David Zammit & Associates, Solicitors

16/06/2024

Supervising the grandkids in the backyard

19/04/2024

Please click below to view my April newslettter

Just like 2023, 2024 seems to be defying the forecasts of economists and the news media. Property prices are delivering solid price growth around Australia.

14/11/2023

Many Reasons Not To Write Your Own Will

While writing your own Will, using a DIY kit may seem attractive from a cost viewpoint, it can be a risky approach to take. If errors are made or if witnessing rules are not followed correctly, the document could be invalid. Before examining these risks more fully, outlined below is a recent example of what difficulties can occur when writing a self-prepared Will without suitable advice. The turmoil in the estate of Peter Reid highlights the extent to which matters can go wrong if a Will is ill-prepared.
When writing a homemade Will, using a kit or otherwise, you risk not drawing it up properly or not expressing intentions sufficiently clearly. This means it is more likely to be contested and the whole process of giving assets away is likely to end up in a courtroom.
Case study: The estate of Peter Reid
Peter Reid was a very wealthy widower when he died childless, aged 100, in August 2015. His estate was valued at $76 million and included property at Point Piper and Surfers Paradise and bank shares worth $6 million. Although he had no children of his own, he did have a number of step-children, nieces and nephews who were to go on to claim an entitlement to a share of his large estate.
He prepared a Will by himself in January 2000, followed by 22 potentially testamentary documents between 2001 and 2014. Court documents showed he executed at least 12 codicils or amendments to his Will. He also wrote several documents entitled a ‘statement of wishes’. These changes were drafted poorly, with the judge saying that the ‘provisions ... are essentially idiosyncratic products of a lay imagination vaguely familiar with the use of legal language’.
Inevitably, Mr Reid’s intentions were far from clear and challenges appeared from his nieces, nephews and step-children, amounting to 40 people in all. His niece by marriage, with whom he had had a romantic liaison, initiated a family provision claim.
The claims were made amid allegations that Mr Reid was not of sound mind when he made the various amendments and statements of wishes. Several beneficiaries alleged that the executor, and significant beneficiary, may have coerced Mr Reid and that some documents were signed in ‘suspicious circumstances’. The end result was three years of litigation, family conflict and lack of privacy.
As to Mr Reid’s motivation for this unfortunate state of affairs, if it was privacy, it was not to be. The Court surmised: ‘Confident in his own abilities, and anxious not to pay legal fees for the preparation of another will or any codicil, the deceased took it upon himself to prepare the will dated 25 January 2000, and subsequent legal instruments, without legal assistance. The deceased became an enthusiastic will-maker, but his strategy for minimising legal fees miscarried at the expense of the deceased estate. His poorly drafted documentation has served as a beacon to controversy, and with that, engagement of not a few litigation lawyers.’
Without a modest investment in professional advice, the result was extensive litigation and legal costs as well as the serious family rifts which could have been avoided. It is hard to believe this was what he wanted, yet this was part of his legacy.
What could you lose by making a homemade Will?
Writing a Will is a specialist area of the law and trying to write one of the most important legal documents in your life on your own is often not likely a good idea for your dependants. The reasons for this include:
Lack of guidance
Even if using a prepared DIY kit, there is limited assistance offered on issues such as what forms part of an estate, how to deal with blended families, how to treat superannuation, the powers of the executors, and the role of guardians and trustees.
The law evolves, but DIY kits and online Wills services come with no guarantees about being current and are unlikely to be State-specific.
Lack of flexibility
Many people believe their affairs are simple and straightforward and do not require professional estate planning. Often this proves not to be the case. For example, your family circumstances may be more complex than you think. You may have an interest in a business or might have overseas assets. It is important to have a Will that is specifically tailored towards your circumstances.
There may be elements that require careful attention and specific language to achieve the desired result regarding what may have initially been thought to be a simple task. This may result from a misunderstanding about what can be achieved with proper planning.
Lack of familiarity
Lack of familiarity with legal vocabulary can result in ambiguous wording open to interpretation. This could result in argument or conflict between beneficiaries as to intentions at the time of making the Will. If no interpretation can be agreed upon, this will probably lead to added expense or even taking the matter to Court.
Lack of ex*****on
There are strict requirements on how a Will needs to be signed and witnessed. If done incorrectly, the Will could be deemed invalid. In such an event, the estate will pass according to intestacy rules.
Lack of warranty
Even if you use a kit or online service, they disclaim responsibility for problems arising from the use of their documents. Even small mistakes can be costly. A professional adviser stands behind their advice.
Conclusion

A Will is one of the most important documents you will sign, so it is wise to have it professionally prepared. Even small mistakes in Will writing can have detrimental consequences and lead to Will disputes. Whilst a DIY Will may seem attractive in relation to costs, you will not benefit from the peace of mind you would have received if you had taken professional advice.

12/10/2023

10/03/2023

First-home buyers in NSW choose stamp duty or land tax
Stamp duty vs land tax

… which will cost you more?

