Hello all and welcome to the inaugural Hall & Wilcox Graduate blog post! There are six of us in the Sydney cohort – Winnie, Paul, Alex, Rebecca, Mark and Ashlee.
Every Wednesday for the next six weeks we will publish a blog sharing our experiences and giving insights into life as a graduate at Hall & Wilcox.
We thought an apt first post would be a reflective one, exploring five key lessons we have learnt throughout our first few months of private practice. We hope sharing our experiences will be helpful for prospective graduates and other young lawyers.
Enjoy!
1. Mistakes are not your enemy
We can almost hear the collective gasps of our fellow type-A law students – “what do you mean mistakes are okay?!” Now we are certainly not endorsing providing a careless, mistake-riddled document to a supervisor – that is a sure-fire way to get yourself into hot water! However, the simple reality of being a graduate is that our knowledge of legal practice is limited and mistakes are bound to happen.
Instead of stressing about the error, we have found it is important to focus on what we learnt from that mistake so that we know how to avoid it in the future. Supervisors are not expecting graduates to hand back a perfectly drafted document. What they do expect is for a graduate to give it their best effort, to find and challenge the gaps in their knowledge, to ask many, MANY questions and to own and learn from their mistakes when they make them.
2. Plan, plan… and then plan some more
While it doesn’t exactly sound like a revelation, we’ve come to realise how crucial good organisational skills are. Great client service necessarily demands effective time management and this goes hand in hand with your ability to organise yourself.
As graduates we often have work coming at us from many different sources. It can feel overwhelming when the tasks involve navigating unfamiliar territory and conflicting deadlines, so harnessing the organisational skills that got you through law school and putting them into action really does help. You may not always get a real sense of when someone needs something by, so if you’re not sure, just ask… don’t leave it to chance!
3. Self-care is non-negotiable
On our first day at the firm, a previous grad told us ‘private practice is a marathon, not a sprint – look after you’. Now being three months into our graduate program, we can definitely see the value of this advice.
As young lawyers, we often hold ourselves to unsustainably high standards and as a result, our wellbeing tends to fall to the wayside. Achieving a work-life balance and taking the time to practice self-care can feel somewhat unrealistic. But instead of thinking of these ideas as something separate to the traits that make up a good lawyer, it helps to shift the thinking around wellbeing to something that is an integrated part of being a great lawyer.
Doing one thing each day that’s just for you – whether that be going to the gym, eating lunch with colleagues away from your desk, or taking a 10-minute walk can be a good way of hitting the reset button. Ultimately, unless you look after yourself, you won’t be able to perform to the best of your ability.
4. Knowing the law is only 50% of the job
Law school prepares us well to prove the elements of a breach of contract or advise a client on what Chapter 2D of the Corporations Act 2001 (Cth) tells us about director’s duties. What law school cannot do so well is train us to consider the practical, commercial implications of this advice.
Putting yourself in the client’s shoes is key to delivering good advice. Clients do not want a ten page summary of every recent contract case; they want a succinct and commercially savvy recommendation about whether their circumstances allow them to terminate. No more 3000-word essays! Concise, client-tailored advice is the way to go!
5. A tree without roots doesn’t stand for very long
Being a graduate does not come without its challenges. As a year of learning, there are inevitably going to be highs, lows and everything in between. In our first few weeks, it quickly became apparent that having a strong support network to ride out the highs and lows with you is vital to stability and success.
A strong support network should not just include friends and family, but also fellow graduates and work colleagues. Fellow graduates are experiencing the same thing as you and it is important that we can always lean on each other for support. We are really fortunate at Hall & Wilcox where a three-tiered formal support system comprising of a buddy, mentor and supervising partner ensures that we are supported while settling into life as a private practice graduate.
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Mitchell Ogilvie Menswear Pty Ltd v Rapid Edge Pty Ltd [2019] QSC 136
Should a property insurer faced with a catastrophic loss, quickly quantify as best it can and pay the claim, and then look with confidence to recover this amount from the negligent party? Or can the negligent party challenge the reasonableness of that payout for lack of certainty, months or even years down the track?
The Queensland Supreme Court considered this issue in the context of the salvage value of luxury menswear damaged by soot and smoke from a fire. The decision will relieve first-party property insurers that the current claims assessment process, of valuing the loss suffered as at the time of the loss is favoured by the Courts.
Where there’s fire, there’s smoke
The fire was caused by a faulty vacuum igniting in a basement tenancy, which neighboured the Mitchell Ogilvie store. Smoke and soot from the fire rose through the air ducts into the menswear store and settled in a fine grey layer across the stock of luxury suits on display in the store. A variety of cleaning processes were attempted, including vacuuming, chemical wipes, and ozone treatment. The efficacy of these processes in returning the exceptional quality suits to their previous state was expressed by Justice Applegarth:
‘the high quality and high retail value of the stock made it practically impossible to bring the items back to their pre-fire condition.’
What to do with the damaged goods?
The disposal of the damaged menswear was pivotal to the issues at trial. Once a determination was made that the items were irreparably damaged, it was necessary to decide what to do with the damaged goods. The wholesale value of the damaged stock immediately before the fire was $1,465,367 with a retail value of approximately $4,500,000. Under its Commercial Special Risks policy, Allianz took ownership of the damaged goods when it made a payout under the policy. However, Mitchell Ogilvie offered a sum of $150,000 – $200,000 to retain the damaged goods, in order to protect the risk to trade, goodwill and reputation should a competing retailer gain access to the goods at auction and subsequently, sell them at a significantly discounted price. Allianz decided to engage a fire sale auctioneer to get a better feel for the likely value of the suits and determine what price they might achieve at auction. The auctioneer felt that an auction might recoup approximately 5-10% of the retail value, equating to a range of $225,000 – $450,000. The auctioneer offered Allianz a guaranteed return net of costs and commission of $195,000 to sell the suits, with any additional proceeds payable to Allianz at a higher commission. Mitchell Ogilvie then increased his offer to $225,000, to which Allianz agreed. This sum was consequently deducted from the insurance payout to give a net loss of approximately $1.24 million.
Liability insurer pursued ‘alternative measure’
The liability insurer for Rapid Edge Pty Ltd, took issue with the salvage value assigned to the damaged goods, pleading at trial that $225,000 did not reflect the market value of these goods. The defendant’s allegations were based on the findings of a forensic accountant that in the years after the fire there was no real discernible difference in the store’s profit margins. Following this logic, the defendant argued that the suits were worth more than the salvage values paid by Mitchell Ogilvie. The defendant pleaded that the damaged value of the menswear stock should be valued using an alternative test, working backwards from the ultimate retail sale price achieved by Mitchell Ogilvie for each of the damaged items. As the store’s financial records did not descend to this level of detail, broad calculations were made across all the damaged stock sold and retail sales achieved.
The Court’s decision: immediate crystalisation of loss
