Take a look at what happens when someone wants to contest/challenge a Will:

Understanding the basics of contesting a Will

Before delving into the intricacies of challenging an Will, it’s essential to grasp the fundamentals. Each state in Australia has its own laws that govern Wills and Estates, but there are a few points that tend to be the same across the board.

In Australia, a Will can be challenged on several grounds:

• Lack of testamentary capacity: To create a valid Will, a person must have the mental capacity to understand the implications of their actions. This means if it can be shown that the testator lacked the capacity to make rational decisions when the Will was completed, there may be grounds to contest.
• Undue influence: If there is evidence to suggest that the testator was unduly influenced by someone when creating their Will, it can be challenged. Undue influence may involve coercion or manipulation.
• Forgery or fraud: If it’s suspected that the Will is fraudulent or has been forged, it is not legal and can be contested.
• Family provision claims: In many states, family members or dependents who believe they have not been adequately provided for in a Will can make a family provision claim. This allows family members to petition for what they believe to be a more fair share of the inheritance.
• Invalid execution: A Will must be executed in accordance with the law. If the proper procedures were not followed during its creation, there are grounds for challenge.

The challenging process

Contesting/challenging a Will is not straightforward, and it often involves a lengthy and emotionally taxing legal process.

Here’s an overview of the steps involved:

• Consultation with a lawyer: The first step for anyone considering challenging a Will is to consult an experienced estate lawyer. They will assess the case’s merits and provide guidance on whether it’s worth pursuing legal action. Attempting to challenge or defend a Will without legal counsel is highly inadvisable.
• Notification to executors: If a decision is made to challenge the Will, the executors and beneficiaries named in the Will must be formally notified. This initiates the legal process.
• Filing a court application: To formally challenge a Will, an application must be filed in the appropriate court. The specific court will depend on the state’s jurisdiction.
• Mediation or negotiation: Depending on who is involved and who objects to the Will being challenged, parties involved may attempt to reach a settlement through mediation or negotiation before going to court. This can save time and legal costs and is often the best solution if it is possible.
• Court proceedings: If a settlement cannot be reached, the matter will proceed to court. Both sides will present their arguments, and the court will make a decision based on the evidence and applicable laws.
• Court decision: The court’s decision may involve upholding the Will, making alterations to it, or declaring it invalid. The court’s decision is legally binding.

It is important to understand that there are strict timeframes that you must adhere to if you want to challenge a Will.

Before you challenge a Will

Before you decide to contest a Will, you should spend some serious time discussing the implications with your lawyer. Any steps that can be taken to settle the matter out of court are worth exploring for the mental well-being of all involved.

If challenging a Will means going against the wishes of other parties such as the deceased person’s family members or business partners, it may be worth hiring a professional mediator to talk the issues through in order to come to an amicable conclusion.

Need help to challenge a Will? Reach out to Crest Lawyers today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Then the question arises: Where are all the relevant records and documents?

While making a formal Will and estate plan is important, you also need to make sure they are easy to locate in the event of your passing.

Why do you need Will and estate plan documents?

Your Will and estate plan can be vital to ensure the financial future of your family. They outline all your wishes for the distribution of your assets to family, friends or other recipients. You can work with a specialised lawyer to put together a ‘set and forget’ document, but it also makes sense to review things and make updates when your assets change or if you feel differently about your original decisions.

If you die without a Will, the courts will usually entrust the disbursement of your estate to the person who they see as having the best legal claim. In some circumstances,

this will not be the right person, and your wishes may go unfulfilled. What’s worse, without clear documentation of your wishes it is much easier for recipients to disagree over who is entitled to what.

Keeping your estate plan documents safe and secure in the one place will prevent all of these outcomes.

The other reason to store documents carefully is to keep track of the most recent versions. If you have updated your Will but it is not stored and dated correctly, there could be confusion about which version is valid.

Which documents are most important?

According to Service NSW, there are three major documents you might need to store when it comes to your estate planning.

