2017/18 Federal Budget implications on housing affordability

The 2017/18 Federal Budget introduced additional financial and compliance requirements to foreign investors acquiring a real property in Australia. Now there is a limit on foreign ownership in new developments, having annual charge imposed on foreign owners who acquire residential property and leave it vacant for certain amount of time and the foreign investor tax integrity rules are tightened to reduce avoidance of capital gains tax on Australian property. These measures seek to reduce the pressure on housing affordability for Australians.

 

  1. Cap on foreign ownership in new developments

The new Federal Budget limits the number of properties that can be sold to foreign investors and all new approvals will be subject to a condition that the developer may only sell a maximum of 50 per cent of the total dwellings in the development to foreign investors.

This is applicable to all new developments which comprises of one or more multi-storey buildings that will, or have been built under one development approval (with 50 units or more) and does not include townhouses, house and land packages and greenfield developments.

New Dwelling Exemption Certificates (“the Certificate”) issued by Foreign Investment Review Board (“FIRB”) to property developers act as pre-approval allowing the sale of new dwellings in a specified development to foreign persons without each foreign purchaser seeking their own foreign investment approval.

Previously, the Certificate did not limit the number of dwellings that may be sold to foreign investors, meaning 100% of apartments could be sold to overseas purchasers.

This cap will be imposed on all new applications which are applied for on and from 9 May 2017 and it is intended to increase the housing stock for Australian buyers.

 

  1. Annual vacancy charge

An annual charge on foreign owners of residential real estate will be applied where Australian residential property is not occupied or genuinely available on the rental market for at least six months per year.

The charge will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired, minimum amount being $5,000. The annual liability is assessed based on the date of settlement of the property as the start date for each year.

The annual vacancy charge will apply to foreign persons who make a foreign investment application for residential property from 9 May 2017.

This is intended to ensure that foreign investment in Australian residential real estate contributes to the actual supply of residential property available for use in Australia.

Moreover, foreign owners must report annually about the use of their residential property for the previous year and may be required to provide evidence that the residential property was used:

  • where it is rented out, used as a residence or otherwise occupied;
  • where it has genuinely been made available for rent, including by advertising the residential property, engaging a leasing agent and setting the rent at a market rate; or
  • during the construction period for the building of new dwellings or redeveloping of existing dwellings.

The person who occupies or uses the residential property does not need to be the person who purchased the residential property and there is no requirement for a rental agreement to be in place and the six month period in which the property must be used does not need to be six consecutive months.

 

  1. Increased fees for FIRB applications

Application fees for foreign purchases of residential properties valued at less than $10 million will increase by 10 per cent on the current fees, effective 1 July 2017.

The number of fee categories for FIRB approvals have been limited to three broad categories and new fee categories now include not only developed commercial land, but also vacant commercial land.

 

  1. Reduced Capital Gains Tax (CGT) benefits

The Government will stop foreign and temporary tax residents from claiming the main residence capital gains tax exemption when they sell property in Australia. Foreign and temporary tax residents who hold property on 9 May 2017 can continue to claim the exemption until 30 June 2019.

The CGT principal asset test will also be applied on an associate inclusive basis from 9 May 2017 for foreign tax residents with indirect interests in Australian real property.

The Government will also strengthen the foreign resident CGT withholding regime by:

  • increasing the withholding rate from 10 per cent to 12.5 per cent
  • increasing the number of foreign residents caught by the regime by reducing the threshold from $2 million to $750,000.

These changes will apply from 1 July 2017 and will reduce the risk that foreign residents avoid paying a capital gains tax liability they owe in Australia.

 

  1. Improving housing affordability across NSW

The Government also introduced new measures to provide affordable housing to home buyers in NSW by increasing grants and concessions available to first home buyers and regulating foreign investors with increased stamp duty, which will take effect from 1 July 2017.

Stamp duty relief

The stamp duty is abolished on all homes up to $650,000 for first home buyers. For properties valued at between $650,000 and $800,000, the duty concession will be gradually reduced.

First Home Owners Grant (New Homes)

First home buyers building a new property will be entitled to a $10,000 grant on homes worth up to $750,000 and for those purchasing a new property worth up to $600,000 will also be entitled to a $10,000 grant. This policy aims to provide assistance to first home buyers and stimulate the construction of new dwellings.