From January 16 this year, first home buyers in NSW will have the choice of paying the regular lump sum stamp duty payment or the annual payment on properties valued up to $1.5 million.

The NSW government has announced plans to get rid of stamp duty for first home buyers, offering buyers to pay an annual land tax payment in its place.

The new plan, effective from January 16 next year, means first home buyers in NSW will have the choice of paying the regular lump sum stamp duty payment or the annual payment on properties valued up to $1.5 million.

Those who buy a property after the bill has passed, but before the official start date, would have to pay the stamp duty but would then be eligible for a refund.

The property tax will only be payable by first home buyers who choose it and will not apply to subsequent purchasers of a property.

How much is the annual land tax?

The annual property tax payments will be based on the land value of the purchased property.

The property tax rates for 2022-23 will be:

$400 plus 0.3% of land value for properties whose owners live in them
$1,500 plus 1.1% of land value for investment properties.
These tax rates will be indexed each year so that the average property tax payment rises in line with average incomes.

For a household with the median income that saves 15% of their income, stamp duty adds about two years to the time required to save the up-front costs of the median NSW dwelling.

And how much is stamp duty in NSW?

Here’s the breakdown:

Source: NSW Revenue

So, what’s the difference?

This would mean an owner of a $1.2 million property may have a land value of about $750,000 and would need to pay $2,650 a year instead of $50,875 upfront.

Or a buyer looking to purchase a $1.5 million property could make a saving of $67,375 but not having to come up with the money upfront.

But buyers who opt to pay the land tax could actually end up paying significantly more by opting for the more digestible annual tax if they hold onto the property long term.

A lot more.

In fact, by around 17 years, a property owner who bought a $1.2 million property would have paid the same amount in annual taxes that they would have done paying the lump sum stamp duty payment.

Meaning every payment from then on is an additional cost.

And that would come around even faster as the annual tax increases in line with land value increases.

Why is NSW offering the choice between stamp duty and land tax?

According to NSW Premier Dominic Perrottet, Sydney’s soaring property prices is the key factor influencing the decision to offer a stamp duty alternative.

“We want to lower the barriers to owning a home for first home buyers seeking a place of their own,” Perrottet said.

“In the past two decades, the share of first home buyers under 35 years of age has declined from 67% to 61%.”

And it’s a good reason given Sydney house prices have shot up 280% since 2002, according to Domain data.

And that translates to a huge 406% increase in stamp duty costs.

By comparison, wages have grown 95%.

It’s these numbers, AMP Capital chief economist Shane Oliver told the AFR, that has distorted the housing market, making it more difficult for people to enter the housing market.

“Fundamentally, the concept of land taxes is fantastic reform,” he said.

“Stamp duty is a highly distortionary tax which has adverse economic implications because it distorts people’s decision to buy and sell property, and it should have been removed when we introduced the GST over 20 years ago.”

But Oliver also said that offering the scheme would also have wider benefits to the market by encouraging empty nesters to sell their properties.

This would then create more housing supply for younger people with families who are looking to upsize.

Can’t we just get rid of stamp duty altogether?

Unlikely, because stamp duty brings in such a huge revenue for the NSW government and that money goes a long way to provide government funding for the state.

Stamp duty has earned NSW $9.379 billion for the 2020-21 financial year.

The forecast was $8.372 billion in the half-yearly review and that had been revised from the prior year's budget forecast of $7.9 billion.

It also means stamp duty is now the state's largest taxation revenue source, overtaking payroll tax.

This is the highest stamp duty revenue since the 2016-17 financial year, which was $9.67 billion, when house prices were soaring.

In 2019-20, stamp duty revenue was $6.95 billion, while in 2018-19 it was $7.4 billion.

A final word …

First home buyers who want to get onto the property ladder quickly but are struggling to get together enough money to cover a deposit and also stamp duty could benefit from the government scheme and forego the lump sum payment.

However, buyers wanting to hold onto the property long term could actually end up paying significantly more by opting for the more digestible annual tax.

At the same time, it's quite possible that measures to help housing affordability could even lift property values in the apartment market and outer, cheaper, suburbs with the twin stimuli for first home buyers of a shared equity scheme and the opportunity to pay an annual land tax instead of an upfront stamp duty.

So before making a choice between stamp duty or land tax, first home buyers should do their due diligence, crunch the numbers and speak to a professional about what might work best for them.

Because as is my motto with everything, ‘cheapest isn’t always best’.

Source : https://www.yourinvestmentpropertymag.com.au/expert-insights/kate-forbes/stamp-duty-vs-land-tax-which-will-cost-you-more?

12/08/2021

As predicted last year the COVID-19 pandemic has been giving many in Australia and abroad some very tough times, providing more twists and turns than we have seen by the best recently in the Tokyo Olympic diving.