The Court decided there was no good reason, in this case, to depart from the normal measure of loss, being the difference in valuation immediately before and after the damage event. The defendant asserted the store had largely mitigated or avoided its loss by selling the damaged stock very well in a subsequent fire sale or normal trade. Alternatively, this showed the salvaged stock had been undervalued. The Court found the accounting evidence did not establish this as it could not exclude numerous variables and was based on several unfounded assumptions. It also failed to take into account the risk assumed by Mitchell Ogilvie in reacquiring the damaged stock that may sell poorly.
The evidence from the auctioneer and the subsequent negotiations between the insurer, its assessor and the insured, were the best evidence of the true value of the damaged stock immediately after the fire. Mitchell Ogilvie’s motivation for purchasing the stock was to protect the reputation of his brand and trade connections, which had taken decades to establish. The Court reasoned that the purchase was not legally required by the insured, and that in purchasing the goods Mitchell Ogilvie adopted a significant amount of uncertainty as to the outcome of any proceeds of sale. The Court found that the purchase price of $225,000 represented the market value of the goods, as the competing offers of three commercially knowledgeable parties had been involved in determining the amount. Justice Applegarth considered the hypothetical situation where an alternative measure was adopted and found it would be too costly, complicated and probably unlikely to produce a compelling result. On the balance of these factors, the Court comprehensively decided that the Defendant had failed to form a persuasive argument on any ground. Justice Applegarth relied on the established approach that the application of the general compensatory principle is applied at about the time the loss was sustained. The plaintiff succeeded for its full claim plus interest.
Relief for insurers and insureds alike
Insurers and insureds alike should be relieved about the outcome of this trial. The Court declined to set a precedent that would require the parties to wait months or years to trace the eventual sale of all damaged goods in order to decide the true value of a claim. Such a precedent would undermine the current approach of insurers to settle claims as efficiently and quickly as possible and allow all parties to move on. The alternative is stark to contemplate, with insurance claims dragging on indefinitely and insureds unmotivated to make any extra effort to mitigate their loss that would only reduce their end payout. Common sense and commercial practicality have triumphed over an illusory search for certainty. The decision reinforces that the Court supports the current method of insurance claims assessment whereby the value of damages should be determined at about the time the loss was sustained.
This article was written with the assistance of Ben Wilson, Paralegal.
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ASIC has released an updated to information sheet INFO 225: Initial coin offerings and crypto-assets. While ASIC’s position on when an ICO or crypto-asset will be a financial product remains largely unchanged (you can see our previous updates on the topic here and here), ASIC’s newest update acknowledges the changing nature of crypto-assets and the increased maturity of the market.
INFO 225 has placed heavy emphasis on the risks of an ICO or crypto-asset being a managed investment scheme (MIS) and has significantly increased the detail of the section as it deals with the potential for an ICO or crypto-asset to be considered to be an MIS. ASIC’s emphasis on the risk of an ICO or crypto-asset to be characterised as an MIS accords with our position that, unless the tokens are available for use on an existing platform, there is significant risk that your tokens could be characterised as an MIS, and as such you will require an Australian Financial Services License (AFSL) with the appropriate authorisations. It will not be sufficient to hold a corporate authorised representative agreement if you wish to issue interests in an ICO or crypto-asset that has been characterised as an MIS.
The updated INFO 225 now also clarifies that those who give advice, dealing or provide intermediary services for crypto-assets that are financial products will require an AFSL with appropriate authorisations. This includes those who act as crowdsource funding intermediaries.
Platform operators which enable customers to buy, sell or be issued crypto-assets which are financial products would require an Australian market license unless covered by an exemption. ASIC has noted that there are currently no licensed or exempt platform operators that allow consumers to buy, be issued or sell crypto-assets that are financial products.
Additionally, INFO 225 has now provided further guidance on circumstances where ICOs and an offering of crypto-assets will be a security. ASIC now considers that where a crypto-asset gives a purchaser the right to acquire shares in a company at a time in the future, then this may be an option, which is also a security.
To the extent that miners and transaction processors are part of the clearing and settlement process for tokens that are financial products Australian laws will apply. Additionally, wallet providers which store tokens that are financial products will require an AFSL with appropriate custody authorisations.
In a sign that ASIC’s views on the industry continues to mature, ASIC has inserted Part F to INFO 225, which explicitly addresses overseas categorisations of crypto-assets. ASIC’s view is that the opinions of international regulators do not automatically translate to equivalent products in Australia. This is because the definition of a financial product in Australia is often broader than in other jurisdictions.
ASIC considers that, where crypto-assets such as utility tokens may not be captured by regulatory regimes elsewhere, they may still be covered under Australian law. Importantly, where crypto-assets and ICOs are offered to overseas investors from Australia, Australian law may continue to apply, even where no Australians are included in an offer.
Additionally, ASIC has emphasised that the evolving nature of crypto-assets and ICOs means that disclosures need to be regularly reviewed and updated. This is especially the case where the design of the ICO or crypto-asset changes over the course of the product development life cycle. As the design of your product changes, it is important to ensure that what may not have been a financial product by initial design which becomes one as it matures has appropriate disclosure documentation prepared.
The key takeaway from this update is that ASIC’s views on the industry continue to evolve, and if you operate an ICO or crypto-asset business, you should ensure that you seek appropriate professional advice and engage with regulators where appropriate. Importantly, given the fluidity of the industry, it is important to ensure that legal advice provided is current with ASIC’s guidelines. Particular care should be taken to ensure that ICOs and crypto-assets are properly characterised, given ASIC’s view on the potential for ICOs and crypto-assets to be considered an MIS.
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Introduction
With a forecast surplus for 2019-20, the first time in over a decade, of $7.1 billion, Josh Frydenberg’s 2019 Budget is a not too subtle election budget. Surplus is forecast into the future with government debt eliminated by 2029-30.
There are a number of winners with no new taxes, low to middle income earners receiving $158 billion of personal tax cuts over 10 years and spending incentives for SME businesses proposed through the increase of the instant asset write-off from $25,000 to $30,000, and its extension to medium sized (up to $50million turnover) businesses.
The personal tax cuts will mean almost 10 million taxpayers receiving at least a partial benefit.
There is also significant spending on infrastructure, $100 billion over the next 10 years, and health care.
Tax integrity is also addressed. The Budget increased funding by $1billion for the Australian Taxation Office for its Tax Avoidance Taskforce. This reflects the ongoing theme of targeting tax avoidance, and is likely to result in increased audit activity for the target group being multinationals, large public and private groups, trusts and high net worth individuals. New requirements were also introduced to address the black economy with new rules for Australian Business Number holders.
The budget will bring the challenge to Labor into a debate about incentive and fiscal responsibility.

