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In Check Issue 69 | December 20151 December, 2015
Table of contents
- Count your days to the end of the year carefully
- Common GST queries about the farming business exemption
- Updated purchaser statement
- Changes to foreign investment framework
- 2016 Risk Management Seminars
- New training video – The New Normal
- Office closure over Christmas and New Year
- Law Institute Journal articles
Count your days to the end of the year carefully
As the end of the year approaches there are three simple tips to make sure you don’t start the new year with a messed up time limit claim.
- Be mindful of the various public holidays that occur at this end of the year when calculating deadlines and time limits. We have had claims in the past where practitioners have not taken into account the holidays when calculating business days for the purpose of serving rescission or termination notices.
- If sending notices by post understand when the item is deemed to have arrived. Section 160 of both the Evidence Act 1995 (Cwlth) and the Evidence Act 2008 (Vic) state that an article sent by post is presumed to be received on the fourth working day after being posted. The presumption can be displaced by evidence to the contrary or by the terms of the contract where the proceeding relates to a contract.
- Diarise the dates in more than one person’s diary. In the often frantic lead up to the holidays it is easy for one person to miss a diary reminder so ensure it is in multiple places. We have had claims were unexpected absences at this time of year have meant deadlines for filing or lodging documents were missed. No one else had the deadline listed in their diary and everyone was otherwise too busy to check the absent lawyer’s diary.
Plan ahead now to ensure you have accurately calculated the correct time frames so your new year starts well.
Common GST queries about the farming business exemption
Many of the questions on the GST hotline over the last month have involved farming land so here is some general information about how GST operates in this sector.
What is a farming business?
There is nothing in the definition of farming business in section 38-475 of the A New Tax System (Goods and Services Tax) Act 1999 (Cwlth) (GST Act) to indicate the minimum scale of operations needed to qualify. Whether a farming activity amounts to a farming business or not will depend on whether the operation is accepted by the ATO as being sufficient in scale to qualify. As a rule of thumb, the scale has to be more than a hobby farm and sufficient to entitle the operator to claim expenses as income tax deductions. The use of land for agistment is not accepted as the conduct of a farming business on that land. Further information of interest relating to farming business can be found in the Primary Production Industry Partnership Issues Register at 6.2.
How long must the farming business operate?
When GST was first introduced, section 38-480 required that the supplier have carried on a farming business for five years and that the recipient intend to carry on a farming business on the land. In 2000, the section was amended to its present wording which now only requires that a farming business has been carried on for the five year period on the land and that the recipient intend that a farming business be carried on.
The section does not require either that the supplier has carried on a farming business itself, or that the recipient intend, itself, to carry on a farming business. It is sufficient that a farming business has been carried on by someone or other for the requisite period (it could be by a succession of entities) and that the recipient intend that someone carry on a farming business from the date of supply. Unless both of these requirements are satisfied, a supply of farming land cannot qualify for exemption under section 38-480.
Who needs to be registered for GST?
To apply for the farming exemption only the vendor must be registered for GST or be required to be registered for GST. Section 38-480 does not require that the purchaser be registered or required to be registered for GST for the exemption to apply.
When considering whether the vendor is required to be registered for GST, the threshold for registration is based on turnover, not profitability. An entity is required to be registered if its GST turnover is at or above the GST registration threshold of $75,000 p.a.. GST turnover consists of current GST turnover and projected GST turnover, and includes turnover from all sources other than salaries and input-taxed turnover. All too often practitioners look at this issue on a property by property basis as if there could only be a requirement to be registered if the turnover generated by the subject property was at or above the registration turnover threshold.
If the position is that the vendor is neither registered nor required to be registered for GST, section 188-25 of the GST Act excludes the proceeds of sale of a capital asset from projected GST turnover, avoiding the situation where the sale itself triggers a requirement to be registered. However, the exclusion does not apply where land is trading stock (for example, land acquired for resale).