These are the three estate plan documents you will need to store safely:

• A Will: Your Will is the document that lays out what you intend to happen to all your assets and belongings after you die.
• Enduring Power of Attorney: Enduring power of attorney documents outline who will make legal and financial decisions for you when you are no longer capable of making those decisions for yourself.
• Enduring Guardianship documents: Enduring guardianship grants the person of your choosing the power to make medical and lifestyle decisions when you can no longer make these decisions for yourself.

Where to store your Will and estate plan documents

There are a few places where you can store your estate plan documents.

• At home: If your documents are kept at home, they are close and easily accessible. They might be tucked away in a filing cabinet or stored in a waterproof safe. However, storing documents at home may not be the best option. Things at home have a way of going astray, especially if you move house. Worse, there is the possibility of someone getting hold of them and either taking them or making changes without you knowing.
• In a safe deposit box: A safe deposit box will keep your documents safe, but it needs backup plans. You need multiple people to know how to access it in case of an emergency. If you die without providing the information, your relatives may have some difficulty in dealing with the bank in question to have the documents released.
• Online: Online storage is a modern option to store sensitive documents like your Will and estate plan, but it too has its drawbacks due to password and security issues.
• Your lawyer: The most suitable place to store your estate plan documents is with your lawyer, this means they are kept safe and up to date versions will be on file.

Your family will be able to contact your lawyer and get the support they need to access and review these important documents in the event of your death, and there will be less confusion and stress figuring out where things are, and which versions are most relevant.

Crest Lawyers will hold your important estate planning documents for you at no charge. When you have an estate plan prepare with us, we will compile an estate planning folder with copies of your important documents for you to keep while we hold the originals.

As a final note, it will also be easier to make amendments to your Will if your lawyer has the paperwork to hand.

Need help to create a Will and store it somewhere safe? Get in touch with Crest Lawyers today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

If you have been active in this area, it’s important to include your crypto assets in your Will. Your legal team and beneficiaries need to be aware of your activity and be able to access your account.

A brief definition of cryptocurrency

You may have heard the terms ‘crypto’, ‘blockchain’ and ‘Bitcoin’.

Cryptocurrency is the term used to describe digital or virtual currency that uses cryptography for security and operates independently of a central bank. The most well-known cryptocurrency is Bitcoin, but there are others such as Ethereum, Dogecoin, and Polkadot.

Cryptocurrency transactions are recorded on a decentralised digital ledger called a blockchain, which ensures transactions are secure and cannot be altered. Like other forms of investments, cryptocurrency can be bought and sold on exchanges.

Including your cryptocurrency investments in your Will

When you pass away, your legal team, your Will Executor and your beneficiaries need to know what to do with your belongings, and this includes any cryptocurrency investments you have made.

Part of the reason this is important is because crypto is relatively new. There aren’t clear legislations around distributing this kind of asset after someone passes away in Australia. If you don’t make it very clear what your wishes are, your beneficiaries may never even know you have a crypto account. If they are aware of it but you haven’t left any instructions about distributing the proceeds, they can wind up in a dispute, which is costly, frustrating and time-consuming.

When you create your Will, keep in mind that you may need to update it. Crypto investments have proven to be volatile so if you leave someone your entire crypto ‘fortune’ and nothing else, you need to keep an eye on its value and rearrange your Will if things change dramatically.

What to include in your Will in relation to cryptocurrency

When including cryptocurrency in your Will, be clear about this asset but don’t necessarily include the login details for your crypto wallet (which is where your crypto is stored) in the Will itself.

Make sure your Executor has access to information about the account, but store the login and password details somewhere safe, for example with your lawyer.

How you divide the proceeds of your crypto investments in your Will is up to you but speak to your legal team if you need specific advice.

Tax implications of cryptocurrency in your Will

Another important consideration when including cryptocurrency in your will is tax.

