Due to increasing technological developments and the focus on efficiencies in the workplace, we are seeing an evolution in the different ways employers are looking to collect and use employee information.
In Australia, the rising use of workplace fingerprint scanning devices to collect biometric data has raised some important privacy issues for employers.
In a recent decision of the Full Bench of the Fair Work Commission, Jeremy Lee v Superior Wood Pty Ltd [2019] FWCFB 2946, an employee was found to have been unfairly dismissed for refusing to use a fingerprint scanner to record on-site attendance. There is no doubt that this case raised ‘important, novel and emerging issues’1 surrounding the collection of employee data in the workplace.
Case Example
Jeremy Lee was employed by Superior Wood as a casual General Hand at a sawmill in Queensland.
Citing safety and payroll efficiency reasons, Superior Wood introduced fingerprint scanners to replace their paper-based ‘sign in’/’sign out’ system and implemented a policy requiring all employees to use the new biometric scanning system to record on-site presence.
Mr Lee was concerned about the collection and storage of his personal information (fingerprint) and Superior Wood’s inability to guarantee that no third party would be allowed access to the personal information once electronically stored.
On this basis, he refused, from the outset, to register his fingerprint for scanning.
Employees other than Mr Lee had given their implied consent to the collection of their personal information by registering their fingerprint for use by the scanners. Mr Lee did not give express or implied consent to the collection of his sensitive personal information by the scanners.
Superior Wood met on multiple occasions with Mr Lee ‘to discuss his concerns’2 and warn him that his continued failure to comply with the new scanning policy could result in his employment being terminated. Mr Lee maintained his refusal and proposed to instead continue using the old paper-based method or a swipe-card system.
Eventually, Mr Lee was dismissed for not complying with the policy.
Mr Lee then commenced unfair dismissal proceedings.
First instance decision
At first instance, the Fair Work Commission held that Mr Lee was not unfairly dismissed and it was reasonable for Superior Wood to request the biometric data (fingerprints) from its employees.3
Commissioner Hunt reasoned that while Mr Lee was entitled to refuse to consent to Superior Wood collecting his fingerprint, in doing so he was in breach of their policy and therefore validly dismissed.
Mr Lee appealed the decision.
Full Bench decision
The Full Bench upheld Mr Lee’s appeal and quashed the original decision.
In taking a strict view of Mr Lee’s employment contract, it was found that he was only bound by Superior Wood’s policies, procedures and workplace rules that were in place at the time he entered into his contract.4 Accordingly, Mr Lee was not contractually obliged to comply with the new scanning policy (that came into existence after he commenced employment).
The Full Bench also considered whether Superior Wood’s direction to Mr Lee to comply with the policy and use the scanners to sign in and out of work, was a reasonable and lawful direction.
Superior Wood submitted that by requiring Mr Lee to consent to the collection of his biometric data it did not breach the Privacy Act 1998 (Cth) (Privacy Act) as the ‘employee records exemption’5 applied in relation to the collection of personal information via the fingerprint scanner. However, the Full Bench indicated that the exemption applies only to ‘records obtained and held by an organisation’6 but not to records that have not yet been created or to the creation of future records.
Consequently, the exemption was held not to apply and the direction by Superior Wood was held to be unlawful, being directly inconsistent7 with Mr Lee’s rights under the Privacy Act. This is because the Privacy Act prohibits both the collection and solicitation of sensitive personal information (such as fingerprints), unless an individual consents to that collection.
It was noted, however, that once collected, the exemption would apply and Superior Wood’s obligations under the Privacy Act would cease.
Then, in weighing up relevant factors in the Fair Work Act 2009 (Cth)8 the Full Bench determined on balance, that Mr Lee’s termination was unjust and he was dismissed unfairly.9
Key lessons for employers
A number of significant implications arise for employers from this landmark decision, particularly for those entities subject to the Privacy Act10 due to the novel application of the employee records exemption.
We recommend employers adopt the following risk minimisation strategies:

Review employment contracts, specifically to ensure employees are required to comply with all current and future workplace policies.
Ensure employers have in place a privacy policy that is compliant with the Privacy Act that clearly sets out the requirements relating to the collection of an employee’s personal information i.e. the kinds of personal information collected, how and why it collects that information, and whether the personal information is likely to be disclosed to another entity.
Ensure there are proper systems and mechanisms in place to alleviate employee concerns surrounding potential breaches of the privacy of their personal information.
In respect of the collection of sensitive personal information (for example, fingerprints or health information), ensure that voluntary consent is obtained from employees where required under the Privacy Act, or that an employee’s employment contract provides for this consent.

Our Employment and Privacy team would be pleased to assist your business to navigate the complexities arising from the intersection of employment and privacy law.
This article was written with the assistance of Alexandra Davies, Law Graduate.

1Jeremy Lee v Superior Wood Pty Ltd t/a Superior Wood [2019] FWCFB 95 at [35]
2Ibid at [6]
3Jeremy Lee v Superior Wood Pty Ltd t/a Superior Wood [2018] FWC 4762
4Jeremy Lee v Superior Wood Pty Ltd [2019] FWCFB 2946 at [23]
5Privacy Act 1988 (Cth) s 7B(3)
6Ibid at [56]
7Ibid at [48]
8Fair Work Act 2009 (Cth) s 387
9Ibid at [102]
10Generally, private organisations with an annual turnover exceeding $3 million and Commonwealth or Federal agencies
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In this article we consider ASIC’s consultation package in relation to the exercise of its new product intervention powers, including some observations about ASIC’s understanding of and proposed implementation of the new regime.
Key points

ASIC’s product intervention powers commenced on 6 April 2019.
ASIC has released draft guidance on how it intends to administer the regime.
The guidance suggests that the governance and implementation processes in relation to the product lifecycle, including advertising and promotional material, will need to be constantly improved and ever-vigilant.
ASIC expects to consult on regulator guidance on the product design and distribution obligations towards the end of this year.

Overview
ASIC’s product intervention powers (PIP) derive from amendments to the Corporations Act 2001 (Cth) and National Consumer Credit Protection Act 2009 (Cth) made under the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth), which came into force on 6 April 2019. This legislation was enacted alongside the legislation dealing with product design and distribution obligations, which will come into effect on 6 April 2021.
The PIP give ASIC the power to proactively intervene in relation to certain financial products and credit products by making orders to prohibit specified conduct relating to those products, on an industry or individual basis, when the conduct is or is likely to result in significant detriment to retail clients. There does not need to be a breach of the law (including the design and distribution obligations) for ASIC to exercise its product intervention powers. Product intervention orders can last up to 18 months, but can with the approval of the Minister be extended or made permanent. ASIC must consult with affected persons before making an order (and consult with APRA, if it relates to a body that is regulated by APRA). Intervention orders can only be made in respect of products that are issued or sold after the date of the order. Further information about the PIP is set out in our earlier article.
On 26 June 2019, ASIC released the following documents for public consultation:

Consultation Paper 313 Product intervention power (CP 313); and
A draft regulatory guide, which is attached to CP 313 (Draft RG).

The Draft RG sets out the scope of the power, when and how ASIC expects to use the power and how a product intervention order is made.
In announcing the consultation package, ASIC states that it has taken a ‘principles-based approach to the regulatory guidance’, which ‘reflects the product intervention power being a broad and flexible tool for ASIC to use’. In CP 313 ASIC considers that providing additional benchmarks for when ASIC will exercise the power will unduly limit the scope of the power.
Aspects of ASIC’s proposed approach to its new powers
To assist consultation, the paper provides case studies of past products and practices to illustrate the circumstances in which ASIC may have contemplated using the product intervention power (had it been available) to address consumer detriment identified at the time. The case studies chosen relate to:

the practice of the automatic rollover of term deposits in 2009, in circumstances where there were higher rates advertised for products other than automatically-rolled products; and
the practice of ‘flex commissions’ in the car finance market in 2011, where car dealers arranged car loans at a higher interest rate than the base rate that the financier was willing to offer and thereby earn a much higher commission.

In exercising its PIP, ASIC proposes to consider its regulatory objectives set out in section 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth). ‘Significant detriment’ will be considered on a case-by-case basis, and any responses to ASIC’s assessment and publication of ‘significant detriment’ will need to be supported by evidence and data.
ASIC considers that ‘significant detriment’ can take on the following features:

it could be non-financial harm, such as the effect on a person’s credit rating;
it can arise where consumers are sold a product that is misaligned with their needs, understanding or expectation;
it can be apparent detriment or hidden detriment; and
it can arise immediately if a product is obviously inappropriate or mis-sold at point of sale, or takes time to emerge.

ASIC says it is more likely to intervene where there is consumer detriment and the product has been designed poorly without consumer needs in mind, or is being distributed to, or targeted at, consumers who are unaware of the product’s risk and whose objectives are inconsistent with that product offering.
According to ASIC, detriment becomes ‘significant’ where the ‘choice architecture’ – that is, the design features of a product and its distribution that present choices and processes to consumers that influence their take-up and use of the product – is poor. This includes where products are not fit for purpose, sales or marketing techniques prioritise commercial interests over consumer interests and shroud key features of a product, including fees and how they are charged.
Some of the factors that ASIC considers relevant to the likelihood of significant consumer detriment include the extent and operation of any conflicts of interest, poor ‘choice architecture’ and the complexity or opacity of the product and the circumstances of its sale.
General observations
ASIC recognises that the PIP is not designed to give pre-approval for a product, or a de facto approval for a financial product where ASIC has not exercised its powers. However, there is a risk that this regime may give the wrong impression about the low level of riskiness of a product (where no intervention order is made), and may give investors a false sense of security about the degree of regulatory oversight of financial markets and products. These policy and practical concerns were a matter for Parliament, not ASIC, in devising the regime, and ASIC’s regime follows similar or analogous powers given to regulators in the United States, the United Kingdom, the European Union Hong Kong and Taiwan. Rightly, the PIP regime is not (or is not designed to be) a shield against market risk, the loss of investment capital or any other usual risks associated with investments.
The two case studies in CP 313 demonstrate, perhaps surprisingly, the breadth of ASIC’s intentions with respect to its PIP. While ASIC states that the equivalent powers in the United Kingdom were used for the sale of contingent convertible securities and binary options, and in the European Union were used in relation to contracts for difference and binary options, ASIC is evidently prepared to use its powers in more vanilla products such as term deposits and car finance. This approach in our view is a warning sign to product manufacturers that vanilla products sold without adequate advertising, where consumers are not being a fair deal, in may attract ASIC intervention. Further, ASIC’s proposed guidance that it intends to use its powers in relation to marketing material means that advertising and promotional material has taken on additional regulatory significance.
It remains to be seen whether the PIP regime inadvertently stifles innovation or curtails the development of new products or, potentially, new ways of providing financial services. Undoubtedly, this is not intention of the regime, but new extensive powers of intervention may curb entrepreneurial flair, at least until there is regulatory experience with the regime. Certainly, the threat of an intervention order has the power to damage brands and goodwill, which makes reputational risk all the more palpable.
The good news is that ASIC expects that it use of PIP will diminish over time, as product manufacturers and distributors implement effectively their design and distribution obligations. The effective implementation of design and distribution obligations, however, pre-suppose that product manufacturers have effective and robust financial product governance processes and controls in place to ensure that all aspects of the product lifecycle are well-attuned to consumers’ needs.
ASIC plans to release its final guidance on PIP in September this year.
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The management of ill and injured employees is fraught with risk. If you get it wrong, you’re looking down the barrel of a number of claims. However, if you get it right, you’re boosting the chances of a healthy and productive workforce.
Hall & Wilcox invites you to a lunchtime seminar where we will discuss:

Who is an ill & injured employee
Legal framework
FAQs and key cases

The seminar will also include the opportunity for attendees to ask any questions they may have.
This session is suitable for those who manage staff. In particular, it is valuable for in-house counsel, HR managers and supervisors, insurers, self-insurers, workers compensation claims management officers and workers compensation and rehabilitation coordinators.

RSVP

Event details

Brisbane

Date
Thursday 18 July 2019

Time
12:30pm – 2:00pm

Venue
Hall & Wilcox
Level 18
240 Queen Street
Brisbane
Map

Contact
Sarah Porter
Events Advisor
T: +61 2 8267 3815
Email

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Melbourne-based stencil artist Kirpy creates highly detailed stencils of street scenes. His work ‘Night Lines’ was the winner of the 2018 Hall & Wilcox Art Prize. Here he shares some of his thoughts about art, his inspiration and what he has coming up next.
Tell us about your work Night Lines. What inspired you to make this piece?
I had wanted to trial a large-scale night scene for a while. I had some technical ideas about how I wanted to capture and create atmosphere through the colours and tones I used. The tram running down Brunswick Street in Fitzroy turned out to be a perfect subject.

You are described as a stencil artist. Can you explain what that means?
My practice involves the layering of hand-cut stencils to build up tonal levels. Each layer is painted with a certain tone, or opacity of spray paint, and, as the stencils are layered, the image is built.
What project are you working on now?
I have entered a portrait into the Archibald Prize [a portrait of Paralympic gold medallist and disability ambassador Dylan Alcott, which was selected as a finalist] and I have begun research for my next exhibition in September.
Where can we see more of your work?
You can see more of my work on Instagram @kirpy_ or on the Port Jackson Press website.

What is the earliest art work you remember creating?
I can’t quite remember the earliest. I always used to draw a lot as a child and then, as soon as I first got into stencils and spray paint, I used to spend my weekends in the shed painting. I definitely didn’t make anything good or memorable though!
Banksy: love him or hate him or just indifferent?
I think he’s had lots of great ideas, and his social and political commentary is always quite smart and well executed. But as soon as an artist enters the auction house art market and works are selling for millions of dollars, their work always gets convoluted and it’s hard to view their work separate from the price tag and the hype.
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The dust has now settled since the surprise re-election of the Morrison Government last month and the subsequent Cabinet reshuffle. Now is a good time to consider what the focus of Government is in respect of workplace relations, and what this may mean for Australian employers.
On 24 June 2019, Prime Minister Scott Morrison addressed the Chamber of Commerce and Industry in WA in his first major speech since re-election that has touched on industrial relations issues. He indicated that a ‘key goal’ of Government is job creation which will be achieved by:

lowering taxes to enable Australians to take home a greater portion of their pay;
removing ‘regulatory and bureaucratic barriers to businesses’, for example, to ‘protect investment from the impact of militant unions’; and
boosting long term growth by lifting skills capabilities in emerging industries, such as advanced manufacturing, ICT and cyber-security.

The new Minister for Industrial Relations, Christian Porter, has been asked by the Prime Minister to ‘take a fresh look at how the system is operating and where there may be impediments to shared gains for employers and employees’. The Minister has indicated that his initial focus will be on the law enforcement aspects of the portfolio. As such, it is likely we will see the Fair Work (Registered Organisations) Amendment (Ensuring Integrity) Bill 2017 before Federal Parliament which is aimed at ensuring the integrity of unions and union officials.
Consistent with the Prime Minister’s message, the Minister has made clear that the Government will continue to focus on ensuring Australians pay lower taxes which, when combined with the minimum wage increase announced by the Fair Work Commission’s Expert Panel on 30 May 2019 (refer to our previous update), will increase the average Australian employee’s take-home pay.
Clearly, the workplace relations overhaul promised by the ALP’s election campaign will not take place (refer to our previous update). The focus of the Government appears to be working within Australia’s existing regulatory framework and achieving greater efficiencies within that framework.
Some key aspects of the Government’s workplace relations agenda include the following:

Casual conversion: The Government introduced a Bill prior to the election (which lapsed following dissolution) to legislate for the right for all casual workers to request to convert to permanent employment. If reintroduced and passed into law, the legislation will require employers to carefully consider any conversion request they receive from a casual employee and ensure that such consideration, and any refusal to grant the request, is in accordance with legislative requirements.
Enterprise agreement making: The object of any overhaul in this area will be to achieve greater efficiencies within Australia’s existing industrial relations system. The mechanisms and scope of changes have not yet been articulated. Employers who are active in the industrial relations space, particularly those likely to commence bargaining for new enterprise agreements in the coming year, will need to watch this space.
Labour Hire Registration Scheme: The Government proposes to introduce a National Labour Hire Registration Scheme in the horticulture, cleaning, security and meat processing sectors (which are considered to be industries at a high risk of worker exploitation). The scheme will aim to protect vulnerable workers (including migrant workers), improve accountability, provide greater transparency and drive behavioural change among labour hire operators.
Sham contracting: The Government has indicated in its 2019-2020 Budget that it proposes to give additional funding to the Fair Work Ombudsman (FWO) to establish a sham contracting unit. The purpose of this unit will be to target employers who knowingly or recklessly misrepresent employment relationships as independent contractors to avoid statutory obligations and employee entitlements. The unit will address sham contracting by increasing education, compliance and enforcement activities, and dedicating additional resources to investigate and litigate cases.
Criminal sanctions: Prior to the election, the Government indicated it would accept recommendations of the Migrant Workers’ Taskforce Report, which included introducing criminal sanctions for serious and egregious forms of deliberate underpayment of workers (where employers currently face only civil penalties). It remains to be seen whether, and when, the Government will legislate for the introduction of such measures.
Religious discrimination: As part of its election platform, the Government indicated it would introduce a dedicated Act prohibiting discrimination on religious grounds. The Minister has indicated that drafting of the legislation is well progressed. Depending on the extent of changes introduced, this may not have a particularly significant impact on employers given that discrimination against employees and prospective employees on religious grounds is already prohibited under the Fair Work Act 2009 (Cth) and certain State equal opportunity and anti-discrimination legislation.

We will continue to keep you updated on changes to Australia’s employment and industrial relations landscape as greater details become available.
This article was written with the assistance of Maia Joseph, Law Graduate.
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As with any law firm, there are teams that are primarily ‘front-end’ focused and those that are ‘back-end’ focussed. By that, we mean that some teams are more transactional and others are more litigious.
Each type brings with it its own challenges. For those of us rotating through more litigious teams, one particular challenge we have had to face head-on has been appearing in court.
Now all of us have had a dream about our first appearance in court. We turn up super prepared, early and enthusiastic. The hearing starts, the judge calls for appearances and we completely blank. Nothing. Mute.
Now in our experience, we have discovered that court is not as scary as your subconscious would have you believe. Although first appearances are nerve-racking, we have found them to also be an exciting chance to represent the interests of real clients. We have been fortunate enough to be eased into appearing in courts and would love to share some insights into what we’ve learnt.
What kinds of matters are we involved with?
While we are given the opportunity to test ourselves, as graduates we are not expected to cross-examine witnesses or engage in complex legal arguments with the other side. Instead, senior lawyers give us opportunities to dip our toes in and build our confidence. We have appeared at various directions hearings, subpoena matters and matters by consent in the Local, District and Supreme Court.
Mooting is just the tip of the iceberg
Participating in university moots gave us a taste of what to expect, but it is definitely different from the real thing! Oral submissions play an important role in the judicial system, however, there is a lot more at play in court than the talented orators of legal TV dramas would have you believe. Listing dates, rules of evidence and court protocols are some of the other factors that influence how a matter progresses.
The main difference we have noticed between mooting and court is the intricacy of the court protocols, some of which are not immediately intuitive. Remembering the substance of what you are trying to convey whilst being mindful of protocols can feel like a juggling act when just starting out.
Preparation is key
Chief Justice Murray Gleeson famously observed that:
‘to be a good advocate it is necessary to be a good lawyer. Not all good lawyers are good advocates, but an advocate who hasn’t taken the trouble to master the principles of law relevant to the contest is like an athlete who can develop a dazzling turn of speed in the course of a race but hasn’t taken the trouble to find where the finishing line is located’.1
These words could not be closer to the truth. Judges and registrars will spontaneously ask you questions about your matter and it is your job to assist the court with their queries. We have learned that no matter how prepared you are, there is always a chance that something unexpected will come up. If you are not sure about something – always ask!
It sounds overly simple, but making sure we are clear on what the matter is about and what we are trying to achieve is half the battle against the inevitable nerves. We also make sure to find out whether anyone from the other side will be appearing and whether we need to mention their appearance.
A judging eye falls on those who are late
It is crucial that you are always on time to court appearances. The best tip we can offer is to list your court appearances in your calendar and always make sure to check the online court to see what court and which courtroom you are appearing in. Getting to court 10 minutes early is also helpful as you can observe some of the other matters and see how that judge, registrar or magistrate runs their court.
Respect respect
A strong understanding of court etiquette and procedure allows you to be taken seriously at a junior level. Before appearing, we always make sure to do a quick mental refresher on courtroom etiquette such as bowing to the judge, standing when speaking to the judge or registrar, knowing when to seek leave and remembering to ask to be excused from the table after appearing. Good etiquette means you won’t be caught offside by the dreaded ‘I cannot see you’ from the bench!
1The Hon A.M. Gleeson AC, “Advocacy”, Paper to NSW Bar Association’s Bar Practice Course, November 2001
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From 1 July 2019, Australia will have a new whistleblower protection regime covering the corporate, financial and tax sectors.
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 (Act) aims to encourage ethical whistleblowing and discourage white collar crime, while holding employers accountable for protecting eligible whistleblowers.
The Act makes important changes to the Corporations Act 2001 (Cth) and the Taxation Administration Act 1953 (Cth) affecting almost all companies, including foreign corporations, trading or financial corporations formed within the limits of the Commonwealth, ADIs, NOHCs, super funds, and insurers. This means thousands of Australian employers will need to rapidly change their approach to whistleblowing.
Key reforms include:

Protected disclosures may relate to matters beyond criminal breaches, including breaches of tax laws, ASIC laws and APRA laws. Conduct that is not illegal but indicates systemic issues will also be disclosable. However, the protections will not extend to disclosures about personal employment or workplace grievances such as interpersonal conflicts, transfer, promotion, or disciplinary decisions.
More people can be ‘eligible whistleblowers’, including anyone who has ever been in a relationship with a company (such as former employees, contractors, employees of contractors, associates, and relatives of such individuals).
More people can be ‘eligible recipients’ of disclosures, including senior managers, directors and auditors; and in certain circumstances, even journalists and politicians.
Stronger protections for whistleblowers including anonymity, increased immunities against prosecution, and protection against detriment through victimisation. Whistleblowers are no longer required to act in good faith to be protected (although they need to have reasonable grounds to suspect misconduct).

Severe civil and criminal penalties will apply to employers who breach those protections, and courts are empowered to make orders for relief against a company if they fail to fulfil a duty of care to protect a whistleblowing employee from detriment.
The maximum civil penalties under the new Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) for breaching confidentiality of an eligible whistleblower’s identity or causing or threatening detriment include:

for individuals, up to $1.05 million (5,000 penalty units); and

for companies, $10.5 million (50,000 penalty units), or 10% of the annual turnover (up to $525 million or 5 million penalty units).

Here are three actions companies should take now to ensure compliance:
1 – Implement a whistleblower policy
From 1 January 2020, certain companies will be required to have a whistleblower policy that complies with the new section 1317AI of the Corporations Act 2001 (Cth).
Although only certain companies are required to have a whistleblower policy, we strongly recommend that all companies regulated under the new regime create or update their whistleblower policy. Given the complexity of the new whistleblower legislation and the severe penalties in the event of a breach, many clients are working with us to prepare whistleblower policies now so that they can properly deal with disclosures from 1 July 2019.
The requirement carries a $12,600 penalty for non-compliance, and applies to:

public companies;
large proprietary companies (characterised by having any two of the following: $50+ million in consolidated revenue; $25+ million or more in consolidated gross assets; or 100+ employees); and
registerable superannuation entities.

To comply with section 1317AI, the policy must contain:

the protections available to whistleblowers;
how and to whom an individual can make a disclosure;
how the company will support and protect whistleblowers;
how investigations into a disclosure will proceed;
how the company will ensure fair treatment of employees who are mentioned in whistleblower disclosures; and
how the policy will be made available.

In addition to those requirements, we are recommending to clients that their policies include scope to conduct investigations internally and externally, and address client legal privilege. Further, we recommend that policies set out a process to work through situations where a person subject to a disclosure is also authorised to receive the disclosure. Lastly, we suggest that policies include a process to determine whether an eligible whistleblower consents to be identified during an investigation.
ASX-listed companies should also consider the ASX Corporate Governance Principles and Recommendations, which further recommends that policies:

link to the company’s values;
identify the types of concerns that may be reported under the policy;
provide for the training of employees about the policy and their rights and obligations under it;
provide for the training of managers and others who may receive whistleblower reports about how to respond to them; and
state that the policy will be periodically reviewed to check that it is operating effectively and whether any changes are required to the policy.

2 – Train all staff
Given the significant changes presented by the Act, we are recommending to clients that employers provide two types of training.
The first training program is for ‘eligible recipients’, which includes senior managers, officers, and anyone else authorised by the company to receive disclosures from whistleblowers (such as Compliance Officers). This training should cover the process set out in the company’s whistleblower policy to respond to disclosures. Special attention should be paid to the importance of protecting the whistleblower’s right to anonymity during the investigation, unless they consent to their identity being disclosed.
A company’s auditors, actuaries, tax agents and BAS agents are also ‘eligible recipients’. Although employers cannot be expected to train those persons, we recommend they be informed of their new obligations under the Act.
The second training program is for all staff. It sets out how the whistleblower regime works under the Act, and how the whistleblower policy provides a process for disclosing and investigating certain matters. It also details the protections that will be provided to eligible whistleblowers.
3 – Assess current procedures
The new regime requires a thorough analysis of any existing whistleblower procedures. It is likely that these will have to be reworked or replaced in light of the changes.
Further, to protect whistleblowers from harm, companies should ensure that the storage of whistleblowers’ information is secure and complies with privacy laws.
Next steps
Employers must respond to the new whistleblower regime now to ensure compliance.
With significant experience across all aspects of employment, whistleblower and privacy laws, we can provide up-to-date and bespoke solutions that will help you confidently comply with the Act. Contact us to discuss your needs.
The post New whistleblower laws apply from 1 July 2019: three things employers should do appeared first on Hall & Wilcox.

PCG 2019/4 and the practical implications for retirement village operators
The Australian Taxation Office released Practical Compliance Guideline (PCG) 2019/4 on 12 June 2019 which explains the Commissioner of Taxation’s compliance approach to how certain liabilities (i.e. ‘lease surrender liabilities’ and/or ‘increase entry price’ liabilities) are to be treated when a retirement village operator leaves an income tax consolidated group, and where the value of such liabilities has increased between the operator joining and leaving the group. PCG 2019/4 relates only to the treatment of the increase in the liability, which is taken through the entity’s profit and loss account – at which point no deduction is available
See more

To date, there has been confusion in the industry as to whether the ‘value increase’ portion for such liabilities can be excluded from Step 4 of the exit allocable cost amount (ACA) calculation, when a retirement village operator leaves an income tax consolidated group. PCG 2019/4 clarifies the Commissioner’s view, that the increase in the value of such liabilities can be excluded on the basis that the leaving entity will be able to claim a deduction for payments made to discharge such liabilities as they fall due after the leaving entity has left the tax group.
In accordance with TR 2002/14, payments made to discharge a ‘lease surrender’ liability or an ‘increase entry price’ liability are deductible in the year in which the operator becomes liable to make the payment to the resident on termination of the lease.
When a subsidiary member that is a retirement village operator leaves an income tax consolidated group (leaving entity), the head company of the group must determine the capital gain or loss incurred with respect to the leaving entity by calculating the exit ACA in accordance with section 711-20 of the Income Tax Assessment Act 1997 (Cth) (Act).
The deductible nature of a payment made to discharge a ‘lease surrender’ liability or an ‘increase entry price’ liability has previously caused confusion at Step 4 of determining the ACA as section 711-45 of the Act required that all liabilities of the leaving entity be included in the calculation.
However, pursuant to the new PCG 2019/4, the Commissioner now accepts that the increase in the value of the ‘lease surrender’ liability or ‘increase entry price’ liability are amounts that are taken into account for income tax purposes at a later time than under accounting principles for the purposes of applying section 711-45 of the Act.
That is, section 711-45(5) of the Act will apply and deny the head entity from being able to claim a deduction in respect of a lease surrender liability or increase entry price liability that has been incurred by a leaving entity.
Instead, the leaving entity will be able to claim a deduction for payments made to discharge a lease surrender liability or increase entry price liability as they fall due after the leaving entity has left the consolidated tax group.

2019-20 New South Wales Budget measures
The New South Wales (NSW) State Budget was handed down on Tuesday 18 June 2019 by the Honourable Dominic Perrottet MP. NSW taxpayers will be pleased to hear that ‘not a single new tax has been introduced’ as a part of the 2019-20 Budget and the NSW Government has provided a number of tax concessions that are summarised below.
The State Revenue and Other Legislation Amendment Bill 2019, which is currently before Parliament, contains the proposed tax changes.

See more

Indexing of transfer duty thresholds
From 1 July 2019, the transfer duty threshold will be indexed to the Sydney Consumer Price Index. This will cause the transfer duty thresholds to increase gradually over time so that those purchasing property in NSW will not continue to fall victim to bracket creep. This is the first change to the general NSW transfer duty brackets since 1986 (with the exception of the introduction of a new ‘premium rate’ for high value residential properties).  Similar indexation of duty thresholds would be a welcome change for some other jurisdictions to also adopt.
Foreign Investor Surcharge exemption
From 1 July 2019, certain ‘retirement visa holders’ (visa subclasses 405 and 410) will be exempt from the foreign investor surcharges (both the transfer duty surcharge and the land tax surcharge) for their principal places of residence. This amendment better aligns the surcharge tax treatment of visa holders in NSW with the treatment of visa holders in other states.
Payroll tax
In keeping with its announcement in the 2018-19 Budget, the NSW Government will increase the payroll tax threshold from $850,000 in 2018-19 to $900,000 in 2019-20. The threshold will continue to increase year on year until 2021-22, when the threshold will peak at $1 million.
The increase in the 2019-20 payroll tax threshold is expected to save NSW businesses $187 million in payroll tax.
Additionally, from 1 July 2019:

businesses with payroll tax liabilities up to $20,000 who currently submit monthly payroll tax returns will now only need to submit one annual payroll tax return;
pre-set monthly payments will be available for businesses with liabilities between $20,000 and $150,000 per annum, freeing them from the need to prepare detailed calculations every month; and

all businesses will have an extra week to submit their annual reconciliation.

2019-20 Queensland Budget measures
The Revenue and Other Legislatives Amendment Act 2019 (Qld) that enacts the Queensland Budget announcements has received Royal Assent and results in a raft of changes for Queensland taxpayers.  The key tax measures are summarised below.
In addition to the legislative changes, further compliance funding will be provided to the Queensland Office of State Revenue to undertake additional targeted tax compliance activities.  Payroll tax, land tax, transfer duty and royalties will be the focus areas for these compliance activities.