If you are uncertain as to whether your vendor client is required to be registered, one option would be to insert “plus GST” in the box in the particulars. You can also include a special condition to the effect that the vendor is not registered for GST and believes that it is not required to be registered and that, consequently, the supply will not be taxable but that the words “plus GST” in the particulars are to apply in the event of the vendor being assessed for GST in respect of the supply.
For more information search our website for GST or see Frequently asked questions.
Updated purchaser statement
The State Revenue office form 62 purchaser statement, was updated on 1 December 2015 and must be used for all purchases of land in Victoria entered into from 7 December 2015. This form must be filled in for all purchasers even if they are not foreign purchasers.
Changes to foreign investment framework
Significant changes involving foreign investment review board applications were brought in on 1 December 2015. Applications for FIRB approval are still made via the www.firb.gov.au website but the ATO will process the applications and there will be a fee charged. The size of the fee will depend on the value of the property. For properties of $1million or less the fee will be $5,000 and for properties over $1million it will be $10,000 plus a further $10,000 for every addition $1million in value.
There will be a new civil penalty regime and an increase in the current criminal penalties. Third parties that aid, abet, counsel, procure or conspire with others to contravene the civil penalty provisions will be taken to have contravened the provisions as well by reason of the Regulatory Powers (Standard Provisions) Act 2014 (Cwlth). The same can be said for the criminal offences by reason of part 2.4 of the Criminal Code.
Practitioners acting for foreign purchasers need to be sure they understand the requirements of the Foreign Acquisitions and Takeovers Act 1975 (Cwlth) and advise their clients accordingly to avoid any possibility of being found to aid and abet any contravention.
2016 Risk Management Seminars
We have a full program of risk management seminars planned for next year and the dates are listed here on our website to help you to map out your CPD year. The brochures for each series will be emailed to you closer to the dates.
Cost estimating and the Uniform Law
Wednesday 17 February 2016 – FULLY BOOKED
Verification of Identity workshops
Wednesday 2 March 2016
Registrations open 15 December 2015
Regional Risk Management Tour
Registrations open 7 March 2015
|13 April 2016||Mt Eliza|
|21 April 2016||Warrnambool|
|22 April 2016||Geelong|
|27 April 2016||Bairnsdale|
|28 April 2016||Traralgon|
|4 May 2016||Horsham|
|5 May 2016||Ballarat|
|11 May 2016||Wangaratta|
|12 May 2016||Shepparton|
|17 May 2016||Mildura|
|19 May 2016||Bendigo|
Risk Management Intensive
27 July | 4 August | 9 August 2016
Registrations open 15 June 2016
Legal Business Essentials
6 September | 18 October | 3 November 2016
Registrations open 10 August 2016
9 November | 15 November | 17 November | 23 November 2016
Dandenong | Ringwood | Moonee Ponds | Bundoora
Registrations open 4 October 2016
New training video – The New Normal
We are pleased to announce our new training video The New Normal is available on the risk management training resources section of our website. It is a password accessible section of the website that only firms insured with us are eligible to use. The New Normal raises a range of issues including:
- client relationship and retainer management
- advising clients who don’t want to listen
- documenting advice
- the risks of dealing with long standing and sophisticated clients
- practicing safely in a time of changing client demands.
We encourage you to use the online video resource to run your own in-house risk management seminars.
Office closure over Christmas and New Year
LPLC’s office will close at 1.00pm on Thursday 24 December and re-open again on Monday 4 January 2015. We wish you all a very safe and peaceful festive season and New Year.
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 at the start of each month.
Articles published in the past six months are:
July Looking after leases
Implementing simple and effective lease preparation processes can help practitioners avoid a claim.
August Write it right
Avoiding common pitfalls when drafting will help mitigate risk and ensure that documents accurately reflect the client’s intention.
September Private lending pitfalls
Advising on termination payments requires specialist expertise.
October Making it personal
Litigators who breach their obligations are at risk of a personal cost order.
November Wills and super claims
Specialist knowledge is needed to advise on superannuation when preparing wills.
December Strategic thinking reduces risk
Business strategy in a changing legal market affects risk of claims.