The $5,000 New Home Grant Scheme, which was available to other buyers including foreign investors will no longer be available.

Insurance duty on lenders’ mortgage insurance abolished

The removal of insurance duty on lenders’ mortgage insurance (set at 9 per cent of the premium) will save money for all home buyers including first home buyers if are subject to LMI.

Foreign investors to pay higher duties

Foreign investors will pay higher surcharges when they purchase residential real estate:

  • surcharge on stamp duty doubled from 4% to 8%
  • surcharge on land tax from 0.75% to 2%

The surcharge is in addition to the duty payable on the purchase of residential property and foreign developers will be exempt from the increased surcharges.

No more stamp duty deferral for foreign investors

The Government is abolishing the 12-month deferral of duty for residential off-the-plan purchases by foreign investors.

Australian buyers including first home buyers who plan occupy their purchase of off-the-plan property will still be entitled to a 12-month delay in the payment of stamp duty, deferring payment from 3 to 15 months after settlement.

 

  1. Other implications

The following measures which affect superannuation could also assist with reducing pressure on housing affordability.

First Home Super Saver Scheme

The First Home Super Saver Scheme will help first home buyers to save funds at a discounted tax rate by making additional contributions to their superannuation from 1 July 2017. These additional contributions, and earnings made on them, can then be withdrawn to be used as a home deposit.

The new Scheme provides an incentive for first-home buyers to save any concessional contributions and earnings withdrawn will be taxed at the marginal tax rate, less a 30 per cent offset. First home buyers can make voluntary contributions into superannuation of up to $15,000 per year, up to $30,000 in total (effectively $60,000 for a couple) and withdrawals are allowed from 1 July 2018.

A previous First Home Savers scheme required potential home buyers to set up a special account with a financial institution, however the new Scheme avoids this requirement.

New downsizing cap – contributing proceeds into super

This measure is designed to encourage people aged 65 and over to downsize from homes that no longer meet their needs and free up housing stock for young families.

From 1 July 2018, people aged 65 and over will be able to make a non-concessional contribution into their superannuation of up to $300,000 from the proceeds of selling their principal place of residence which has been held for at least 10 years. Couples can take the advantage of contributing $600,000 to their super fund through the downsizing cap.

The new downsizing cap is in addition to the existing voluntary contribution rules (i.e. work test, no contributions for those 75 and over) and restrictions on non-concessional contributions for people with balances above $1.6 million.

If you want to become an Australian Citizen, you will need to know the Changes to the Australian Citizenship requirements

On the 20th of April 2017, the Australian Government introduced a package of reforms strengthening the requirements to become an Australian citizen.

The key changes to note are:

  1. Increased general residence period which requires applicants for Australian citizenship to demonstrate a minimum of four years permanent residence.
  2. New English language test which requires applicants to demonstrate competent English language listening, speaking, reading and writing skills before being able to sit the citizenship test.
  3. New requirement for applicants to demonstrate their integration into the Australia community.
  4. Revised test for Australian citizenship including the addition of new test questions on Australian values, the privileges and responsibilities of Australian citizenship.
  5.  Australian Values Statement with applicants to make an undertaking to integrate into, and contribute to the Australian community
  6.  Extended requirement for applicants aged 16 years and over to make the Pledge of Commitment to all streams of citizenship by application.

The Government also noted that they will introduce new citizenship related legislations into the Parliament by the end of 2017.

All new citizenship applications lodged on or after 20 April 2017 will be subject to the new reforms.

If you are seeking to become and Australian citizen, Koffels can assist prospective applicants with assessing their eligibility under the different streams of citizenship application. Ross Koffel is a licenced Immigration Agent (No.0006391)

Stella Park

Solicitor

YOU DON’T HAVE LONG! REVIEW YOUR STRATA BY-LAWS ASAP TO ENSURE YOU ARE COMPLIANT. THE RULES HAVE CHANGED, AND HERE ARE SOME OF THE MOST NOTABLE CHANGES OF WHICH YOU SHOULD BE AWARE

Strata Reform: Effective By-Laws

The Owners corporations of existing strata schemes must review their by-laws within 12 months of the commencement of the Strata Schemes Management Act 2015 (“Management Act”) and consider if their existing by-laws would be limited by operation of the new Act. It is highly recommended that you review and amend your current by-laws to continue to enjoy the appropriate and enforceable controls over your scheme.