Cryptocurrency is treated differently than traditional assets for tax purposes, and it is important to understand the implications of transferring your cryptocurrency assets to your beneficiaries.

In Australia, cryptocurrency is treated as an asset for tax purposes, which means that any gains or losses on the sale or exchange of cryptocurrency are subject to capital gains tax. If you transfer your cryptocurrency assets to your family or other loved ones after you pass away, they may be responsible for paying capital gains tax on any gains that occur after your death.

If your investments are significant, you may need to speak with an accountant as well as your lawyer to get an idea of how growth in crypto value may affect your beneficiaries’ tax.

Give yourself and your family peace of mind about all your assets, including cryptocurrency. Reach out to Crest Lawyers to start preparing your Will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

A business may also restructure in order to grow or change direction. It can be a catalyst for positive change, especially when executed with a clear understanding of numbers and purpose.

The positive results of a restructure may be:

• Increased cash flow
• More manageable debts
• Better control of expenses
• Greater flexibility to operate in the current market
• A more competitive position in the market
• Increased profits
• A more compliant business

To start the process, your legal and financial team will do all or some of the following:

• Analyse current and recent performance (across sales, profits etc)
• Conduct forecasting and predict future outcomes
• Review a range of strategies and solutions
• Develop an action plan to move forward

This is why some clients reach out to us for help to restructure their business:

Change in market conditions

Market conditions are constantly evolving and companies must adapt to remain relevant. Changes in consumer spending or demand and the emergence of new competitors can significantly affect a business’s performance.

If a business is struggling to keep up with these changes, it might be time to restructure. For example, if a business is experiencing declining sales due to new technology being introduced to the market (think Blackberry vs iPhone), restructuring can help it realign its operations to meet these new demands.

Declining sales or financial difficulties

Financial difficulties can arise for many reasons, such as poor management, high debt levels or an unexpected downturn in sales. If a business is struggling financially, it may need to restructure to address these issues.

Restructuring can involve cost-cutting measures such as layoffs or reducing expenses, to improve the company’s financial position. In some cases, a company may need to restructure its debt or seek new financing options.

Expansion, diversification or strategy

As a business grows, it may need to restructure to support its expansion or diversification efforts. For example, if a business wants to start operating in new markets or launch new products, it may need to restructure its operations. This could involve hiring new staff, investing in new equipment or reorganising the company’s management structure.

A company might restructure in order to take on more debt and limit the personal liability of the director/owner. For example, it may make sense for a business that was originally operated as a partnership to move to be a more formal company, so the entity stands alone.

Changes in ownership or leadership

Changes in ownership or leadership can also be a catalyst for restructuring. If a business is sold or acquired, the new owners may want to restructure to align the business with their strategic goals. Similarly, if there is a change in leadership, the new management team may decide to restructure to improve the company’s performance.

Regulatory compliance

Regulatory compliance is a critical aspect of doing business in Australia. Companies must comply with a range of regulations, including tax laws, employment laws, and industry-specific regulations. If a company is struggling to comply with these regulations, restructuring may be necessary to address these issues. For example, a company may need to restructure its payroll system to ensure compliance with employment laws or reorganise its operations to meet new industrial regulations.

If any of the above apply to your business and restructuring is an option, Reach out to Crest Lawyers today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

As estate planning lawyers, we frequently help individuals and couples to ensure their home is either retained by the right people or sold so that funds can be distributed in accordance with their wishes after they pass away.

Take a closer look at some important considerations for Australians when it comes to property, mortgages, Wills and estate plans.

Estate planning when you co-own property

Some families find themselves in a situation where a person wants their share of a property to go to one or more individuals other than the co-owner.

The outcome of this situation will depend on whether the owners of the home are recognised as joint tenants or tenants in common.

Usually, if a joint tenant dies, the asset will automatically be transferred in full to the other joint tenant.

If the property was purchased by two people as tenants in common, the surviving person does not necessarily have the right to claim the full value of the home as their own.