Tony Macvean
Managing Partner
Peter Murray
Partner, Head of Tax

Contents

Infrastructure
Bringing forward personal tax rates

Low and middle-income tax offsets raised
Medicare levy low-income threshold increased

ATO tax avoidance taskforce expansion
Clarifying the operation of hybrid mismatch rules

Increased compliance on tax and superannuation liability
Government bolsters support for Australian exports

Supporting small businesses with tax disputes
Division 7A start date deferred

Instant asset write-off threshold
Strengthening the Australian Business Number system

Single Touch Payroll expanded
Contributions changes to superannuation

Infrastructure
On the infrastructure front, this Federal budget from the Coalition was consistent with expectations. It further increased infrastructure spend from $75bn to $100bn for the building of road, rail and air infrastructure.
With the increasing number of infrastructure projects being delivered nationally, this places further pressure on our construction clients to find skilled workers. Helpfully, an additional $525m has been allocated towards the funding of 80,000 new apprenticeships, which will assist with alleviating some of these skill shortage pressures.
For our health clients, we saw $100m allocated to upgrading existing health infrastructure and a further $1.3bn allocated to support patient care in the community, which will reduce the pressure on hospital services.
For our housing clients, there was no change to existing Government policy. The Treasurer referenced in his speech the National Housing Finance Investment Corporation and its recent $300m bond raising. This bond will offer cheaper finance for Community Housing Providers to deliver 300 new affordable rental dwellings. There was no reference to matching Labor’s current election proposal to deliver 250,000 new affordable homes.
With an estimated 47,000 job vacancies in regional Australia and the absence of affordable housing to accommodate potential key workers, targeted investment in affordable housing infrastructure would be an additional avenue to support the Federal Government’s budget surplus strategy. The increased focus on economic infrastructure projects is a real positive for our construction clients. There is still a real need for growth in social infrastructure projects, which will – at least in the short term – continue to fall to the States and our Community Housing Provider clients.
Bringing forward personal tax rates
Summary
The Government has announced two key changes to complement its Personal Income Tax Plan announced (and legislated) in 2018.
Previously, from 1 July 2022, the 19% personal income tax bracket was to apply to a taxpayer’s income between $18,201 and $41,000. The upper end of that top threshold will now be raised to $45,000.
Similarly, from 1 July 2024, the 32.5% personal income tax bracket was to apply to a taxpayer’s income between $41,001 and $200,000. This rate will now be lowered to 30% for income between $45,001 and $200,000. Additionally, as part of the original measures under the Personal Income Tax Plan, the 37% tax bracket will be abolished from this date.
The tables below summarise the changes over the next 6 years.

