurisdictions.
We work on fixed fees for Probate, and hourly rates for Administration. We welcome you to contact our offices on (07) 5574 3560 or email info@nautiluslaw.com.au. We thank you for considering Nautilus Law Group.