If you don’t want your property to go to a joint owner after you pass away, you need to clarify this in your estate planning and work with your lawyer and accountant to make sure you are formally recognised as tenants in common.

A circumstance where you may wish to do this is if you have purchased a home with your second spouse and you have children from your first marriage. If you want some of the money from the home to go to your offspring when you die, talk to your partner and lawyers to make the right arrangements.

What happens to your mortgage after you die?

When you pass away, any debt you owe on your property (such as a mortgage) becomes a liability of your estate. This means the debt must be paid off before any proceeds from the sale of the property can be distributed to your beneficiaries.

It’s important to plan ahead to ensure that your estate has the resources to pay off outstanding debts. You may want to consider taking out life insurance or exploring other financial products that can help cover these costs. This will allow your beneficiaries to retain more of your assets.

How to split the proceeds of a property sale to multiple beneficiaries

If you plan to leave your property to multiple beneficiaries, it’s important to consider how the proceeds of a property sale will be distributed.

There are several options, including:

• Equal shares: This is the simplest option, where the proceeds are divided equally among all beneficiaries.
• Proportional shares: This option takes into account each beneficiary’s share of the property. For example, if one beneficiary owns 25% of the property and another owns 75%, the proceeds would be divided accordingly.
• Priority shares: This option prioritises certain beneficiaries over others. For example, you may choose to give a higher percentage of the proceeds to a beneficiary who has been caring for you in your final years.

Discuss these options with your beneficiaries and work with your lawyer to ensure your wishes are understood and documented so they can be carried out in a fair and legally binding manner.

Give yourself and your family peace of mind. Reach out to Crest Lawyers to start preparing your estate plan today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

One issue that can greatly complicate things is if the executor of the Will dies or is incapacitated. Not having an executor can complicate things and has the potential to lead to court proceedings.

The last thing you want is difficulties in dealing with your Will for your bereaved loved ones. You want the Will to be the last thing they have to worry about at such a sad time.

So, what will happen if an appointed executor is unable to fulfil their duties in handling a deceased person’s estate?

What is an executor?

An executor of a Will is the person appointed to administer the estate of the deceased.

Basically, an executor is a party charged with carrying out the instructions of a Will.

What if the executor dies?

An executor can die at two different times during the lifetime of a Will, and each situation creates its own problems.

If the executor dies before the maker of the Will or is not available

When you appoint an executor, you clearly expect them to outlive you. However, this might not be the case. It may also happen that they are not able to execute your Will for another reason such as distance or mental impairment.

The best thing to do from the outset is to appoint one or more backup executors.

If you have yet to appoint backup executors and your executor dies before you, it is best to update your Will right away with a new executor.

If you don’t appoint a new executor, another party can apply to the supreme court to become the executor. The court will normally agree to a person with a large interest in the estate becoming the executor, but it will be out of your hands and may not end up being your preferred person.

The executor dies shortly after the Willmaker

This is a more complicated situation.

Of course, if you have appointed backup executors, then the job will go down the line to the next surviving executor.

If there is no executor, then someone will need to apply to the court for Letters of Administration With the Will Annexed.

These documents will grant the applicant the authority of an executor.

Normally, the court expects that the applicant is a beneficiary of the Will, has the written consent of other beneficiaries and that the Will is legal and current.

Protecting your Will and your loved ones

There are a few tips for getting your Will right and ensuring you have no trouble with your executor:

• Appoint more than one executor: Have a preferred and a backup executor so there is less stress caused by an executor not being available.
• Review your Will regularly: You may have done your Will long ago and need to remember who you appointed as your executor. Conduct an annual review to ensure your Will is always up to date. You can confirm your executor is alive and well as part of this process
• Make sure your Will is correctly drafted: Work with a legal professional to ensure your Will is valid and has been signed by the right people, including your executor.
• Speak with your executor or update the executor: It’s worth touching base with your Will’s executor from time to time to ensure they are still comfortable with their role. If they aren’t or if you would prefer to have someone else do the job, find someone else and complete the necessary paperwork.