Years ending 30 June 2019to 30 June 2022

Taxable incomeTax on this income

$1–$18,200Nil

$18,201–$37,00019 cents for each $1 over $18,200

$37,001–$90,000$3,572 plus 32.5 cents for each $1 over $37,000

$90,001–$180,000$20,797 plus 37 cents for each $1 over $90,000

$180,001 and over$54,097 plus 45 cents for each $1 over $180,000

Years ending 30 June 2023 to 30 June 2024

Taxable incomeTax on this income

$1–$18,200Nil

$18,201–$37,00019 cents for each $1 over $18,200

$37,001–$90,000$5,092 plus 32.5 cents for each $1 over $45,000

$90,001–$180,000$24,375 plus 37 cents for each $1 over $120,000

$180,001 and over$22,200 plus 45 cents for each $1 over $180,000

Income years ending 30 June 2025 onward

Taxable incomeTax on this income

$1–$18,200Nil

$18,201–$45,00019 cents for each $1 over $18,200

$45,001–$200,000$5,092 plus 30 cents for each $1 over $45,000

$200,001 and over$46,500 plus 45 cents for each $1 over $200,000

Observation
These measures complement the government’s legislated Personal Income Tax Plan – to lower taxes, consolidate the personal income tax brackets and to limit bracket creep.
Flattening the progressive marginal tax rate scale is a win for simplicity. With the reduction of the 32.5% rate to 30% and the removal of the 37% tax bracket by 2024-25, 94% of Australian taxpayers are projected to have a tax rate of 30% or less.
While the details of these changes were not known before the Budget papers were released, they are not unexpected. With a forecasted surplus and a rapidly approaching election, we should expect generous promises from both sides of politics.
$158 billion of income tax cuts over a decade – while taxpayers will no doubt be excited by the prospect of a lower personal income tax bill, they may need to keep some grains of salt on hand. We will see two full election cycles before the full effect of these changes will be seen, and who knows what will happen in that time.

Low and middle-income tax offsets raised
Summary
The low and middle-income tax offset (LMITO) will be increased.
The maximum LMITO available will increase from $530 to $1,080 per annum, with the base amount increasing from $200 to $255 per annum.
The increased LMITO will be available for returns lodged for the income year ending 30 June 2019. The LMITO will remain available for the income years ending 30 June 2020 to 30 June 2022, after which it will be removed.
Then, from 1 July 2022, the low-income tax offset (LITO) will be increased.
The LITO will increase from $645 to $700. The full LITO will be available to people with taxable incomes of less than $37,000. It will progressively be phased out for those on incomes between $37,000 and $66,667.

Observation
The changes to the LMITO and LITO are welcome changes for those on low and middle incomes. Unlike the marginal tax rate cuts, the change to the LMITO is more immediate, with Australian taxpayers benefiting when they lodge their returns from 1 July 2019. However, the increase to the LITO is not scheduled to take effect until 1 July 2022, after the completion of another election cycle.

Medicare levy low-income threshold increased
Summary
The Medicare levy low-income thresholds will be raised to the following amounts from the 2018-19 income year.

Taxpayer Existing thresholdNew threshold

Singles$21,980$22,398

Families$37,089$37,794

Single seniors and pensioners$34,758$35,418

Senior and pensioner families$48,385$49,304

Dependent child or student+$3,406 per child or student+$3,471 per child or student

Observation
Together with the changes to the LMITO and LITO, the increase to the Medicare levy low-income thresholds will undoubtedly provide further relief to lower and middle-income earners.

ATO tax avoidance taskforce expansion
Summary
The Government will increase ATO funding to extend the operation of the Tax Avoidance Taskforce’s programs and activities. The Taskforce carries out compliance activities targeting large corporates, multinationals and high net worth individuals.
The Government proposes to provide an additional $1 billion of funding until 30 June 2023, which is estimated to raise a further $3.6 billion in tax liabilities over the next four years.

Observation
The Government is continuing its focus on combating tax avoidance and these additional funding measures reflect additional resources available for the ATO to achieve its broader compliance objectives. This is likely to result in increased audit activity for the target group.

Clarifying the operation of hybrid mismatch rules
Summary
The hybrid mismatch rules seek to prevent multinational corporations from exploiting differences in the tax treatment of an entity or instrument under the income tax laws of two or more countries.
The Government will clarify the operation of Australia’s hybrid mismatch rules through a number minor technical amendments commencing from 1 January 2019. These measures are expected to include stipulating how the rules apply to MEC groups and trusts, limiting the meaning of foreign tax, and specifying that the integrity rule can apply where other tax provisions have applied.