See more

Land tax absentee surcharge
The Queensland Government will increase the land tax absentee owner surcharge (applicable for certain absentee individuals) from 1.5% to 2.0%.  This rate is in line with Victoria (from 1 January 2020) and NSW.  Importantly, the Queensland Government plans to exclude Australian citizens and permanent residents from being treated as ‘absentees’, despite being out of the country at the relevant assessment date..  A 2% surcharge will also be imposed on foreign companies and trustees of foreign trusts.  This surcharge (in line with the individual absentee owner surcharge) will be payable on the taxable portion of the taxable value of $350,000 or more.  Ex gratia relief from this surcharge may be available in exceptional circumstances, considered on a case-by-case basis.
Increased land tax for companies and trusts
The Queensland Government will also increase the land tax rate for companies and trusts by 0.25% for landholdings with a taxable value above $5 million.
Payroll tax
The Queensland Government is attempting to drive jobs growth by raising the payroll tax-free threshold from $1.1 million to $1.3 million from 1 July 2019 in a move that is expected to exclude approximately 1500 Queensland businesses from having to pay payroll tax.
The payroll tax rate:

for large employers or groups (with taxable wages above $6.5 million) will pay payroll tax at 4.95% (increased from 4.75%)
while businesses with up to (and including) $6.5 million of taxable wages will remain at the lower 4.75% rate.

A 1% discount will be provided for regional employers, such that:

large businesses in regional Queensland ($6.5 million and over) pay payroll tax at 3.95%; and
businesses with up to (and including) $6.5 million of taxable wages will pay 3.75%.

Businesses that are growing and employ new full time employees for more than a year (based on a net increase in full time employees) will also be eligible for a 100% rebate up to $20,000 on the payroll tax paid in respect of those new employees.
Petroleum Royalties
The petroleum royalty rate will increase from 10% to 12% from FY20, with transitional arrangements available for certain taxpayers.
Other Queensland Duties Act amendments
Other amendments (that are not Budget measures) have also been made to the Duties Act 2001 (Qld) to clarify:

when references to consideration include both monetary and non-monetary consideration; and

that land-holdings of a partnership are deemed to be land-holdings of the respective partners for landholder duty purposes.  This amendment is in response to a recent duty decision in Victoria regarding partnership interests (Danvest Pty Ltd & anor v Commissioner of State Revenue [2017] VSCA 382).

Victorian economic entitlement provisions
As the new Victorian economic entitlement provisions have come into force (the State Taxation Acts Amendment Act 2019 (Vic) received Royal Assent on Tuesday), the SRO has released guidance outlining the Commissioner’s view regarding the operation of these provisions: https://www.sro.vic.gov.au/economic-entitlements  This guidance does not adequate certainty for taxpayers negotiating their arrangements as it does not have legislative force and only addresses ‘plain vanilla’ circumstances.  Importantly, the Commissioner’s views expressed in this guidance that provide a carve-out for various types of ‘service fees’ only apply where the relevant parties are not associated (and other requirements are satisfied).  Accordingly, the Commissioner’s view is that fees payable to related parties will prima facie be subject to the new economic entitlement provisions.

South Australian Budget
In contrast to other jurisdictions, the South Australian Budget (handed down on Tuesday) only includes a few state tax changes. The Budget tax measures include land tax amendments to:

introduce new land tax aggregation provisions (relating to grouping of companies and tracing of interests through ownership structures to the ‘true’ owners of land);
impose a land tax surcharge on certain trusts (where the beneficiaries are not disclosed or cannot be identifies), which is similar to the trust surcharge that applies in Victoria; and
progressively reduce the top land tax rate from 3.7% to 2.9% by FY28.
RevenueSA will also receive additional funding to increase payroll tax compliance activities.

This article was written with the assistance of Charlie Renney, Law Graduate.

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A Queensland magistrate has imposed the first conviction of a company under labour hire licensing legislation in Australia.
The Queensland Labour Hire Licensing Act 2017 began operation on 16 April 2018, with all existing labour hire companies required to file their licence applications with Labour Hire Licensing Queensland by no later than 15 June 2018.  After that date, it is unlawful for a company to provide labour hire services without a licence.
To date, over 3,000 labour hire licences have been granted in Queensland (including 13 conditional licences) with only 11 applications refused, and 99 applications withdrawn after the applicants failed to provide sufficient information to demonstrate their compliance with workplace laws.  Seven licences have been cancelled and 129 have been suspended for breaches of the legislation.
Victoria and South Australia have introduced similar licensing regimes, although they are both going through transition phases until 30 October and 1 November 2019 respectively (SA licence applications must be filed by 31 August 2019).
A&J Group Services Pty Ltd had initially applied for a labour hire licence but withdrew the application after failing to provide information regarding its compliance with various workplace laws.  The company was warned by Labour Hire Licensing Queensland not to provide labour hire services in Queensland. However the company continued to operate surreptitiously and was caught supplying workers to a strawberry farm in Queensland’s Granite Belt in January 2019.
The magistrate imposed a fine of $60,000 which was high for a first offence (maximum penalty of $391,650).  However, the magistrate noted the deliberate decision of the company to ignore the warning and flout the licensing requirements.  There was no dispute that the company was a labour hire company and was caught by the legislation.
The company was exposed after a member of the public notified Labour Hire Licensing Queensland. Following this tip-off, Labour Hire Licensing Queensland issued a general warning to strawberry growers in the Granite Belt, pointing out they needed to check that their labour hire suppliers were licensed.  There are heavy penalties of up to $400,000 for a corporation and $135,000 for individuals for hosts who engage a labour hire firm without confirming they are licensed.  The best method of checking compliance is to conduct an online search of the Labour Hire Licensing Queensland website which contains a register of all licensed suppliers.
The conviction will have an additional long term sting for A&J Group Services Pty Ltd and its directors, as the conviction will adversely affect any future licence applications in Queensland, South Australia and Victoria should they seek to re-enter the labour hire industry.
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One thing that stood out to all of us in our interviews was how welcoming and supportive our interviewers were. Now, three months into our rotation, it is apparent that this was representative of all members of the firm where inclusiveness and collegiality is a driving ethos.
A firm initiative that accurately captures this culture is the ‘Hallmarks’. Our Hallmarks are ‘stay true’, ‘be remarkable’, ‘respect respect’, ‘evolve always’ and ‘better together’. We have found that these are not just empty words and every member of the firm seeks to live by the mentality they each entail.
From our first day, it was apparent how committed the firm is to nurturing this culture and striking the right balance between working hard and enjoying ourselves. We have participated in various initiatives or events designed to do this, including:
Daily breakfast: Every morning the firm provides breakfast – what better way to get to know your co-workers than over coffee and toast?
We dress for our day: Of course, if you have court or a client meeting you’ll need to dress up. However, the option to dress for our day gives us the freedom to dress comfortably and express our individuality.
Quiz: Every afternoon at 5 pm, we run ‘Quiz’. As you can imagine, a room full of lawyers competing for bragging rights and glory can get a little heated, but it is a lot of fun and an excellent way to get to know people outside of our sections.
Open plan design: Our open plan office encourages a flat structure which has helped us to feel comfortable asking our many, many questions. Senior lawyers always give us the time of day and are invested in our learning.
Friday drinks: Every Friday the firm hosts drinks and nibbles, providing us with an opportunity to mingle and chat about the week.
Social events: In our time at the firm so far, we have participated in the ‘Grape Adventure – Around the World’ trivia night and ‘The Hall and Wilcox Amazing Adventure’, racing across Sydney.
Health & wellbeing: The firm encourages us to live active, balanced and healthy lifestyles, offering group fitness, including weekly yoga classes before work and providing corporate discounts for gym memberships.
Sporting events: The firm enters a weekly lunchtime social netball competition where we have the opportunity to compete against other businesses in the CBD. Nothing like a bit of inter-firm rivalry to get the blood pumping!
Pro bono: We are encouraged to get involved in pro bono projects from the get go. We have each helped out on pro bono matters, including preparing employment contracts, mediation preparation, preparing court hearings for refugee matters, preparing advice on judicial review of an asylum seeker matter and a contract termination matter.
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Leading independent business law firm Hall & Wilcox is delighted to announce the appointment of eight new partners: Liam Campion, James Deady, Stephanie Driscoll, Maree Ferguson, Frank Hinoporos, Nathan Kennedy, Ilona Strong and James Whiley.
The firm also announced 21 senior lawyer appointments. You can get to know our new partners and senior lawyers here. All promotions are effective from 1 July 2019.
Managing Partner Tony Macvean said the appointments reinforced Hall & Wilcox’s position as one of Australia’s leading mid-market national law firms.
‘Core to our purpose is to enable our people to thrive. We are an ambitious firm and our growth and the strong support of our clients means there are many opportunities for our people to progress and succeed,’ Tony said.
‘It’s very satisfying as a leader of the firm to see the exceptional talent of our people recognised by this significant milestone in their career. All have made, and will continue to make, a strong contribution to our firm’s success and that of our clients. The future of our firm is in excellent hands.’
Consistent with the firm’s focus on diversity and inclusion, Tony noted that nearly 40 per cent of the new partners and more than 70 per cent of the senior lawyer appointments were female.
Liam Campion is an experienced litigator who advises insurers on complex litigation, class actions, indemnity disputes and insurance fraud, public and product liability and professional indemnity claims.
James Deady is experienced in a broad range of commercial, technology and intellectual property matters. James has particular expertise in technology matters including technology procurement, technology and digital transformation projects and technology outsourcing matters.
Stephanie Driscoll specialises in workplace injury claims, both statutory and common law, and represents employers, insurers and self-insured corporations in the management and defence of a range of claims, with a particular focus on complex stress claims.
Maree Ferguson specialises in the management and defence of general liability and workplace injury claims. She has a particular interest in workplace fatality, complex stress claims and indemnity disputes. Her clients include insurers, employers and self-insured corporations.
Frank Hinoporos is a specialist tax advisor focusing on business transactions and restructures, risk management and dispute resolution. He has expertise in the charity and not-for-profit sector and philanthropic giving by wealthy individuals and corporates. His clients include privately owned businesses, high-wealth individual and family groups and not-for-profit organisation
Nathan Kennedy is the firm’s first pro bono partner and has 10 years’ experience working with community legal centres and human rights organisations. He runs the Pro Bono & Community practice, which has seen a 75 per cent increase in total pro bono hours over the past year. Nathan is an experienced insurance litigator specialising in catastrophic and major claims in CTP and general liability.
Ilona Strong practice focuses on understanding her self-insured clients and working closely with them to achieve the right outcome. Ilona practices in both statutory and common law areas across the Victorian, Tasmanian and Commonwealth WorkCover legislation. Ilona’s interest in working smarter and finding solutions for her self-insured clients lead to the development of a web-based application known as CLEAR.
James Whiley is a private clients lawyer for high and ultra-high net worth clients specialising in estate and succession planning. He is experienced in complex cross-border planning and structuring work for Australian and international clients. He also advises on estate and trust disputes, and probate and estate administration.
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A District Court judge has dismissed a worker’s claim for damages on the grounds that her employer had failed to properly evaluate her fitness for work before she returned to her pre-injury role. It was concluded that the employer had taken sufficient steps prior to the worker’s return to work, having regard to contemporaneous medical and vocational rehabilitation evidence.
Mrs Beasley was employed by Fortescue Metals Group as a haul truck driver at Cloudbreak Mine site in the Pilbara. On 17 August 2012, Mrs Beasley suffered an injury to her neck while operating a haul truck. She lodged a workers’ compensation claim for which liability was accepted. She returned to work in her full duties on 7 December 2012.
Mrs Beasley later reported sustaining a strain injury to her right elbow on 30 March 2013, when releasing a lever while operating a haul truck. Mrs Beasley lodged another workers’ compensation claim. Liability was accepted for the claim and Mrs Beasley received workers’ compensation payments and was started on a graduated return to work programme.
Ultimately, Mrs Beasley was unable to return to work. In June 2015, her employment with FMG ceased. Mrs Beasley was not certified as fit to return to her full pre-injury duties at any time following the March 2013 injury and claimed to be totally unable to return to work at all by reason of that injury.
Mrs Beasley pursued a common law damages claim against FMG. Her allegations of negligence essentially related to her return to full pre‑accident duties in December 2012. She alleged that she was not symptom free at that time and had not finished her return to work program. She further contended that there was no certification by a medical practitioner independent of FMG and contended that it was negligent to rely on this certification. It was also alleged that FMG was negligent in having her operate the haul truck from August 2012.
Mrs Beasley also contended she was pressured into returning to work by an injury management coordinator of FMG, who had directed a GP to certify the worker as fit to work. However, evidence was later led to the effect that the coordinator was not on site at the time that this allegedly occurred and so this contention was dismissed.
District Court Judge Gillan found that, by the time Mrs Beasley had returned to work in December 2012, she was largely but not completely recovered from her injury. Despite the fact she had not fully recovered, Mrs Beasley was nonetheless fit for her usual duties. It was noted that there was no evidence that Mrs Beasley was unfit for work and there was ‘no substance to the contention that Mrs Beasley was not adequately assessed for her fitness for work’.
District Court Judge Gillan noted that Mrs Beasley had been regularly assessed by her GP and onsite general practitioners, in addition to attending upon an external occupational physician, Dr Silbert, regarding her fitness for work. Dr Silbert certified Mrs Beasley as fit to work provided she had regular postural breaks and a four hour restriction in driving. Gillan DCJ found that this restriction was adhered to by virtue of postural breaks which were built into FMG’s work system.
District Court Judge Gillan determined that there was no evidence to support the plea that FMG failed to ensure Mrs Beasley could safely operate the haul truck. As to the remaining breaches, as it was determined by District Court Judge Gillan that the March 2013 was a new injury and so the remainder of the grounds were not made out.
This judgment demonstrates the value in employers and their insurers ensuring a thorough evaluation of a worker’s capacity when returning to work from injuries. It highlights the importance of involving treating doctors, who are well informed of a worker’s pre-injury duties, in the decision making process and ensuring that the process is well documented.
Beasley v Pilbara Mining Alliance Pty Ltd [2019] WADC 56
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The Voluntary Assisted Dying Act 2017 (Victoria) (Act) comes into force in Victoria on 19 June 2019.
Victoria is the first Australian State to pass voluntary assisted dying laws. The laws represent part of the Victorian government’s broader reforms in relation to end of life choices and the quality of palliative care.
There have been many years of debate regarding this issue, including eligibility and checks and balances. A number of safeguards have been built into the legislation which mean that the Victorian law will be some of the most comprehensive law in the world in relation to this issue.
This legislation is relevant to:

all Australian hospitals and health care providers; and
private individuals who may wish to benefit from the legislation.

What do Australian hospitals and health care providers need to know?
It is important for health care providers to know that voluntary assisted dying must not be initiated by a registered health practitioner in the course of providing services to the person but a registered health practitioner may provide information about voluntary assisted dying to a person at that person’s request.1
Clinicians should become aware of the requirements in terms of eligibility, the assessment process, the required documentation, voluntary dying permits and the process of prescribing and storing the drugs as summarised below.
Clinicians should also be aware that they may make a conscientious objection to participating in a voluntary assisted dying process.
What do private individuals need to know?
Private individuals who wish to take advantage of the legislation need to know the eligibility requirements and the process as summarised below.
What is Voluntary Assisted Dying?
Voluntary Assisted Dying (VAD) means administering a voluntary assisted dying substance for the purpose of causing death in accordance with a step by step process set out in the legislation.
Making a request for VAD
To access VAD, a person must make a written declaration witnessed by two independent witnesses and the co-ordinating medical practitioner confirming that they are making an informed, voluntary and enduring decision to access VAD.
The witness must be aged 18 years or more and must not be an ‘ineligible witness’ (a beneficiary under the will of the person making the declaration or who will otherwise benefit financially or in any other material way from the death).
Two doctors must make assessments of the person’s eligibility to access VAD and must also certify that the request and assessment process has been complied with in accordance with the legislation.
There must also be a final request to the co-ordinating medical practitioner personally.
The coordinating medical practitioner must then make a final review.
Once the assessments are completed, the doctor can apply for a permit to prescribe the medication and the medication can then be dispensed to the person.
Who will monitor VAD?
The Voluntary Assisted Dying Review Board will monitor all activity under the legislation, including the issue of permit applications. Participating health practitioners will be required to report to the Board.
Can a guardian or other appointed medical treatment decision maker apply for VAD?
A family member or carer can’t request VAD on somebody else’s behalf. This is to ensure that the request is completely voluntary and without coercion, and that the decision is the person’s own. Therefore, a guardian cannot make a request for a VAD.
In order to access VAD, the person must have full decision making capacity at all times.
What principles must be considered?
The principles that must be considered in exercising a power or performing a function or duty (including the Victorian and Civil Administrative Tribunal) under the Act2 are:

every human life has equal value;
a person’s autonomy should be respected;
a person has the right to be supported in making informed decisions about the person’s medical treatment, and should be given, in a manner the person understands, information about medical treatment options including comfort and palliative care;
every person approaching the end of life should be provided with quality care to minimise the person’s suffering and maximise the person’s quality of life;
a therapeutic relationship between a person and the person’s health practitioner should, wherever possible, be supported and maintained;
individuals should be encouraged to openly discuss death and dying and an individual’s preferences and values should be encouraged and promoted;
individuals should be supported in conversations with the individual’s health practitioners, family and carers and community about treatment and care preferences;
individuals are entitled to genuine choices regarding their treatment and care;
there is a need to protect individuals who may be subject to abuse;
all persons, including health practitioners, have the right to be shown respect for their culture, beliefs, values and personal characteristics.

Who will be eligible?
A person is eligible for access to VAD if the person is3:

aged 18 years or more; and
an Australian citizen or permanent resident and ordinarily resident in Victoria and at the time of making a first request, has been ordinarily resident in Victoria for at least 12 months; and
has decision-making capacity (as defined in section 4 of the Act) in relation to VAD; and
diagnosed with a disease, illness or medical condition that is:

incurable; and
is advanced, progressive and will cause death; and
is expected to cause death within weeks or months, not exceeding six months; and
is causing suffering to the person that cannot be relieved in a manner that the person considers tolerable.

However, a person is ineligible for access to VAD only because that person is diagnosed with a mental illness within the meaning of Mental Health Act 2014 (Vic) or because that person has a disability within the meaning of the Disability Act 2006 (Vic).4
When may a person access voluntary assisted dying?
A registered medical practitioner, known as a ‘co-ordinating medical practitioner’ under the Act, must assess whether a person meets the eligibility criteria for assisted dying.
A person may request access to VAD if:

the person has made a clear, unambiguous and personally made first request to the registered medical practitioner (sections 6 & 11); and
the person has been assessed as eligible for access to VAD by:

the co-ordinating medical practitioner for the person; and
a consulting medical practitioner for the person; and
the person has made a written declaration; and
the person has made a final request to the co-ordinating medical practitioner; and
the person has appointed a contact person (to monitor the voluntary assisted dying substance); and
the co-ordinating medical practitioner has certified in a final review form that the request and assessment process has been completed as required by this Act; and
the person is the subject of a voluntary assisted dying permit.

At all times, the person seeking access to VAD can decide not to continue the request and assessment process. In this occurs, and the person then decides to proceed with VAD, that person must commence a fresh request.5
A co-ordinating medical practitioner must hold a fellowship with a specialist medical college or be a vocationally registered general practitioner and must have completed approved assessment training.6
A registered health practitioner who has a conscientious objection to VAD has the right to refuse to do any of the following:

to provide information about VAD;
to participate in the request and assessment process;
to apply for a voluntary assisted dying permit;
to supply, prescribe or administer a voluntary assisted dying substance;
to be present at the time of administration of a voluntary assisted dying substance; and
to dispense a prescription for a voluntary assisted dying substance.7

What is a voluntary dying permit?
A self-administration permit authorises the prescription, possession, storage of the voluntary assisted dying substance to specified people, including;

the co-ordinating medical practitioner,
the person self-administering the substance; or
the self-administering person’s contact person within 15 days after the date of death.

How is the voluntary assisted dying substance dispensed?
The government has established a VAD statewide pharmacy service, which is operated by the pharmacy department at the Alfred Hospital in Melbourne to8:

prepare the voluntary assisted dying medications;
deliver the voluntary assisted dying medications (in a locked box) to patients who have a voluntary assisted dying prescription;
provide patients with information and support to self-administer the voluntary assisted dying medications;
support medical practitioners, patients, families and carers throughout the process; and
receive and dispose of any unused voluntary assisted dying medications.