Some of the notable changes regarding the by-laws are:

  • Occupancy limits

 

A provision in the Management Act allows for by-laws to limit the number of adults occupying a lot, however, the limits cannot be fewer than 2 adults per bedroom. In particular, there is an exception where a by-law may have no effect if all of the occupiers are related to each other as members of the family.  You should carefully consider the class of people who are exempt from the occupancy limit, and seek advice as to keeping your by-law to effectively manage the number of people living in each lot.

  • Prohibition on pets

 

If your by-law contains a prohibition on pets, consider whether it is still operative under the new reforms. A by-law cannot automatically prevent the keeping of an animal and it is now easier for lot occupiers to keep pets by simply notifying the Owners Corporation in writing and complying with the condition of supervision; or by obtaining the written approval of the Owners Corporation.

In the case of an assistance animal, any by-laws restricting or regulating the keeping of pets are not enforceable under the new Act, to the extent they prohibit or restrict the keeping of an assistance animal, such as a guide or hearing dog. To determine whether such animal is allowed, the Owners Corporation can require the lot occupier to produce evidence that the animal is an assistance animal.

  • Prohibition on smoking

 

The Management Act and its explanatory Note considers the penetration of smoke into a lot or common property as a possible nuisance or hazard which may unreasonably interfere with the use or enjoyment of the common property or another lot. If you did not have a specific restriction on smoking, you could impose a more thorough by-law in place regarding smoke drift which may affect other lot occupiers in the scheme. If you are considering to use the model by-laws, you must carefully consider the options and adequately amend it so that it will be applicable to your circumstance.

  • Notify any change in use or occupation of lot

 

A new model by-law contained in the Regulations suggests that if a lot occupier wishes to utilise the lot for other purpose such as short term leases, a by-law can require an occupier to give written notification to the Owners Corporation of any change of use, 21 days before any such change occurs. Owners Corporation can adopt this clause to regulate lot owners that are using their lot as short term accommodation, such as AirBnB. By doing so, the Owners Corporation will be able to adequately monitor people accessing the scheme to maintain the security of the premises and check compliance with any development approvals.

The most important requirement of the new Management Act is that a by-law must not be harsh, unconscionable or oppressive, otherwise it will not be enforceable. Therefore it is highly recommended that you seek legal advice to review your by-laws in order to be compliant, effective and enforceable.

Call us if your require assistance with review and amendment of your Strata By-Laws

 

Fundamentals of Setting up an Online Business – do your homework and get it right from the start

When you’re setting up an online business, it’s important to consider the legal aspects that should be included in it.

Generally speaking, websites contain disclaimers, privacy policy and terms and conditions of use depending on their nature of use. It is essential to have these legal policies to safeguard your online business from potential disputes that may arise. Most importantly, these policies must be relevant to your business, and drafted carefully so they are legally compliant. Therefore you should always seek legal advice when wording these terms for your own use.

You should consider the following three fundamental features when setting up an online business:

Website Privacy Policy

A Privacy Policy sets out how your website collects, stores, uses and manages any sort of personal information of users such as their email address, physical shipping address and payment details. It is also an obligation under the Privacy Act 1988 (Cth) for all Australian websites to display a privacy policy if collecting user information online. It is particularly important if you are using any third party advertising or analytics features on your website. As they will collect data about your website usage and offer third party links, you must notify the users of this in the privacy policy.

To be legally compliant the privacy policy must be featured, and accessible throughout the navigation of your website, for example; the link to privacy policy may be featured at the bottom or top of the page as a default display.
Website Disclaimer

The right disclaimer for your online business will depend on the type of business and the goods and services you are providing. If you are selling products for instance, you will need a Disclaimer to limit your liability for any loss or damage, (subject to any statutory protection to consumers), that the buyers may face as a consequence of use or misuse of your products. A Disclaimer cannot prevent users from raising claims, but you can at least set the boundaries of your liabilities and protect your business. Generally the types of liabilities that can be covered by a Disclaimer include content accuracy, copyright infringement and links to third party websites and virus transmissions. The Disclaimer must be prominently displayed on your website in order to notify the users of its existence.