11/08/2021

15/07/2021

Why it can be a mistake to pay an aged care deposit for mum or dad
Helping out with lump sums often means increased costs elsewhere for your parents so run through the numbers to decide on the best way you can help out
Decisions on how to fund residential aged care can be difficult and emotional – particularly how to pay for accommodation. With accommodation costs of up to $2 million, elderly people who do not have enough assets or who are reluctant to sell the cherished family home or other assets may worry about how they can come up with these large amounts of money.
This might be where adult children come to the rescue. One or more of the children may come together and offer to use their own money to pay the costs. But before making this offer, there are some important rules to know.
Low means residents
For someone who is assessed as low-means at entry, the price quoted by the care provider will not apply and, instead, a government-set daily rate is charged. The resident may pay part of the daily rate and the government subsidises the rest. The contribution payable by the resident can be paid as a daily fee or be converted into a lump sum.
Kids should never use their own money to pay the lump sum for a parent classified as low means. If kids want to help, paying the daily fee may be a better choice.
This is because the contribution payable by a low-means resident is based on assessable assets and income. If kids pay the lump sum on a parent’s behalf, it is not an assessable asset for Centrelink purposes but will increase assessable assets when calculating aged care fees.
Example:
Dora and Alberto own their home, a $20,000 car and have $140,000 of savings in the bank. Dora enters care as a low-means resident. Assuming a maximum room rate of $58.19 per day, she is only asked to pay the first $14.18 per day and the government pays the rest.
Dora can choose to pay $14.18 per day for her room, or she can convert it to a lump sum of $126,237 (at current interest rates of 4.1 per cent per annum) which is refunded to her estate when she passes away. She also needs to pay the basic fee of $52.25 per day towards her living expenses and care.
Alberto is worried about how to pay for Dora’s care. He is staying on in the home and is afraid their savings will be quickly depleted.
Their two children come up with a plan to help out. They plan to use their own savings to pay the $126,237 lump sum so Alberto and Dora only have to pay the basic fee which Dora can afford from her age pension.
But a nasty surprise is realised when they get their next fee invoice. The money paid by the children increased Dora’s assessable assets and she is now expected to pay the first $44.53 per day of her room cost. The government reduces how much it pays and Dora needs to pay another $30.35 per day towards her room. The children have given up access to a large amount of money and doubled the amount Dora still has to pay for her room.
If the children had just paid the $14.18 per day, her accommodation contribution would not have been recalculated.
Standard residents
If a person is not low means at entry, the cost of accommodation is set by the provider and is fixed at entry. If children add their own money to pay a lump sum refundable accommodation deposit, accommodation costs are not increased by the increase in assessable assets but may increase means-tested care fees payable.
The savings arising from children paying a lump sum need to be compared against the higher daily fees and the opportunity cost to the children from giving up access to that money.
Example:
Joe is a widower moving into residential care. With $80,000 cash in the bank and a $500,000 home, he will not be low-means and will be asked to pay a means-tested care fee of $2.20 per day as well as the basic fee of $52.25 per day.
The care service he has chosen has a room cost of $420,000. The family does not want to sell or rent Joe’s house as they want to be able to use it when they come to visit him and for family holidays. But without using the home, Joe will struggle to pay for his room.
His son offers to pay the $420,000 room cost as interest rates on his savings are so low anyway. However, what they did not realise is that this decision increases Joe’s means-tested care fee from $2.20 per day to $20.82 per day – an increase of $6,796 per year.
Consider impact on the Estate
Solving the problem of how to fund aged care is like putting together a jigsaw puzzle. You need to have all the pieces and know how each piece relates to the other pieces. Seek advice from a financial planner to run the numbers and explain the risks.
In addition to the impact on fees that may arise when a child uses their own money to pay the lump sum accommodation costs for a parent, estate planning can cause more problems. When the parent dies, any lump sums paid for accommodation will be refunded, but only to the parent’s estate regardless of who paid the money.
Lawyers can help with the impact on the estate and consider whether loan agreements can be put in place to allow the child to recover their contributions from the estate.
Please phone our office if you have any questions – thank you
Source: Financial Review
Disclaimer: This article is not legal or personal financial advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions.

04/07/2021

Franchising reforms
A suite of changes to the Franchising Code of Conduct kicks in from today that aims to better balance the rights of franchisees and franchisors in the $154 billion industry.

Franchisees in a dispute with their franchisor can receive assistance from the Australian Small Business and Family Enterprise Ombudsman, who now has the power to appoint an independent arbitrator if both parties agree.

The cooling off period that allows franchisees to exit new agreements or leases without incurring a cost has been increased to two weeks.

Franchisors now face more reporting requirements when providing documentation to franchisees about the costs of running a franchise, and there are more restrictions on franchisors that demand significant capital expenditure or payment for legal costs.

02/09/2020

when you get a chance, check out our new website:

David Zammit provides general lawyers solicitors, Property, lawyers & solicitors Gosford NSW. He has 30 years' experience in many areas of the law, such as Commercial Leasing, Retail Leases, and Civil Litigation in the Local, District and Supreme Court jurisdictions, and Conveyancing.