This voluntary assisted dying statewide pharmacy service is to supply the medications and the education. However, it is not the pharmacists’ role to administer the medications.
Generally, the person must administer the drug themselves (section 47), but there are provisions which allow the co-ordinating medical practitioner to apply for a ‘practitioner administration permit’ if the person is physically incapable of self-administration.9
What medications will be used for VAD?
To minimise the risk to the public the exact composition of the voluntary assisted dying substance is unavailable. In addition, the appropriate medications will vary on a case by case basis depending on the individual person and their medical condition. Access to this substance is provided free of charge to the persons seeking to use the medication.10
Can VAD be requested in an Advanced Care Directive?
An advanced care directive permits a person to document their preferences regarding future medical treatment should they lose decision making capacity.
You cannot request VAD in an Advanced Care Directive.  People requesting VAD must retain decision making capacity through the entire request and assessment process.
Further information
More information can be found on the Victorian Government’s voluntary assisted dying website.

1Voluntary Assisted Dying Act 2017 (Vic) s8
2Ibid s5
3Ibid s9
4Ibid, section 9(2) & 9(3).
5Ibid, s 12
6Ibid ss 10, 17
7Ibid s 7
8https://www2.health.vic.gov.au/Api/downloadmedia/%7B19027479-23B0-4EEF-9DB6-7288FF8693F7%7D
9Ibid s 48(3)(a)
10https://www2.health.vic.gov.au/Api/downloadmedia/%7B19027479-23B0-4EEF-9DB6-7288FF8693F7%7D
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Funds and financial products
ASIC issues guidance to licensees to protect against share sale fraud
On 17 June, ASIC issued guidance for Australian financial service (AFS) licensees about how they can mitigate the risks to their clients and business of share sale fraud. The guidance is in Information Sheet 237 Protecting against share sale fraud (INFO 237)
ASIC has identified a rise in the instance of share sale fraud, primarily in connection with issuer-sponsored holdings.
Specifically, INFO 237 provides guidance in relation to ASIC’s expectations around licensees’ management of:

one-off share sales;
customer due diligence;
ongoing customer due diligence;
intermediary clients;
anti-money laundering and counter-terrorism financing (AML/CTF) training; and
reporting of suspicious matters.

ASIC consults on proposals to maintain investor protections by restricting retail offers of ‘stub-equity’ in control transactions
On 4 June, ASIC issued Consultation Paper 312 Stub equity in control transactions, and an accompanying draft legislative instrument, seeking feedback on proposals to address concerns with offers of ‘stub-equity’ to retail investors in control transactions.
ASIC states the proposals seek to restrict certain structures that would result in retail investors not being covered by the normal protections available under Australian law when participating in a broad offer of securities.
Comments close on 17 July 2019.
ASIC updates guidance on ICOs and crypto-assets
On 30 May, ASIC released an updated Information Sheet 225 Initial coin offerings and crypto-assets (INFO 225).
ASIC states its update is based on its recent experiences with ICOs and crypto-assets, which indicate that ICOs and crypto-assets will often be financial products or involve financial products that are regulated under the Corporations Act.
Financial product advice
FASEA approves higher education Graduate Diplomas and bridging courses
On 13 June, FASEA confirmed its approval of a first round of Graduate Diplomas and bridging courses from select higher education providers as part of its education standard for financial advisers.
FASEA states that the approval is recognition of the alignment of the listed programs and courses with FASEA’s required curriculum and standards.
Financial markets
ASX listing rules consultation
On 30 May, ASX announced that ASX has been advised by ASIC that it will not be able to process the rule changes proposed in ASX’s consultation paper Simplifying, clarifying and enhancing the integrity and efficiency of the ASX Listing Rules in time for them to come into effect on the originally proposed implementation date of 1 July 2019.
Consequently, ASX states that it has decided to defer the implementation date for those changes to 1 December 2019, to give listed entities the opportunity to complete their AGMs for 2019 before having to absorb the rule and guidance changes in the package.
Subject to receipt of the necessary regulatory approvals, ASX states that it expects to release a consultation response and the final version of the listing rule changes and associated guidance note changes in late September/early October 2019. Further, ASX states will conduct a national roadshow about the rule and guidance changes in late October/early November 2019.
Other financial services regulation
ASIC approves AFCA Rules change for legacy complaints
On 18 June, ASIC announced it approved changes to the Australian Financial Complaints Authority (AFCA) Rules which give effect to the AFCA authorisation condition introduced by Government on 19 February 2019.
ASIC states that, under the Government’s additional condition, AFCA is required to give expanded access to the AFCA scheme for consumers and small businesses that were harmed by financial misconduct, dating back to 1 January 2008.
ASIC approved these Rules in accordance with legislative requirements in section 1052D of the Corporations Act which require AFCA to seek ASIC approval of material changes to the AFCA scheme.
Treasury consults on Open Banking designation instrument (second round)
On 14 June, Treasury released for public consultation the second version of a draft Designation Instrument for the application of the Consumer Data Right to the banking sector (Open Banking).
The second stage of consultation responds to concerns raised in the first stage of consultation regarding the scope of information about the use of a product by carving out information about the use of a product that meets the test of having been materially enhanced.
The Design Instrument for Open Banking (second stage), Explanatory Materials and summary of proposals is available here on the Treasury website.
Consultation closes on 12 July.
RBA issues conclusions paper on New Payments Platform
On 13 June, the RBA issued NPP Functionality and Access Consultation: Conclusions Paper on the functionality of, and access to, the New Payments Platform.
The RBA states the report presents 13 recommendations from the public consultation that the RBA has undertaken with input and assistance from the ACCC. The recommendations, if fully implemented by NPP Australia (NPPA) and its participants, should address the issues and policy concerns identified during the consultation.
The RBA states that the report’s overall conclusion is that the NPP is enabling payments functionality that largely addresses the gaps identified in the Reserve Bank’s 2010–2012 Strategic Review of Innovation. However, it highlights that the slow and uneven roll-out of NPP services by the major banks has been disappointing and that this has likely slowed the development of new functionality and contributed to stakeholder concerns about access to the NPP. Therefore, the RBA states, the report includes a number of recommendations aimed at promoting the timely roll-out of NPP services and development of new functionality.
ASIC amends relief conditions for superannuation and retirement calculators
On 5 June, ASIC amended ASIC Corporations (Generic Calculators) Instrument 2016/207 to ensure that estimates produced by superannuation and retirement calculators are adjusted for inflation. The amendment is effected by ASIC Corporations (Amendment) Instrument 2019/514.
ASIC states that the new requirements will commence on 5 December 2019 to provide calculator providers with a transition period of six months. The amendments require superannuation and retirement calculator providers to adjust for inflation in estimates by using either:

the default inflation rate set out in the instrument for superannuation and retirement calculators; or
an alternative inflation rate, as long as certain disclosure requirements are met.

APRA responds to first phase of consultation on revisions to ADI capital framework
On 12 June, APRA released its response to the first round of consultation on proposed changes to the capital framework for ADIs.
APRA states that, after taking into account both industry feedback and the findings of a quantitative impact study, APRA is proposing to revise some of its initial proposals, including:

for residential mortgages, some narrowing in the capital difference that applies to lower risk owner-occupied, principal-and-interest mortgages and all other mortgages;
more granular risk weight buckets and the recognition of additional types of collateral for SME lending, as recommended by the Productivity Commission in its report on Competition in the Financial System; and
lower risk weights for credit cards and personal loans secured by vehicles.

