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In Check Issue 73 | December 20167 December, 2016
Table of contents
- Cyber risk awareness for lawyers and clients
- PPS – Raising awareness – how accurate is your registration?
- Termination of contract notices
- A new GST checklist
- A new risk manager
- Common GST question
- Book now for our 2017 Risk Management Seminars
- Law Institute Journal articles
- Office closure over Christmas and New Year
We regularly hear stories from law firms about cyber risk issues they are experiencing and to assist in managing this ever increasing, more sophisticated and ongoing threat we recently published a bulletin and checklist on the subject. The bulletin explains how easy it is to be caught out by cyber criminals and also refers to a checklist of the basic steps you need to take to prevent cyber criminals gaining access to your computer system.
A topical example from a firm illustrates the importance of good communication with your clients about these issues as well. The firm discovered their overseas client, who had purchased a house and land package, had received fake emails purporting to be from the firm after the settlement of the property had been completed. The emails directed that money due under the building contract be paid into a bank account that was supposedly the firm’s account. Several emails were sent to the client professing to be from two people in the firm. The emails were sent from a fraudster and the firm knew nothing about them. A close inspection of the emails would have shown the email address was not that of the firm and the language used not typical of a lawyer.
It is not hard for fraudsters to create similar email addressed given the information readily available about a firm’s staff members and their email addresses on firm’s websites.
It may be a good idea to warn your clients in a newsletter or general communication about the possibility that fraudsters may send them emails that purport to be from the firm directing them where to send money. If they receive such an email they should look very carefully at the email address and content of the letter and if in any doubt telephone your firm. You might also confirm that your firm will only ever require money to be paid into your trust account.
Are you across the issues with the personal property securities regime? Maybe it’s on your to do list or one of your New Year’s resolutions.
We are concerned that practitioners may not be dealing with the PPS regime as well as they should. The session by Nick Anson of Minter Ellison about PPS at our mid-year Risk Management Intensive, called Secure your securities, is now on our website and available for everyone to watch. We encourage you to watch this video for a good update on PPS.
One of the themes that came out of the session was the need for practitioners to engage with their clients on the accuracy of the security interests on the register. An estimated 80 per cent of security interests registered on the PPS register are inaccurate in some way. Given the large numbers of registrations that may be unenforceable, it is good risk management as well as good client relationship building to talk to clients about the need to audit their registered security interests to ensure they are appropriately recorded.
It is timely to do so as the five-year transition period for charges that were migrated from other registers onto the PPS register will end on 31 January 2017. Many of the charges migrated had missing or incomplete data for the purposes of the PPS register and security interest holders were granted five years to fix these problems.
For more information on this transition period and how to review registrations see the End of final transitional period article on the PPSR website.
The Consumer Acts Amendment Bill 2016 (Vic) proposes a change to section 31 of the Sale of Land Act 1962 (Vic) to provide that termination notices can be served on a vendor’s estate agent. The change will be retrospective and any notices served on estate agents before the amendment was enacted will be taken to have been validly served unless proceedings had been issued to challenge the service. The provisions will come into operation the day after the Consumer Acts Amendment Act 2016 (Vic) receives royal assent.
We launched a new GST checklist during our 2016 Metro Series around suburban Melbourne in November. The checklist is a handy summary of the issues you need to consider when dealing with GST, and has links to various GST tax rulings and other useful information.
The checklist can be found on our website under Resources>Checklist as well as under Risk management>GST or by using the search function on the website.
For more information on GST go to the frequently asked questions (FAQs) . The FAQs can be easily accessed by hovering your cursor over the risk management box on the front page of the website and then clicking on the FAQ link in the menu that appears.
Please review the FAQs and the GST checklist before you use our GST hotline enquiry service as the answers to many enquiries can be found there.