Website Terms and Conditions of Use

Often the “Disclaimer”, and “Terms and Conditions”, are considered as interchangeable. A Disclaimer however, is generally less detailed than Terms and Conditions. Terms and Conditions are more widely used for commercial websites, for example, regarding their supply of goods, services or subscription for payment. If your website is of a commercial nature, then you must have Terms and Conditions of use as required under the Australian Consumer Law.

The Terms and Conditions should generally explain the rights and responsibilities of the user (consumer), rights and responsibilities of the business, the way it complies with any legal requirements and its limits on liabilities. The terms of payment, services, return, refund and delivery must be made clear in your Terms and Conditions as required by the Australian Consumer Law.

The Terms and Conditions will also extend to limiting your liability for any information and material displayed on your website. It should also include statements to protect your intellectual property including original videos and articles that you create.

These legal policies are subject to the existing consumer protection laws, nevertheless, having them right will prevent abuse from users, help enforce your rights over the intellectual property, limit your liability and set the governing law for any potential disputes.

Having an Online Business can be both satisfying and rewarding, but always make sure you build your business on sound foundations right from the start.

Stella Park

Solicitor

Koffels Solicitors & Barrristers, Sydney

CAN THE PARENT OF A CHILD ABDUCTED TO JAPAN, EVER SEEK THE RETURN OF THEIR CHILD TO AUSTRALIA?

Japan’s acceptance of the Hague Convention on the Civil Aspect of International Child Abduction

“The Hague Convention of the Civil Aspects of International Child Abduction”, concerns the issue of international parental child abductions.

The Convention provides a process in which a parent can retrieve their child who has been abducted or retained in another country by their former spouse or partner, and bring them to their country of origin.

The Convention aims to uphold any existing parenting order, and to protect children from the harmful effects of abduction and wrongful retention, as well as ensuring the opportunity for parent-child visitation or contact. Australia is a signatory to the Convention along with 90 other countries.

In the past it has been particularly difficult to bring back children who had been taken to Japan because it was not a signatory to the Convention until 24 February 2014. Even when the parent with legal guardianship sought his or her right to the return of the child, the majority of the decisions made by the Japanese Courts, were in favour of the parent who was a Japanese national. The Convention however, which took effect in Japan as of 1 April 2014, dictates that the Japanese Ministry of Foreign Affairs is now responsible to fulfil the obligations set out by the Convention.

A parent seeking the return of a child, can make an application for assistance at the Central Authority of his or her own state, or directly to the Japanese Ministry of Foreign Affairs. The Ministry will then review the application and carry out the necessary investigation to locate the missing child and provide assistance leading to a mutually agreeable resolution, such as mediation, in order to arrange for the return of the child.

If the parties cannot resolve the issue, the Japanese Court will decide and can issue an order for the return of the child. The Tokyo and Osaka family courts hear these matters and decide whether the child should be returned to his or her country of origin.

There are some exceptions to the Court issuing an order for the return of the child:

The application is filed to the Court after a period of more than one year has elapsed from the date of wrongful removal or retention, and the child is now settled in a new environment.
The applicant was not the legal guardian of the child at the time of removal or retention.
The applicant had consented to or subsequently agreed to the removal or retention.
There is a serious risk that if the child is returned, he or she would be exposed to physical or psychological harm or otherwise be in an intolerable situation.
If the child objects to being returned, the child’s age and degree of maturity is taken into account

In reality the return order from a Japanese court can still be frustrated by a parent refusing to comply, or when the child is influenced to refuse its return. Consequently the court orders will be meaningless without sanctions for contempt of court. In addition, Japanese Family Court Judges, are accustomed to deciding domestic cases without regard to rules of evidence and the procedures that apply in these Convention cases, add to procedural uncertainty.

Furthermore, while the Japanese courts should publish case resolutions and statistics on successful applications, in reality, this does not appear to be the case. It is due to this lack of published information that it is difficult to find precedents on how the Convention cases have been decided.

Koffels Solicitors & Barristers are experienced in cross border Family Law disputes, and have representation in Japan and around the world.

If you have concerns about your child travelling outside of Australia, it is always best to seek advice and consider the issues that may arise, well before the date of departure. Afterwards may be too late. At best, the retrieval of a child is always a difficult path to take.

Stella Park

Solicitor