Is your Will up to date?

Having your Will professionally prepared and kept up to date by a lawyer who specialises in this area makes sense, particularly if your Will and estate are more complex.

When you have an up to date and legally binding Will as well as reliable executors, you will have peace of mind about your family being protected and provided for in the event of your death.

Give yourself and your family peace of mind. Reach out to Crest Lawyers to start preparing your Will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

So, how do you update a Will after separation?

What is a Will?

Very briefly, a Will is a legal document that appoints a beneficiary or beneficiaries of your belongings and assets in the event of your death.

What if I don’t update my Will after separation?

Your Will is a legal and binding document, regardless of when you signed it. If you die before you update yours, the wishes that are legally documented will be used to distribute your assets, even if you have since changed your mind.

This can result in assets going to a person who is no longer part of your life.

How does divorce affect my Will?

Under Australian law, divorce affects a person’s Will in different ways depending on the state or territory you live in. In some circumstances, a divorce can completely nullify a Will, but this is not something you can rely on. Plus, in these cases, you could be left without a Will, which can cause its own complications.

In most states, though, a divorce will nullify any gifts or bequests appointed to a former spouse unless a judge believes it is still your wish that they should receive them.

Why update a Will after separation?

It is very important to note that while an official divorce can nullify parts of your Will, separation does not.

If you are separated but yet to be divorced, then your Will is still likely to be legally binding.

This is why you should move quickly.

Updating your Will

• Assets

The first step is to review your existing Will and identify any changes that need to be made. It’s very likely that you have appointed your former partner as an executor or beneficiary, so you need to remove them.

You also need to consider who will be responsible for distributing your assets after your death. If you have your former partner down as your executor, aim to remove them and appoint a new executor instead.

It is also important to review any trusts or other arrangements that you have in place. If you have a trust for the benefit of your former partner, you may need to modify or revoke it to ensure that your assets are properly distributed according to your wishes.

• Estate

In some cases, a separation or divorce can result in a complex estate planning situation. For example, if you have children from a previous marriage or relationship, you may need to consider how your money and assets will be distributed to ensure your children are adequately provided for. You may also need to consider how your assets will be distributed if you have a blended family.

If you have children under the age of 18, it is important to appoint a guardian in your Will. The guardian will be responsible for the care and well-being of your children if you pass away. If you have recently separated or divorced, you may need to review your choice of guardian and consider whether your former partner is still an appropriate choice.

Get support to update your Will after separation or divorce

Your needs and wishes should be priority as you go through a separation. When you work with an experienced lawyer, the process to update your Will and make sure it is legally binding should be straightforward.

Give yourself and your family peace of mind. Reach out to Crest Lawyers to start preparing your Will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

What happens when an SMSF member dies?

If someone who has a self managed super fund dies, the money in the fund will be passed to someone else. It can be distributed in a couple of ways.

The first option is what’s known as a ‘death benefit’. This is generally paid to a dependent or another beneficiary.

In the event that the recipient is a dependent such as a child or a spouse, the death benefit can be paid as either a:

• Lump sum
• Income stream

According to the Australian Tax Office, if the nominated recipient is not a dependent of the person who has passed away, the death benefit must be paid as a lump sum.

Ideally, the SMSF member will have signed a death benefit nomination, which will clearly nominate the person who should receive the funds.

If a beneficiary has not been nominated but there is a legal Will, the SMSF trustee may be able to transfer the funds to the deceased person’s estate. The Will executor will then distribute the money in accordance with the person’s wishes.

The other option is what’s known as a ‘reversionary pension’. Under this, the super pension of the person who has passed away will transfer to a nominated beneficiary, providing they are eligible. This means the beneficiary will start to receive an income in the form of superannuation payments.

What happens if there are no instructions in place?

If there is no binding nomination in place and a super fund member passes away, the trustee will have to use their discretion to decide where the money should be distributed.