Copies of the Response Paper and draft prudential standards are available on APRA’s website.
Written submissions are requested by 6 September.
APRA finalises its approach to apportionment of variable remuneration for medium and small ADIs under the BEAR
On 12 June, APRA released a response letter and the final wording of the schedule in relation to how the Banking Executive Accountability Regime (BEAR) applies to variable remuneration arrangements for medium and small ADIs.
APRA states that the final legislative instrument will be published before the BEAR comes into force for medium and small ADIs on 1 July 2019.
APRA releases updates to frequently asked questions on the implementation of Protecting Your Super legislative amendments
On 3 June, APRA updated its frequently asked questions (FAQs) on the implementation of the Treasury Laws Amendment (Protecting Your Superannuation Package) Act 2019.
The updates relate to fees charged to superannuation members (section 1 of the FAQs) and insurance for inactive accounts (section 2 of the FAQs).
Tax
New Victorian transfer duty legislation may affect property professionals and fund managers
New legislation in Victoria that is expected to take effect on 12 June could impose transfer duty on ‘economic entitlements’, such as income derived from property transactions.
The Victorian Government is proposing to revamp and extend the ‘economic entitlement’ rules by introducing new provisions into the ‘transfer’ duty regime (rather than just in the ‘landholder’ duty regime) and significantly extending their scope. These proposed changes will have extensive reach and will bring many commercial arrangements to duty. They will apply to most ‘standard’ commercial development agreements, many arrangements in the funds management space, and will even go so far as to apply to common real estate transactions involving Victorian land with an unencumbered value that exceeds $1 million. This includes commercial agreements negotiated at arm’s length between unrelated parties.
Read our article on the subject.
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Leading Australian law firm Hall & Wilcox is pleased to have advised Victory Offices Limited on its successful $30 million initial public offering of securities and listing on the Australian Securities Exchange.
Victory Offices is a leading company in Australia’s evolving flexible workspace industry, providing comprehensive serviced office packages and co-working spaces as an alternative to traditional office space. The company was founded in 2013 and now has 19 locations open for business across Melbourne, Sydney, Brisbane and Perth.
The Hall & Wilcox team, led by corporate Partner John Hutchinson, advised Victory Offices on all aspects of the $30 million IPO and ASX-listing process. The team also comprised Partner Natalie Bannister,  Special Counsel Nik Dragojlovic, Senior Associate Jung Ryu and Lawyers David Holland and Harry Croft.
The IPO, which was fully underwritten by Ord Minnett, involved a Retail Offer and Institutional Offer of 15 million new securities, representing approximately 36.7% of the shares on issue at the time of listing on the ASX.
‘Victory Offices is a highly successful innovative business and we are delighted to have advised on this transformational step which facilitates its future growth opportunities’ John Hutchinson said.
Hall & Wilcox has a strong ECM practice, with extensive experience in capital raising and capital management transactions. We have acted in IPOs and ASX listings, secondary retail and institutional offerings, capital raising transactions by managed investment schemes, stapled security structures, on-market buy-backs and capital reductions. We also assist ASX-listed clients with ongoing compliance and corporate governance-related obligations.
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On 7 June 2019, the Fair Work Ombudsman (FWO) announced that it would not pursue Uber Australia Pty Ltd (Uber Australia) for employee entitlements after finding that Uber drivers are independent contractors and not employees of Uber Australia.
During its two year investigation into whether Uber Australia was carrying on a regime of ‘sham contracting,’ FWO investigators examined documents such as the drivers’ contracts, log on log off records, ABN documents, payment statements, banking records and pricing schedules. It also conducted various interviews with Uber drivers and Uber Australia.
In concluding that the Uber drivers are not employees, FWO Sandra Parker stated that:
For such a relationship to exist, the courts have determined that there must be, at a minimum, an obligation for an employee to perform work when it is demanded by the employer… Uber Australia does not require drivers to perform work at particular times and this was a key factor in our assessment that the commercial arrangement between the company and the drivers does not amount to an employment relationship.1
The outcome of the FWO’s investigation is consistent with the recent decisions of the Fair Work Commission (FWC) in Kaseris v Rasier Pacific V.O.F2 and Pallage v Rasier Pacific Pty Ltd3 where the FWC found that Uber drivers were independent contractors and not employees of Uber Australia.
There is no doubt that the FWO confirming the employment status of its drivers is a positive result for Uber Australia.
However, the FWO stressed that its investigation related to Uber Australia specifically and not the gig economy more generally. The FWO will continue to assess allegations of non-compliance on a case by case basis. This means that, to a degree, uncertainty remains for other operators in the gig economy.
This uncertainty was recently demonstrated by the FWC’s November 2018 decision of Klooger v Foodora Australia Pty Ltd4 (you can access our update on that case here) in which the FWC determined that a delivery rider engaged by Foodora as an independent contractor was in fact an employee.
Implications for employers
The FWO’s decision and the decisions of the FWC demonstrate the significant challenges facing the gig economy – an industry in which regulation is attempting to catch up with rapidly evolving business models.
With various enquiries into the gig economy underway, and States such as Victoria legislating to further regulate owner-driver businesses, the industry is becoming ever more complex. It also means that it is unlikely we have heard the last of the independent contractor v employee issue.
This is particularly the case with the union movement focused on protecting its members within the industry. The National Secretary of the Transport Workers’ Union, Michael Kaine recently commented that the FWO’s decision not to pursue Uber Australia is “devastating for workers in the gig economy.”
Even though the Uber decision is focused on the gig economy, there are lessons for all businesses who engage independent contractors. Most importantly, that each arrangement will turn on its own unique set of facts.
It is therefore imperative that businesses adopt a pro-active approach when engaging independent contractors to determine that those workers are in fact ‘genuine’ independent contractors and that business arrangements support the independent contractor model.
Also, where the cost of ‘getting it wrong’ is so high, not just with respect to employment entitlements but also with respect to tax and superannuation, it is incumbent upon businesses not to ‘set and forget’. Adopting a proactive approach to monitoring and reviewing independent contractor arrangements will help businesses navigate ever complex laws and minimise their exposure to potential claims.

1Fair Work Ombudsman Media Release: ‘Uber Australia investigation finalised’, 7 June 2019
2[2017] FWC 6610
3[2018] FWC 2579
4[2018] FWC 6836
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Forgiveness of a loan – deemed dividend under Division 7A
In VCJN and Commissioner of Taxation (Taxation) [2019] AATA 968 (23 May 2019), the Administrative Appeals Tribunal (Tribunal) agreed with the Commissioner of Taxation (Commissioner) that the taxpayer’s forgiveness of a loan should be treated as a deemed dividend per s 109E(1) of the Income Tax Assessment Act 1936 (Cth) (ITAA36).
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In this decision, the Tribunal disagreed with the taxpayer’s arguments that he did not make the loan repayments due to circumstances outside of his control. Specifically, the taxpayer had argued that the 2008 Global Financial Crisis, and the subsequent economic downturn, was the cause of his failure to make the minimum yearly repayments. The Tribunal’s response was that:
If a person chooses to put himself into a position where he must meet certain financial obligations, if the operation of inevitable or foreseeable circumstances or the foreseeable financial environment, cause the [taxpayer] not to be able to meet those financial obligations, that cannot be considered beyond his control.
The [taxpayer] chose to expose himself to the consequences of reasonably foreseeable, in fact predictable, financial circumstances.
Furthermore, the Tribunal found that the taxpayer would not suffer ‘undue hardship’ if he were treated as having derived the dividend. The Tribunal did acknowledge that there may be some hardship in that the taxpayer may have to sell assets and rearrange his affairs but this did not amount to undue or unreasonable hardship. This was because the taxpayer, over a number of years, had structured his affairs so as to receive hundreds of thousands of dollars through his superannuation fund while neither he nor the entities that generated that income had met their tax obligations.
Ultimately, this Tribunal decision provides some useful commentary on:

what is meant by “circumstances beyond the entity’s control”; and
whether the Commissioner should be satisfied that a taxpayer would suffer “undue hardship” if there is a deemed dividend under s 109E of the ITAA36,

in the context of the Commissioner’s discretion to allow a loan to not be treated as a dividend under section s 109Q(1) of the ITAA36.

Summary judgement for payment of Director’s penalty relating to PAYG tax obligations
In Deputy Commissioner of Taxation v Giuseppe Giovanni Antonio De Simone [2019] VSC 346, Associate Judge Mukhtar of the Supreme Court of Victoria accepted the Commissioner’s application for summary judgment that the defendant pay a director’s penalty for the Pay-As-You-Go income tax (PAYG tax) obligations in respect of two companies of which he was a director.

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A company must deduct and withhold the PAYG tax payable on the gross wages, salaries, commissions, bonuses and allowances derived by its employees. The taxpayer was the director of a company which had deducted and withheld approximately $540,000 in PAYG tax payments.
Upon an amount of PAYG tax being withheld, the taxpayer (as director of the relevant company) had to cause the company to take at least one of the following steps:

remit the withheld PAYG tax to the Deputy Commissioner of Taxation (DCT);
make an agreement with the DCT for payment; or
move promptly into voluntary administration or liquidation.

The taxpayer failed to cause the relevant company to take any of these steps and was subsequently served with a Director Penalty Notice (DPN) by the DCT requiring him, as director, to pay a penalty equal to the amount of the unpaid PAYG tax.
The taxpayer pointed to 9 separate payments totalling $1 million that had been made to the ATO. The DCT had taken the 9 payments made and offset them against other primary tax debts owed by the relevant company to the ATO. The taxpayer claimed that he had made the payments on his own behalf, in his personal capacity, from his own money and that the payments were made to extinguish his personal liability for any penalty as a director of the relevant company. The taxpayer also contended that because the payments had been made by him personally, the DCT did not have the discretion to allocate payments made to satisfy the other tax debts of the relevant company, meaning that his liability to pay the PAYG penalty amount had been satisfied.
Whilst the judge noted that this argument was “ingenious,” it was ultimately unsustainable as the taxpayer was unable to produce evidence, beyond a mere assertion, that the payments were made by him specifically to satisfy his liability to pay the PAYG penalty amount. Indeed, 5 of the nine payments had been made before the relevant liabilities even arose.
Ultimately, this case covers a range of issues relating to:

the imposition of penalties;
the necessary onus required for summary judgement in relation to enforcing a payment; and
a consideration of the character of penalties (as opposed to being characterised as tax).

This case may be used as an example of how debt enforcement proceedings can play out in reality where a director has failed to pay penalties, and sheds light on the risks involved for directors of entities that fail to comply with their tax obligations.

Extended ‘economic entitlement’ duty provisions will become law in Victoria
The controversial State Taxation Acts Amendment Bill 2019 (Vic) (Bill) was introduced without prior industry consultation, and has been passed by both houses without amendment and referred to the Governor to receive Royal Assent.
Some of the more controversial provisions in the Bill will come into effect the day after it receives royal assent, while others will commence on 1 July 2019 or later. These changes will have broad ranging consequences for taxpayers in Victoria.

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One of the most significant changes is the revamping and extension of the ‘economic entitlement’ rules by introducing new provisions into the ‘transfer’ duty regime (rather than just in the ‘landholder’ duty regime). These proposed changes will have extensive reach and will bring many commercial arrangements to duty. They will apply to most ‘standard’ commercial development agreements, many arrangements in the funds management space, and may even go so far as to apply to common real estate transactions involving Victorian land.
For entities seeking to finalise their transactions and operations soon, they should be aware that certain arrangements that do not trigger duty under the current regime might trigger arrangements under the new provisions.
You can find our analysis of the impact the Victorian changes will have for taxpayers below:

New Victorian transfer duty legislation to sting property professionals and fund managers
Victorian State FY20 Budget
Draconian new ‘economic entitlement’ duty provisions will become law!

Should you have any queries in relation to these changes, please contact Rachel O’Donnell, Jim Koutsokostas or Joel Benjamin.

This article was written with the assistance of Charlie Renney, Law Graduate.