Observation
These changes should provide greater certainty for taxpayers in respect of complying with the hybrid mismatch rules. Impacted taxpayers should consider the proposed amendments once further details and draft legislation are released.

Increased compliance on tax and superannuation liabilities
Summary
The Government proposes to provide an additional $42.1 million of funding over four years to the ATO to increase its activities to recover unpaid tax and superannuation liabilities. These activities are aimed at increasing compliance and ensuring timely tax payments by large businesses and high wealth individuals. The measure will not extend to small businesses.
Over the forward estimates, these measures are estimated to have a gain to the budget of $103.6 million and increase GST payments to states and territories by $41.8 million.

Observation
This additional funding will provide the ATO with additional resources to increase its compliance activities to recover unpaid tax and superannuation liabilities from large businesses and high wealth individuals. This is likely to result in increased audit activity for the target groups.

Government bolsters support for Australian exports
Summary
The Government will provide an additional $61 million over 3 years from 2019-20 to support Australian businesses to export Australian goods and services to overseas markets. This includes:

$60 million over 3 years from 2019-20 to increase funding for the Export Market Development Grants (EMDG) to increase reimbursements of export marketing expenditure for eligible small and medium enterprise exporters; and
$1 million in 2019-20 to further promote Australian industries to overseas markets.

Since the EMDG’s establishment in 1997, it has been very popular amongst start-ups and scale-ups resulting in thousands of applications per year. However, recently, due to the number of applicants and the limited pool of funds the Government has been unable to provide the full 50% reimbursement.
As a result, the Government had changed the method of reimbursement so that payments were made over two tranches. Businesses that applied before the first tranche payment would generally be granted a reimbursement of 50% for the first $80,000 of expenses; second tranche payments would vary depending on the number of additional applicants throughout the year and the amount of funds left in the pool. In effect, the two tranche payment method has meant that some businesses have only received a 35-40% reimbursement for expenses.

Observation
The increase could allow businesses to receive a full 50% reimbursement of claimed expenses outright, or at least to receive a full 50% reimbursement over first and second tranche payments. Overall, this will likely be a welcome measure by a number of start-ups and scale-ups expanding their operations overseas.

Supporting small businesses with tax disputes
Summary
The Government will provide $57.5 million over 5 years from 2018-19 to provide small businesses with access to a fast, low cost, independent review mechanism where they are in dispute with the Australian Taxation Office (ATO). Funding will be spread across the ATO, the Administrative Appeals Tribunal (AAT) and the Department of Jobs and Small Business.
This measure came into effect on 1 March 2019, along with the setup of the Small Business Taxation Division (SBTD) of the AAT to improve access to justice for small businesses appealing the outcome of a tax dispute.
On 20 March 2019, the ATO released an internal ATO document – Dispute Resolution Instruction Bulletin DR IB 2019/1 – which instructs ATO staff on how litigation should be conducted in the SBTD. The Instruction Bulletin states that where the ATO engages an external legal service provider but the taxpayer is not legally represented, the ATO will give the taxpayer funding for “equivalent legal representation”. In addition, funding will not be denied if the taxpayer also receives legal advice through the Australian Small Business and Family Enterprise Ombudsman Concierge Service.

Observation
At this stage, there is no clarity about how tax and/or legal advisors can express interest and/or lend support to the SBTD. We would welcome further information about this measure.

Division 7A start date deferred
Summary
The start date of the targeted amendments to Division 7A (originally announced in the 2016-17 Budget and again in the 2018-19 Budget) will be deferred (again) from 1 July 2019 to 1 July 2020. Our summary of the Division 7A amendments was discussed in our 2018-19 Budget update.

Observation
In October 2018 the Government issued a consultation paper to seek stakeholder views on the proposed approach for implementing the amendments to Division 7A. The Government received valuable feedback from stakeholders which highlighted the complexities of the tax law. As a result, the deferral of a further 12 months will allow the Government to consult with stakeholders and refine an implementation approach, including appropriate transitional arrangements.
While the deferral provides Treasury with an opportunity to reconsider some of the more onerous proposals included in its consultation paper, it leaves taxpayers and their advisors in limbo as to what to do with historical issues such as pre-1997 loans and pre-2009 UPEs.

Instant asset write-off threshold
Summary
From Budget night to 30 June 2020, the instant asset write-off threshold will increase from $25,000 to $30,000 and will extend to medium-sized businesses (aggregated annual turnover of less than $50 million). The instant asset write-off is already available to small businesses (aggregated annual turnover of less than $10 million).
We note that in January 2019, the Government announced an increase to the threshold from $20,000 to $25,000, and an extension of the write-off for an additional 12 months to 30 June 2020.
For small businesses, assets acquired from 1 July 2018 which are valued at $25,000 or more, and assets acquired from Budget night which are valued at $30,000 or more, can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
For medium-sized businesses, assets acquired from Budget night which are valued at $30,000 or more can continue to be depreciated in accordance with existing depreciating asset provisions.

