Archive for 'legal'
Private companies may be incentivised to make loans to a shareholder or their associate during the income year in an effort to save on income tax. In order to remedy any inequities as a result of making shareholder loan agreements, the Government enforces compliance through a set number of rules. Loans which follow such rules under the Income Assessment Act 1936 will also be exempted from being a dividend.
Minimum interest rate
Loans must have an interest rate greater than or equal to the benchmark interest rate outlined in Division 7A of the Income Tax Assessment Act 1936, published by the ATO annually. The benchmark interest rate for 2020 is 5.35% (under bank variable housing loans interest rates) and is 4.52% for 2021. This interest rate needs to be applied for each year after the year in which the loan was made.
The maximum term for a complying loan agreement is seven years. In the case that the loan is secured by a registered mortgage over real property, the maximum term is 25 years. For a maximum term of 25 years, the market value of the property (not including any other liabilities for securing the property prior to the loan) must also be at least 110% of the amount of the loan.
In addition to meeting the minimum interest rate and maximum term criteria, complying loan agreements need to be made under a written agreement before the private company’s lodgement date. Loan agreements that meet such requirements will not be treated as a dividend in the income year the loan is made.
There is no prescribed form for the written agreement. However, as a minimum, the agreement should:
- identify the parties,
- set out the essential terms of the loans (for example, the amount and term of the loan, the requirement to repay and the interest rate payable under the loan), and
- be signed and dated by all parties involved.
Businesses moving towards online operations (temporarily or permanently) need to be aware of the Government’s modified provisions concerning virtual meetings and the electronic signing of company documents. These modified provisions in the Corporations Act 2001 (Cth) became active on 5 May 2020 and will automatically be repealed on 5 September 2020.
The new temporary provisions outline how a virtual company meeting should be held and procedures they must follow. Under the Determination, meetings may be held using one or more technologies so that members do not have to be at the same physical location to satisfy business requirements such as a quorum.
Additionally, members must be able to speak at the virtual meeting and voting must be done through an online poll rather than a usual show of hands. Proxies may participate in a meeting in the event that businesses are unsure of the necessary virtual procedures.
Notice of meetings
Notices for meetings, along with any material related to the meeting, must be issued to participating members before a virtual meeting is held. Such notices can be sent digitally through email, or posted on an online location where the notice and other material may be viewed by participating members. Under the new provisions, the notice must also include how involved members can speak and vote on polls during the meeting.
Electronic signing of company documents
It is understandably difficult to sign and execute documents online. However, the new provisions allow for electronic signing in place of signing a physical copy if necessary, as long as the electronic signature reliably identifies the person and indicates the person’s intention about the contents of the document. Physical signings with electronic communication (such as fax) are also permitted.
Although there are many virtual meeting and electronic signing technologies available to businesses, not all are easy to operate and free. Consider investing into a paid service if you are considering moving more of your business operations online and test a number of platforms first before committing to one in particular.
When entering a supply contract, it is extremely important to work out all the nuisances before signing to prevent complications down the road and make sure conditions are favourable for you. Here are a few key pointers to look out for in your supply contract.
Warranties are promises within contracts to both parties that certain matters are correct and that certain criteria must be met for the supply of goods and services. Warranties can be expressly stated in a contract, whereby the virtues of particular products from a supplier are restated as warranties in a contract, and warranties are ensured by suppliers to be limited to those specifically stated in the contract.
A guarantee involves a third party, where they must honour the obligations of one of the involved parties in the event that they breach the contract. This offers protection for both contracted parties, almost like insurance in the case that something goes wrong. In some instances, personal guarantees involving personal assets may also be involved.
Risk and title
“Risk” refers to the responsibility for security and safety of goods that is passed onto the customer on delivery, while “title” refers to the legal ownership of goods which is not passed onto customers until a full payment is confirmed. You need to be aware of the differences between these two types of clauses so that the type and frequency of transactions between customers and suppliers can be determined.
Indemnity is a promise made from one party to protect the other from specified loss or damage. For customers, this means protection from damage arising from a breach of contract or the negligence of a supplier and vice versa for suppliers. Suppliers should also an insurance broker review their contract to ensure that there is adequate coverage for suppliers against claims under the indemnity clause from customers.
Defects liability period
The defects liability period is the period of time in which a customer can oblige suppliers to rectify any defects from goods or services performed. Customers need to ensure this period is long enough for any defects to be discovered or consider including a retention amount or some form of guarantee until the end of the period to act as a safeguard. On the other hand, suppliers need to agree on the period, reinstate the definition of “defect” and iron out any exceptions that may come as a result of customer misusage or negligence.
Limitation of liability
It is standard practice for both parties involved in a supply contract to limit their exposure liability and risk wherever possible. Suppliers in particular need to ensure that their contract excludes all implied warranties (where legally possible), reduces liabilities if a customer contributes to a failure to meet warranty and if a warranty is breached, removes liability for indirect loss of profits and limits aggregate liability to a numerical figure (e.g. a percentage).