In some instances, people who believe they are entitled to be beneficiaries of a superannuation fund may dispute the trustee’s decision. This can result in the trustee being overridden or losing their position.

The challenge this type of situation can present demonstrates the importance of installing an experienced trustee to oversee an SMSF. When you appoint someone who has prior understanding of the ins and outs of a self-managed super fund, they will make sure decisions are made and correctly documented when it comes to beneficiaries.

Why nominate a beneficiary?

People often assume the answer to who they wish to give their money to would be obvious, but this is rarely the case.

Consider the following scenarios:

• A dispute arises between an adult child and the deceased person’s spouse
• A former spouse believes they have a right to the money
• One adult child feels they are entitled to more money than their sibling
• The spouse of an adult child steps in and complicates the situation
• An estranged relative shows up and makes a claim

Deciding who will receive the balance of superannuation and how it will be paid is an important step when establishing an SMSF. It’s also important to speak to an advisor about how to minimise tax involved with a super-related death benefit.

Get the right support for a positive SMSF experience

Having a well-managed SMSF fund and the support of an expert advisor makes so much sense. They will ensure the right decisions are made and that documents are signed, witnessed and stored so they are easy to access.

Our experienced advisors

• Explain the requirements of the SMSF in detail
• Help with ongoing management of the fund
• Ensure the fund is compliant with regulations
• Facilitate the smooth transfer of funds in the event of the death of a member

Need help to put in place a binding death benefit nomination or your estate plan, speak to Crest Lawyers today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

To help you nominate the right person, here’s a rundown of what a Will executor’s tasks include.

What do executors of Wills do?

The executor of a Will has to:

• Administer your estate after you pass away
• Ensure all debts are paid
• Close your accounts
• Oversee the disbursement of inheritances in accordance with your wishes

It is also usually the executor’s job to arrange your funeral. They can use funds from your estate to pay for it.

The Will executor may need to go through the process of probate. This is a court order granted by the Supreme Court of Queensland that confirms:

• the Will is valid
• the executor has permission to distribute the estate

Probate is usually required if you leave behind property and a substantial amount of money. Grants of probate usually take around 20 business days and the process includes:

• gathering supporting documents such as an affidavit
• publishing a probate notice
• waiting 14 days
• submitting a probate application
• responding to Requisitions from the court.

After probate is confirmed, the person responsible for executing your final wishes and finalising your estate will have to answer the following questions:

• What do you wish to happen to your remains?
• Who needs to be notified about your passing?
• What will happen to your property and belongings?
• Who is entitled to what percentage of the money that comes from the sale of property and other assets / who are the will’s beneficiaries?
• How will belongings and funds be distributed?

Your executor will ideally have access to your accounts after you pass away. If you have a list of providers for them to get in touch with, they will find the process much easier. Consider your:

• Phone and internet provider
• Gas/electricity provider
• Insurance providers
• Subscriptions (e.g. Netflix etc)
• Gym memberships
• Housekeeping services etc

Think about bank, superannuation and investment accounts as well; it can take a long time for your executor to access accounts (executors generally can only access your bank accounts once probate has been granted by the Court.)

Ask your lawyer to hold onto these details for safekeeping.

Who should execute your Will?

Being executor of a Will can be stressful and time-consuming. When you nominate someone, keep this in mind.

Most people choose a family member or trusted friend. Sometimes, two people are nominated, either to execute the Will together or as an alternative if the first choice is unavailable or incapable of taking on the responsibility.

Often, siblings are nominated as joint executors. This can help ensure everything is kept ‘fair’ during the Will execution process.

Some things to consider include:

• You can nominate someone who is a beneficiary
• You can add a clause to your Will to ensure your executor is compensated for their time and efforts
• If you appoint joint executors, make sure they are able to work well together
• You can nominate a lawyer or trustee instead of a family member. Usually, payment for their services will come out of your estate but make this clear when you ask them to act as executor, so they don’t come up against pushback from your family.