Observation
The increase in the threshold to $30,000 as well as the extension of the write-off to medium business is welcome.
We expect the generosity of the write-off and its extension to more taxpayers will attract greater ATO scrutiny of whether taxpayers meet the aggregated turnover test; including critically examining the notoriously difficult connected entity and affiliate tests. Medium sized taxpayers who have never had to test aggregated turnover in the past will now have to carefully consider and apply these tests.

Strengthening the Australian Business Number system
Summary
The Federal Government proposes to impose more stringent compliance requirements for Australian Business Number (ABN) holders.
Flowing on from other tax system integrity and compliance measures introduced in response to the Black Economy Taskforce’s efforts, the Federal Government proposes to impose more stringent compliance requirements for ABN holders. To retain their ABN, an entity:

must confirm the accuracy of their details on the Australian Business Register annually (from 1 July 2022); and
if they have an income tax return lodgement obligation, must comply with this obligation (from 1 July 2021)

(Refer to Page 13 of Budget Paper No. 2)
According to the Federal Government, these integrity measures are expected to generate net revenue in the order of $22.2 million over FY21 to FY23.

Observation
The changes are intended to complement the other tax system integrity and compliance measures introduced in response to the Black Economy Taskforce’s recommendations.

Single Touch Payroll expanded
Summary
The Government will provide $82.4 million over four years from 2019-20 to the ATO and the Department of Veterans’ Affairs to support the expansion of the data collected through Single Touch Payroll (STP) by the ATO and the use of this data by Commonwealth agencies.
STP data will be expanded to include more information about gross pay amounts and other details.

Observation
These changes are intended, in part, to reduce the compliance burden for employers and individuals who report information to multiple Government agencies. However, it is not yet clear which details will now be included in STP reports. These changes are consistent with the recent focus on sharing and matching data between Government agencies.

Contributions changes to superannuation
Summary
The Budget announced changes to the superannuation contributions rules.

From 1 July 2020, individuals aged 65 and 66 will be able to make voluntary superannuation contributions (concessional and non-concessional) without meeting the work test.
The age limit for spouse contributions will be increased from 69 to 74 years.
Individuals aged 65 and 66 will be able to bring-forward non-concessional contributions.

The Budget also announced that the current tax relief for merging superannuation funds that are due to expire on 1 July 2020 will be made permanent.
It was also announced that superannuation funds with interests in both the accumulation and pension phases will be able to choose their preferred method of calculating exempt current pension income (ECPI). Further, funds, where all of the members are fully in pension phase for the whole income year, will not have to obtain an actuarial certificate when using the proportionate method of calculating ECPI.

Observation
The change allowing contributions to be made by persons aged 65 and 66 without meeting the work test builds on a change taking effect on 1 July 2019 that allows a person aged from 65 to 75 who has stopped working to make voluntary superannuation contributions, if they have less than $300,000 in superannuation, in the first year after they ceased to meet the work test.
The permanent extension of tax relief for merging funds is welcome, as tax issues have in the past constituted a brake on fund mergers.
The changes to the calculation of ECPI and actuarial certificates is also welcome – the need to obtain certificates when all members are fully in pension phase has constituted an unnecessary burden on funds.

Partners Anthony Bradica and Harry New shared their initial thoughts about the Federal Budget on the night. Watch our video below.

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Partners Anthony Bradica and Harry New share their initial thoughts about tonight’s Federal Budget.
Watch more below and keep an eye out for our upcoming in-depth summary.

The post Federal Budget: our initial thoughts appeared first on Hall & Wilcox.

From 15 March 2019, power companies and authorities will need planning approval to build new power lines and electrical sub-stations connecting large-scale electricity generation facilities to the Victorian energy network.
The new requirement, created by Amendment VC157, amends the Victorian Planning Provisions (VPP) and affects all planning schemes. The key change is that the definition of ‘minor utility installation’ under Clause 73.03 of the VPP no longer includes power lines or sub-stations directly associated with an ‘energy generation facility’ or ‘geothermal energy extraction’. ‘Energy generation facility’ means ‘land used to generate energy for use off-site other than geothermal energy extraction’. This includes renewable and non-renewable energy generation facilities, buildings and other structures or things used in connection with the generation of energy.
This significant change means that from 15 March 2019, a proposal to use and develop land for power lines or sub-stations will trigger a planning permit requirement, as this will no longer be subject to the ‘minor utility facility’ exemption under Clauses 62.01 and 62.02. This brings Victoria in line with other States and Territories.
There are two important caveats to this amendment:

If a permit for the use or development of power lines or sub-stations was obtained before 15 March 2019, Clause 62.02-1 of the VPP now provides that a permit will not be required for buildings and works in respect of those power lines or sub-stations; and
This amendment does not affect a company’s or authority’s power to apply to compulsorily acquire easements to erect or maintain power lines, under section 86 of the Electricity Industry Act 2000 (Vic).