Boiler plate causes
These are standard administrative clauses at the end of a contract which outline legal terms such as:
- Forced Majeure ability to delay without penalty,
- Jurisdiction and laws that govern the contract,
- Transferrence of rights.
The Government has introduced a mandatory code of conduct to help commercial tenants with rent relief during the COVID-19 pandemic.
Under the code of conduct for commercial tenancies:
- Landlords must not terminate leases for non-payment of rent during the COVID-19 pandemic and recovery period.
- Tenants must stay committed to their lease terms.
- Landlords must offer reductions in rent as waivers and deferrals proportionate to the tenant’s reduction in trade during COVID-19. Waivers must constitute no less than 50% of the total rent reduction during that period.
- Benefits that owners get for their properties as outgoing reliefs (e.g. deferred loan payments, land tax, reduced charges) should be passed onto the tenant in the appropriate proportion.
The code will be implemented nationwide and aims to encourage parties to reach agreeable outcomes on a case by case basis. For commercial tenants, this means negotiating rent reductions corresponding to their annual turnover reductions and being provided extended lease terms for the rent waiver and deferral period.
From 3 April 2020, the code will apply to SMEs with an annual turnover of less than $50 million and are participating in the JobKeeper program. Take note of how these measures may affect your business and how they may help you plan ahead for the upcoming financial year.
When an employee gets summoned for jury duty, it can put added stress on the workplace with other staff having to take on extra work. As an employer, you’ll likely want to avoid the inconvenience of releasing an employee for jury duty, however, this may prove to be difficult.
Employers must comply with the legal responsibilities outlined when dealing with an employee who has been summoned for jury duty. Employers who don’t adhere to these responsibilities can face penalties of up to $50,000.
Can you refuse to release an employee for jury duty?
As an employer, you are required to release any employee for jury duty if they have been summoned. It is an offence to act prejudicial to an employee if they have been summoned for jury duty, including threatening their employment or wages.
If your business will face significant hardship with an employee at jury service, then you may be able to request for the employee to be excused. This will require an explanation of the impact jury service will have on your business. A request must be communicated before empanelment (when the jurors have been selected), and making a request does not guarantee that your employee will be excused.
What are the employee’s rights?
When your employee is away on jury duty, this cannot be counted as any other leave other than jury duty leave. An employee’s annual leave and sick leave will be unaffected.
Employers also cannot dismiss their employees for attending jury duty. Most Australian states restrict employers from terminating an employee or detrimentally changing or threatening employment terms because an employee is on jury duty. NSW, for example, considers this a criminal offence where a company can be penalised up to $22,000 and an individual employer can be penalised $5,500 or face 12 months of imprisonment.
Employers also cannot ask an employee to work on a day they are serving as a juror in court or ask them to work additional hours to make up for the time they missed whilst on jury duty.
When an employee is serving jury duty, employers generally must pay permanent employees their usual wages for the first 10 days of service, or pay what is often referred to as ‘make-up pay’. This is the difference between the jury service payment and the employee’s base rate for the ordinary hours they would have worked.
New restrictions on cash transactions may be coming into effect after the government released the draft Currency (Restrictions of the Use of Cash) Bill 2019, which proposed to make it an offence to make or accept cash payments of $10,000 or more.
The bill proposes that people using cash above the $10,000 limit could face a two-year jail sentence and fines up to $25,200. There are, however, transactions that are to be exempt from the cash payment limit, including:
- Payments related to personal or private transactions, excluding real property transactions.
- Payments that exceed the cash payment limit due to the payment also including an amount in digital currency.
- Payments that only exceed the cash limit due to the payment being part of a transaction involving cash in transit providers, where the payment results in collecting, holding or delivering cash.
- Payments, where there are no reasonably available non-cash payment methods and the inability to use a non-cash payment method was not a choice by either party involved in the transaction.
The bill was originally set to be enacted on 1 January 2020, however, after a flood of community objections, the Senate Economics Legislation Committee has agreed to hold a public hearing on 30 January 2020. The committee has opened an inquiry accepting concerns from Australians and plans to report back by 7 February 2020.
There are circumstances where unpaid work is okay, however, legal unpaid work situations are limited, and in most circumstances, workers should be paid. Employers who are not meeting the Fair Work Act guidelines can be penalised for breaking the law by paying workers’ compensation and fines up to $63,000 for corporations and $12,600 for individuals.
If no employment relationship exists between the worker and employer, then the worker does not legally have to be paid. An employment relationship can involve:
- Intention to perform work for the employer under the arrangement.
- Helping with the ordinary operation of the business.
- Working for a long period of time.
- An expectation of payment.
- The employer receiving the main benefit of the arrangement.
Unpaid work is legal if the work is to provide someone with experience in that particular job/industry, to provide training and skills as part of formal programs (e.g. university placement), to test someone’s job skills, or if it is volunteer work for a non-for-profit organisation. These include:
A vocational placement is formal work experience that is part of an educational or training course. The aim of vocational placements is to give students important skills to help them transition smoothly into the workforce through industry experience. The placement must be approved through the legal authorisation of the institution delivering the course; programs offered at universities, TAFE and schools will meet this requirement. If the work meets the definition of a vocational placement under the Fair Work Act, then the position can be lawfully unpaid.