If you do nominate a family member, they can work in conjunction with a solicitor to ensure they get everything right.

Make your executor’s life easy

A rushed or unclear Will can make things very difficult for an executor. The more questions you can clearly answer in your Will, the better.

Write down your wishes in a formal Will, store relevant information safely with a lawyer and have everything prepared formally and correctly so you don’t create unnecessary stress for your executor when the time comes.

The right approach to Wills and executors will give you and your family peace of mind. Reach out to Crest Lawyers to start preparing your will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

In multiple proceedings handed down in August, the Federal Court held that nearly all deductions amounting to several million dollars claimed by three entities controlled by one individual should not be allowed.

This is a case referred to as Melbourne Corporation of Australia Pty Ltd v Commissioner of Taxation. It also involved a business called the Anglo American Charitable and Cultural Trust (the AA Trust).

What’s the story?

The case came about because the Tax Commissioner issued amended assessments of income tax and penalty assessments in relation to the above-mentioned companies. These were in relation to tax deduction claims for management fees and interest said to be incurred in respect to purported loans.

The question arose as to whether the alleged management fees were actually incurred.

In addition, there were queries around whether purported loans were actually made, whether the proceeds of the loans were used in producing assessable income or whether the interest claimed was in relation to the alleged loans.

The case concluded with the court upholding that the value of “management fees” and interest were “no more than ex post facto constructions designed to be fiscally convenient for tax purposes”.

Basically, the claims were not valid.

In one of the cases, as shared by Senior Content Analyst Heidi Macguire from Wolters Kluwer Tax and Accounting, “The lead appeal in this decision was in relation to Melbourne Corp which, over the 2001 to 2014 income years, claimed deductions in respect of management and consulting fees as well as interest expenses in relation to arrangements with various Australian entities.

The Commissioner disallowed the deductions and imposed penalties at the rate of 75% for intentional disregard, increased by 20% for the years after 2001.

The assessments resulted in Melbourne Corp’s taxable income increasing from $168,018 to $2,431,071, with penalties of $589,225 and shortfall interest charge of $175,746 imposed.”

You can read further details and evidence from the trial here.

A caution for all business owners

There are many ways to minimise tax as a business or individual but if your accountant goes beyond what is legal, there will always be the risk of a response and investigation from the ATO, and subsequent legal action.

In terms of writing off management fees or loan expenses, it is important to have documented evidence of everything. At the very least, the ATO needs to see the flow of money between bank accounts as a way of proving tax-related claims.

The term ‘wilful blindness’ was mentioned many times during the Melbourne Corporation cast. In his findings, Justice Logan stated that the taxpayer’s directors conduct (and his evidence) was not dishonest, but he was mistaken to the point of wilful blindness to the obvious in fixing and then causing the amounts to be claimed.

Justice Logan stated that the accountant in question, “Appears additionally to have convinced himself, seemingly based on a mistaken understanding of the proposition, that it is not for the Commissioner to dictate to a taxpayer how to run a taxpayer’s business or one controlled by a taxpayer.”

For penalty purposes, this behaviour was classed as ‘reckless’ rather than ‘intentional disregard’. However, as Heidi McClure wrote in the conclusion of her lengthy article about the trial:

“An act of will, no matter how genuine, does not overcome lack of documentation, contradictory evidence, unreliable ledger entries or transactions devoid of any plausible explanation.

Second, making ex post facto (after the fact) constructs or “closing adjustments” after the end of an income in order to achieve a fiscally convenient outcome does not serve to minimise tax but rather leads to a finding of sham.”

Long story short… tax returns require an honest approach based on documentation and evidence. If you’re a business owner, this means keeping your receipts and records of all interest, loan and other transactions. If you make a claim that the ATO notices as outside of standard benchmarks, you must be able to prove it is genuine.

Crest Lawyers provides legal advice for individuals and business owners on the Gold Coast.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.