Companies and authorities seeking to build new power lines or sub-stations for large-scale electricity generation facilities should seek immediate advice on the cost and timing implications of complying with this new requirement.
Hall & Wilcox can assist in navigating all stages of the complex and lengthy planning approval process. Please contact Natalie Bannister or Rory O’Connor for more information.
This article was written with the assistance of Gemma Hallett, Law Graduate.
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Inbound distributors: new ATO guideline on transfer pricing risk framework
On 13 March 2019, the Australian Taxation Office (ATO) released a Practical Compliance Guideline PCG 2019/1 (Guideline) on its approach to identifying potential transfer pricing issues for existing and new inbound distribution arrangements involving multi-national entities (MNEs). The Guideline sets out the ATO’s framework for this compliance activity and provides useful guidance on the ATO’s perception of the risk associated with particular industries including the life sciences, information and communications technology, motor vehicle and general distributors industries.
See more

Pursuant to the Guideline, the ATO will consider an entity to be an ‘inbound distributor’ if its business predominantly involves the distribution of goods purchased from related foreign entities for resale, or the distribution of digital products or services where the intellectual property in those products or services is owned by related foreign entities.
All MNEs required to file a Reportable Tax Position schedule — currently all entities with an Australian turnover in excess of $250,000,000 (who are likely to have been notified already by the ATO) — will need to self-assess their risk rating. However, the risk framework in the Guideline will not apply if a distributor currently has an Advance Pricing Agreement, settlement agreement with the ATO or another exception applies.
The framework contains separate schedules setting out the quantitative and qualitative indicators relevant to the life sciences, information and communications technology, motor vehicle and general distributors industries.
The allocation of an MNEs risk zone as within the low (green), medium (amber) or high (red) zone, is broadly determined with reference to its five-year weighted Earnings Before Interest and Tax margin, compared with industry margins (referred to in the Guideline as ‘profit markers’).
The Guideline operates as a tool for MNEs to assess their transfer pricing risk and consider how closely the ATO will be looking at their intercompany dealings. In the medium to high risk zones, taxpayers should consider seeking pre-emptive advice on whether their current transfer pricing arrangements are compliant with Australia’s transfer pricing rules as the ATO will likely be actively monitoring the taxpayer’s activities and may commence a review or audit.

What is a ‘restructuring’ under Div 125?
On 20 March 2019 the ATO released Draft Taxation Determination TD 2019/D1 (Draft Determination) on the meaning of ‘restructuring’ for the purposes of Division 125 (Div 125) Income Tax Assessment Act 1997 (Cth) (ITAA 1997) (which relates to obtaining CGT relief in a qualifying demerger situation).
The Draft Determination clarifies what kinds of actions and transactions fall within the scope of ‘restructuring’ under Subdivision 125-B, and as a consequence, which of these must satisfy the other conditions for CGT relief, such as the ‘nothing else’ condition.
In short, the Draft Determination notes that ‘restructuring’ of the relevant demerger group takes on its ordinary business meaning and in that sense it refers to the reorganisation of a group of companies or trusts. In determining what constitutes a particular restructuring, the Draft Determination notes that this is a question of fact.

See more

Under the demerger provisions, CGT roll-over relief may be available where the requisite conditions are satisfied. The overall objective is to defer a taxing event where a group undertakes a genuine reorganisation of its operations leaving members in the same economic position as they were immediately before the reorganisation.
A necessary condition to meet the definition of an eligible ‘demerger’ is that there is a restructuring of the demerger group. In the past the interpretation of this requirement has been ambiguous with respect to the nature of transactions that fall within the scope of ‘restructuring’ for these purposes.
Under the Draft Determination, the Commissioner states that a ‘restructuring’ of a demerger group should be given its ordinary business meaning; that is, the reorganisation of a group of companies or trusts.
The Commissioner notes that the ‘preferred’ interpretation of restructuring requires:

identifying all steps and transactions which are connected to, required to give effect to or are expected to result from, the disposal, ending or issue of the original and new ownership interest in a demerger; and
where relevant referring to case law on the meaning of the more general terms ‘scheme’ and ‘arrangement’; and
in some circumstances, considering whether the restructuring would make sense without the relevant step(s) in the commercial context.

In determining whether transactions or steps form part of a single plan, the Commissioner notes that a key factor should be the proposal that is presented to the affected shareholders or unit holders.
The Draft Determination is open for comment until 30 April 2019.

Federal Budget 2019
The Tax Industry’s Night of Nights for 2019, the Federal Budget release, is set for 2 April. Hall & Wilcox will be hosting its own internal lock-up, with the Tax Team and Firm industry leaders analysing the release live and providing their considered thoughts by video on Budget night. This will be followed by a brief written update the following morning.
We welcome any thoughts, questions or comments on our announcements.
This article was written with the assistance of Norberto Rodriguez, Law Graduate.

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The ‘Fairness in Franchising’ Report recommends increased regulation for non-renewal of car dealership agreements
On 14 March 2019, the Parliamentary Joint Committee on Corporations and Financial Services (Committee) released its ‘Fairness in Franchising’ report (Report). The Report seeks to address the deficiencies of the Franchising Code of Conduct (Code) and systemic issues within the sector.
The Report covers various issues. These range from the establishment of a Franchising Taskforce and enhancing the enforcement powers of the Australian Competition and Consumer Commission, through to more industry-specific regulation of car dealership agreements.
See Hall & Wilcox’s detailed summary of the key recommendations of the report here.
Car dealership issue
Various stakeholders, including the Motor Trades Association of Australia (MTAA) and the Australian Automotive Dealer Association (AADA), made submissions to the Committee advocating for the introduction of a separate automotive industry code of conduct.
It was proposed that a separate code of conduct would address industry-specific concerns overlooked by the Code. Specifically, submissions to the Committee outlined some of the concerns arising from the power imbalance between manufacturers and dealers, including:

Unreasonable return on investment timeframes and lack of protection for considerable capital investment.
Arbitrary termination of dealership and franchising agreements.
Imposition of unfair terms on dealers, including end of agreement terms which leave dealers with unsold stock.
Limited capacity to address consumer complaints.
Fear of retaliation from franchisor manufacturers.