Internships and work experience:
An internship or work experience arrangement is a type of on-the-job training, where someone works to gain experience in a particular occupation or industry. This type of work can be legally unpaid if it is a vocational placement, or if there is no employment relationship.
Trials and skill demonstrations:
This is when someone is asked to perform work or undertake a trial in order to be evaluated for a job position. This work trial is used to determine someone’s suitability for the job on offer. It can be unpaid if:
- It is necessary to evaluate someone’s suitability for the job.
- The trial is only for as long as necessary to demonstrate the skills required for the job.
- The worker is supervised by the potential employer or other appropriate staff for the entire duration of the trial.
Work is counted as volunteering when its main purpose is to benefit others, such as a church, sporting club, government school, charity or community organisation. A genuine volunteering arrangement occurs when:
- The parties did not intend to create an employment relationship.
- The volunteer is not obligated to attend the workplace or perform work.
- The volunteer doesn’t expect to be paid for their work.
As the holiday season approaches, so does the shutdown period for many businesses. This is the time of year when it is easier to take off work due to many businesses slowing down, however, there are questions that surround this period, namely if you will get paid or not.
When calculating leave over the Christmas and New Year period, for permanent staff that would typically work on the public holidays, those days must count as a public holiday rather than a day of annual leave. Regular employee rights apply to Christmas Day, Boxing Day and New Years Day public holidays. If you work in an industry that may require staff to work these days, normal requirements and relevant penalty rates are in effect. Employees can choose not to work on a public holiday on reasonable grounds such as how much notice the employee received or whether employers expected them to work on a public holiday. Employers do not have an automatic right to terminate an employee if they refuse to work on a public holiday.
Employees may be instructed to take their annual leave for the remaining days during the shutdown period. Employers can require this if the relevant award allows it or, if the industry’s award does not have a stance on compulsory annual leave over the holiday period, employers can still require employees to take annual leave if the business typically shuts down over Christmas. You cannot compel your employees to take their leave each year. However, an employee cannot unreasonably refuse your request to take annual leave, if they have accumulated it over a long period.
Employees that have not accrued enough leave to cover the holiday period can arrange with their employers to take leave in advance or unpaid. Workers who do not agree to this, however, cannot be forced by an employer to take unpaid leave unless the industry award allows them to. If not, employers will have to pay workers at a normal rate for the period of the shutdown.
When sourcing content for your business, it can be tricky to determine what materials you can use without putting your business at risk of copyright infringement. With the internet providing a range of easily accessible sources, it can be easy to forget about the legalities of using material you did not produce yourself.
In Australia, the Copyright Act 1968 (Cth) covers all sorts of sources including text, videos, images, audio, icons, artwork, maps, and computing programs. It protects the rights of an owner to profit from their content, prevents unauthorised use of their material and enables them to recover damages if their material has been used without permission.
Copyright protection is automatically applied, in Australia, to written and artistic works from the time it was originally created and generally exists from the publication date until 70 years after the owner’s death.
The owner’s permission must be obtained before using, reproducing, or disseminating copyrighted material. Unauthorised use of this material can result in penalties or remedies for the damage caused. This could include:
- Financial penalties of up to $585 000 for corporations and $117 000 for individuals.
- Imprisonment of up to 5 years for individuals.
- Awarding damages for any losses suffered.
- Accounting for any profits made.
- Injunctions preventing any further use of the material.
It is useful to note that copyright does not protect ideas, but the way in which they are expressed. This means that you can work with the concepts of someone else’s material for your own individual creation, so long as you do not copy it outright.
Defamation is a statement published or spoken that negatively impacts the reputation of a person. Individuals or corporations that employ less than 10 people, not related to another corporation, can sue another person in court for defamation.
As there is no constitutional right to free speech, defamation in Australia is harsher and more difficult to avoid than in other countries. Each state and territory has slightly different rules regarding defamation, with Tasmania being the only state in which the estate of a deceased person can sue for defamation. Usually handled as a civil case solved financially, defamation is rarely treated as a criminal issue with jail time. The cap on general damages allowed to be received is currently $389,000, although aggravated damages and costs can be awarded on top of the cap amount.
There are three areas of defamation that can be used in a case:
- Imputation: The act of accusing, defamation through an imputation can be a statement or a visual. Imputation has to injure the defamed’s ability to make money or induce a loss of work as well as affect other people’s opinions of them.
- Identification: Identification is specific to a person or group of people, usually by adding personal details such as their place of work or physical description. There is no need for the defamed to outrightly be named if there are enough details to reasonably identify them.
- Publication: Defamatory material is made known to a third party other than the person being defamed. The publication can be oral, written or in picture form, where every time the material is viewed or heard, a separate publication occurs.