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Innovative. Agile. Disruptive.
We have all heard these buzz words thrown around in the legal industry and university as the new must have accessory of the season. But unlike the fad of pink being the new black, legal innovation is here to stay.
The legal industry has already undergone remarkable disruption in recent years with new technologies fundamentally changing how we practice law. In a manner of years, we have seen offices once filled to the brim with filing cabinets full of documents transform into ‘paper light’ offices courtesy of digital file management systems. E-discovery and document automation technology have streamlined once onerous processes, allowing lawyers to provide superior client services.
In light of these clear efficiency gains, it is no surprise that innovation has become a major element of the business strategy of law firms and in-house legal teams. The skillsets of lawyers are expanding to include digital capabilities, project management skills and a willingness to challenge the status quo, to name a few.
The following are instances of innovation in legal practice that we have already experienced as graduate lawyers at Hall & Wilcox.
1. Smarter Law
It is hard to work at Hall & Wilcox and not witness Smarter Law in action. Smarter Law sets the tone and direction for all the work that we do as the firm recognises and understands the role innovation plays in driving efficiency and delivering superior client solutions. One initiative we are currently rolling out is Sharedo – a document automation platform that will enable staff to populate and personalise precedents to ensure we deliver high quality and consistent advice.
Hall & Wilcox has also partnered with Neota Logic to develop an artificially intelligent web application that facilitates the management and delivery of legal solutions to insurance clients online. The strong focus on Smarter Law enables us to seamlessly operate as legal advisers and commercial managers.
Being exposed to these initiatives as graduates is helping us to expand our perception of what it means to be a modern lawyer. It is not enough for lawyers to be reactive and merely integrate new technologies into the practice of law. We need to be proactive and jump at any opportunity to do something better than those who came before us.
2. Startup partnerships
Alongside our traditional corporate clients, Hall & Wilcox has also embraced opportunities to work with emerging startups. We recognise that an innovative idea today may well become a widespread reality in the future.
Hall & Wilcox recognises the synergies that come from strong partnerships in the startup community. We partner with Stone & Chalk and often collaborate to deliver easily accessible legal support and information to startups who are looking to scale up and commercialise.
Hall & Wilcox also has Frank, a startup program where Frank advisers assist startups to grow by providing legal advice and helping entrepreneurs find practical business solutions. As graduates, we have been able to meet Frank Lab participants and learn about how new business ideas are developed. We have also been able to attend presentations concerned with valuation methods and financing options for startups. These opportunities to network with and learn from disruptors has been fantastic. We have gained valuable insight into the startup world, which has also inspired us to find opportunities for innovation in our own lives.
3. It starts with you
Embracing disruption is not just about getting behind the big, firm-wide initiatives. It is also about continuously improving at an individual level and employing techniques that enable us to work smarter and deliver work more effectively.
One example of individual innovation is using digital time management tools to keep track of tasks. As busy graduates, we have found these tools to be an effective way of both managing the expectations of those who are delegating work and staying across the status of matters. They are also a great way of collaborating on large projects and ensuring everyone stays on top of individual deliverables.
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Dr. Rita Choueiri Director at William Buck and Lawyer Raoul D’Cruz discuss tax and R&D concessions for startups after a recent talk with Stone & Chalk Melbourne.
 
 

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New legislation that is expected to take effect on 12 June could impose transfer duty on ‘economic entitlements’, such as income derived from property transactions. For instance, if a property fund buys a property after 12 June, the trustee/manager may have to pay additional duty on their acquisition fee. Most standard development agreements entered into from this date will also likely trigger a duty liability. Duty will often be charged on the entire value of the property and payable within 30 days of making the arrangement.

Victoria’s existing ‘landholder’ duty rules have some unique provisions that are not mirrored in the equivalent provisions across the country. Broadly, the ‘economic entitlement’ provisions impose duty on various arrangements where there is an acquisition of certain rights or entitlements relating to the landholdings of a private landholder. Though these may have notionally been introduced as ‘anti-avoidance’ provisions, they go well beyond this and impose significant duty liabilities on some genuine commercial arrangements where there is no element of avoidance; in particular, they can result in duty being triggered by development agreements.
The Victorian Government is proposing to revamp and extend the ‘economic entitlement’ rules by introducing new provisions into the ‘transfer’ duty regime (rather than just in the ‘landholder’ duty regime) and significantly extending their scope. These proposed changes will have extensive reach and will bring many commercial arrangements to duty. They will apply to most ‘standard’ commercial development agreements, many arrangements in the funds management space, and will even go so far as to apply to common real estate transactions involving Victorian land with an unencumbered value that exceeds $1 million. This includes commercial agreements negotiated at arm’s length between unrelated parties.
The proposed amendments are contained in the State Taxation Acts Amendment Bill 2019 (Vic) (Bill), which is currently before Parliament and is expected to be further debated in the Legislative Council on Thursday 6 June 2019. The Bill contains the various state taxation amendments announced in the recent Victorian Budget. However, the Budget made no mention of these economic entitlement measures (nor other measures relating to the charging of duty in relation to fixtures).
Under the Bill, the proposed changes will not affect development agreements entered into before, or on the day, the Bill receives Royal Assent.
Therefore, if you have a draft agreement that relates to property in Victoria, finalising and executing the agreement should move to the top of your ‘to do’ list before the new provisions take effect!
However, even if a development agreement is entered into prior to the legislative amendments taking effect, once the new provisions are in force the subsequent transfer, assignment, or variation of rights under the development agreement could also give rise to further duty consequences. This is because the subsequent transaction itself could constitute an acquisition of an economic entitlement.
Current provisions
Broadly, under the current economic entitlement provisions in the landholder duty rules, duty is payable where someone (alone or together with associated persons) directly or indirectly acquires an entitlement to 50% or more of any of the following ‘economic entitlements’:

to participate in the dividends or income of a ‘private landholder’ (i.e. a ‘private unit trust’ or a ‘private company’ with Victorian ‘land holdings’ of $1 million or more);
to participate in the income, rents or profits derived from the land holdings of the private landholder;
to participate in the capital growth of the land holdings of the private landholder;
to participate in the proceeds of sale of the land holdings of the private landholder;
to receive any amount determined by reference to (a), (b), (c) or (d); or
to acquire an entitlement described in (a), (b), (c), (d) or (e).

In the context of development agreements, these provisions can be triggered when the payment of a fee is expressed as being paid or payable from, or referable to, the income, rents, profits capital growth, or proceeds of sale of, the land holdings of a private landholder. Ultimately, development agreements that are not intended to create or grant ‘economic entitlements’ that give rise to duty in Victoria sometimes fall foul of these provisions and unintentionally trigger duty. This may arise where, for example, a developer is paid:

a development fee of less than 50% of the proceeds of sale of the relevant property; plus
a management fee that is payable ‘from’ the proceeds of the sale of the property (often simply as a mechanism to ensure payments are made in a particular order, such that priority is given to the remission of GST to the ATO and the repayment of bank loans),

and the development fee and the management fee, when added together, amount to 50% or more of the proceeds of the sale of the property.
Proposed new provisions
The proposed new ‘economic entitlement’ provisions will, based on the provisions in the Bill, come into operation the day after the Bill (once enacted) receives Royal Assent.
If the Bill is passed on Thursday 6 June (when debate is expected to resume), it will likely receive Royal Assent on Tuesday 11 June, such that arrangements entered into on or after 12 June 2019 will be subject to the new provisions.
Broadly, under the proposed provisions:

No de minimus or 50% threshold would apply. Any arrangement where someone acquires an ‘economic entitlement’ in respect of ‘relevant land’ in Victoria valued at more than $1 million would give rise to duty.
The provisions can be triggered even if the ‘acquirer’ is not a ‘party to the arrangement’. This change is intended for situations where a party under an arrangement directs the benefit of the economic entitlement to flow to another person, such as a newly created subsidiary.
The land no longer needs to be held by a ‘private landholder’ for these provisions to apply; the land could be held by a public company, listed unit trust, trustee of a discretionary trust, individual, or any other owner.

When an ‘economic entitlement’ is acquired, duty will be calculated on the unencumbered value of the relevant land at that time, and will only be reduced to the extent of the economic entitlement acquired if:

the percentage is specified in the arrangement;
no other economic entitlement is acquired; and
the person (and their associates) receive no other entitlement or payment.

If these strict conditions are not satisfied, duty will be calculated on the entire market value of the relevant land unless the Commissioner of State Revenue determines a lesser percentage to be appropriate in the circumstances. Such duty will be phased in where the unencumbered value of relevant land does not exceed $2 million.
To put this in perspective, most ordinary commercial arrangements we review would likely result in duty prima facie being payable on the total value of the relevant land, despite the ‘acquirer’ not actually acquiring rights relating to anywhere near the total value of the land. Some practical examples:

An agreement under which a funds manager would receive performance fees on the possible future sale of land as well as a base management fee would be subject to duty on the entire value of the relevant land.
A development agreement which provides for a monthly management fee (however small) plus a proportion of the proceeds of sale (again, however small) when the property is ultimately sold would also be subject to duty on 100% of the dutiable value of the relevant land.
Most standard agreements engaging a real estate agent to sell land worth more than $1 million (which would apply to many family homes in Victoria) would also be subject to duty on the total value because these agreements usually charge commission based on a small percentage of the sale proceeds plus advertising fees. Even if these agreements were changed to only charge commission of 1%-2%, duty would be payable on that percentage of the value of the relevant land.
Even rental management arrangements with real estate agents could be subject to these new provisions, as their fees are generally tied to the rent derived from the relevant land plus other payments.

Under the proposed provisions, the duty liability would be payable within 30 days of entering into the agreement. For most genuine commercial arrangements, this is not financially viable. In the third example above, for instance, the ‘economic entitlement’ duty liability would be payable by the real estate agent well before settlement of the sale of the property, and often before the contract of sale is even signed. The duty itself would exceed the amount received by the real estate agent! Surely this cannot align with the intended operation of the provisions!.
Once an arrangement is entered into, the ‘acquirer’ is deemed to have acquired beneficial ownership of the land. This can have further implications for future transactions or dealings undertaken by the acquirer. It can also have landholder implications if the acquirer is a company or unit trust scheme. There also appears to be no tie-breaker to deem the actual land owner to no longer own the land for duty purposes, so we have this curious position where two or more parties can be treated as owning the same land.
Watch this space
The Explanatory Memorandum to the Bill suggests these measures were introduced to address an issue with the current ‘economic entitlement’ provisions that was highlighted in the Supreme Court of Victoria’s decision in BPG Caulfield Village Pty Ltd v Commissioner of State Revenue [2016] VSC 172. Relevantly, the Supreme Court found that an economic entitlement could not be acquired in circumstances where the taxpayer only acquired an economic entitlement to some, but not all, of the land holdings of a landholder. Accordingly, the proposed amendments focus on the relevant land itself, rather than the landholding entity. However, the proposed amendments clearly go well beyond addressing this issue.
We understand the Government consulted with industry groups after the Bill was introduced in Parliament (but not beforehand). However, we also understand this consultation has been somewhat notional, as the Government intends to proceed as planned without amendment or variation, or even further consultation and negotiation. The introduction and expected passing of this legislation has been swift and, seemingly, not completely thought through.
Though the Victorian Government might see these new provisions as either ‘closing a loophole’ or, potentially, a money-spinner to catch out taxpayers they consider to be doing something ‘wrong’, it’s entirely possible these changes will drive business and development activity out of Victoria. We see a number of investors (that invest using trusts) who intentionally steer clear of Queensland due to Queensland’s onerous ‘trust acquisition’ duty rules. Will we see some businesses move away from Victoria as a consequence of these provisions being too broad?
For advice on how these new economic entitlement provisions would impact you, please contact us.
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