The GST hotline service will not be operating between 4 and 6 January 2017. From 9 to 18 January please contact Phillip Nolan at Phillip.Nolan@lplc.com.au . The normal GST Hotline service will resume with Derry Davine at email@example.com on 19 January 2017
We are pleased to introduce our new risk manager, Stephen Bubb, who joined LPLC earlier this year. Stephen’s role is to assist practitioners with managing their practices. He has had 30 years’ experience in private practice as well as 18 months at the Law Institute of Victoria. He is also a director of the Goulburn Valley Water Corporation.
Stephen has been visiting firms and talking to principals about the issues they are facing in managing their practice. Stephen can be contacted by telephone or email through our office.
He has also been speaking to principals of new practices and helping them start off on the right foot. As part of that process we have been running Building Solid Foundations workshops for principals of new firms or those thinking of starting their own practices. The two hour workshops run approximately every two weeks. They can be booked through our website here.
Residential premises sold with a planning permit
Q: My client purchased a residential property in 2008 and resided there from 2009 until 2012. He then moved out and leased the property. Recently the client has received a planning permit to redevelop the property into three townhouses. He has now decided to sell the property together with the planning permit to a prospective property developer. Is GST applicable in this sale?
A: The supply of residential premises, not being new residential premises or commercial residential premises, is input taxed. No GST is payable but the supplier cannot claim input tax credits for GST incurred in connection with the making of the supply. This is so even if the supplier is registered for GST and even if the supplier is a developer whose enterprise consists of, or includes dealing in residential property.
To determine whether the premises being sold are residential premises eligible for input taxed treatment, you need to refer to paragraphs 9 to 45 of ruling GSTR 2012/5, which is the Commissioner’s ruling on residential premises. You will note that physical characteristics are more important than use, although premises must be capable, both physically and in planning terms, of use for residential accommodation to be considered residential premises.
The ATO considers that whether premises are “residential premises to be used predominantly for residential accommodation” (s.40-65, GST Act) is to be determined objectively by reference to the physical characteristics of the premises rather than the subjective intentions of the parties. If the premises are still residential premises and are not new residential premises, supply of the dwelling will be input taxed under s.40-65 of the GST Act despite the fact that a permit to redevelop is supplied and despite the intention of the purchaser to demolish and redevelop.
We have a full program of risk management seminars planned for next year and the dates are listed on our website under Training to help you to map out your CPD year. For those organised people who like to book ahead you can now book the sessions you want to go to even though the topics and brochures have not been finalised.
The brochures for each series will be emailed to you closer to the dates.
Law Institute Journal articles
Each month LPLC writes an article for the Law Institute of Victoria’s journal. The articles are posted on our website here at the start of each month.
Three articles have been published since the September issue of In Check.
October | How thorough are you?
Properly advising a purchaser client at the start of a matter is good risk management. The new federal government CGT withholding regime, which started on 1 July 2016, is a timely reminder to keep up to date on legislative changes so thorough advice can be given to purchasers of real estate.
November | Keep out of harm’s way
Practitioners should be aware of key risks when acting for plaintiffs in personal injury litigation. Reviewing the claims against personal injury practitioners, the LPLC found from 2005 to 2015 more than half of the cost of these claims were attributed to workplace injury matters.
December | Not seeing the forest for the trees
Focusing on small details only can sometimes blind practitioners to the bigger picture. Not seeing the forest for the trees refers to someone who can’t see the whole situation clearly because they are looking too closely at the small details or are too closely involved. LPLC receives claims where practitioners become too bogged down in the finer details to see the matter as a whole.
LPLC’s office will close at 1.00pm on Friday 23 December and re-open on Tuesday 3 January 2017. We wish you all a very safe and peaceful festive season and New Year.
The GST hotline service will not be operating between 4 and 6 January 2017. From 9 to 18 January please contact Phillip Nolan at Phillip.Nolan@lplc.com.au . The normal GST Hotline service will resume with Derry Davine at firstname.lastname@example.org on 19 January 2017.