While the Report did not recommend a standalone automotive industry code of conduct, it did recommend strengthening protections for dealers. The AADA has expressed support for the recommendations which are set out in more detail below.
Key recommendations
Key recommendations of the Committee in relation to car dealerships include:

Further enquiries being made into whether automotive franchise agreements should include a provision mandating that a franchisor be required to buy back all vehicles and parts up to three years old at cost price in the event of non-renewal of the lease.
Where buy backs occur, the stock should be independently valued and this cost should be split evenly between franchisor and franchisee.
Manufacturers should be required to provide at least 12 months’ notice when not renewing a dealership agreement.
Dealers should not be obliged to upgrade a dealership after notice of termination or non-renewal has been issued.
The Department of Treasury and Department of Jobs and Small Business should ensure that multiple codes applying to the industry remain aligned over time to avoid inconsistency.

The Report also suggested that a separate automotive industry code of conduct that deals with non-franchising matters would be received favourably provided that it did not obstruct any of the other recommendations of the Committee.
Conclusion
Both franchisors and franchisees in car dealership agreements will need to be ready to make changes to their operational practises ensuring compliance under any new laws or the amended Code.
Hall & Wilcox will continue to monitor how the findings of the Report will be implemented and provide updates on any proposed changes to the law and to the Code as they arise.
This article was written with the assistance of Ashlee Johnson, Law Graduate.
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In Hunt & Hunt v Mitchell Morgan Nominees the High Court went a long way towards clarifying when a claim is ‘apportionable’ under the apportionment legislation which is typical throughout Australia. The test is whether the loss arises from a failure to take reasonable care.
That case was about solicitors who prepared security documents for a lender which advanced money, secured by real estate, to people who turned out to be fraudsters. The security documentation was deficient and so the security could not be enforced against the real estate. That was a loss arising from a failure to take reasonable care. The solicitors were liable, but the High Court agreed that the claim was apportionable against the fraudsters who were ‘concurrent wrongdoers’ because, in terms of the legislation, they had also caused the loss. The loss was the lender’s inability to recover the amount of the loan.
In a recent NSW Court of Appeal case, a woman successfully sued her husband’s solicitors who had acted in the sale of the jointly-owned marital home following the breakdown of the marriage. The solicitors had paid all of the proceeds of sale to the husband, whereas some belonged to the wife, and the husband had refused to hand over her share.
The Court decided that the claim against the solicitors was not apportionable against the husband because:

the loss caused by the solicitors (loss of the entitlement which the wife had to the proceeds of sale as a joint owner of the property) was different to the husband’s failure to pay the wife in accordance with an order made in the Family Court. So the husband had not caused the same loss, which is a prerequisite for apportionment;
in any case, the husband had not ‘caused’ the solicitors to fail in their duty to the wife;
the husband owed no duty of care to his wife and so had no liability to her for damages. It is inherent in the notion of ‘concurrent wrongdoer’ that the plaintiff has, or had, a good ‑ albeit not necessarily recoverable ‑ cause of action sounding in damages against the alleged concurrent wrongdoer.

In our view the first ground arguably conflicts with the High Court decision. The High Court found that, in effect, the loss was loss of the money, however described.
The third point is an interesting gloss on the apportionment legislation, but appears to be consistent with previous decisions.
Trajkovski v Simpson.
Two aspects of the apportionment legislation ‑ arising from a failure to take reasonable care and caused the damage or loss that is the subject of the claim ‑ continue to be explored on a case-by-case basis.
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The Supreme Court of Western Australia has found a network authority’s contractor and a private landowner liable in both negligence and nuisance for property damage arising out of the 2014 Parkerville bushfire. Matt McDonald led a Hall & Wilcox team acting for a large group of insured plaintiffs and their insurers in two of the four proceedings, that were heard concurrently.
The Parkerville bushfire started on 12 January 2014 when a privately owned jarrah power pole failed due to age, fungal rot and termite damage, bringing down a live conductor with it. The plaintiffs sued the network operator (Western Power), its contractor (Thiess) and the person who owned the property and the pole.
Approximately 6 months before the Parkerville bushfire, in July 2013, Western Power appointed Thiess to carry out works on its distribution line which involved detaching and reattaching a service cable from and to the pole. Thiess claimed that during the course of these works, it conducted a thorough inspection of the pole and it was structurally sound and safe for continued service.
The Court disagreed. Justice Le Miere accepted the evidence of the various timber and termite experts that the pole was seriously and obviously defective from rot and termite damage when it was supposedly inspected by Thiess, approximately 6 months prior to it causing the bushfire. Accordingly, the Court found that Thiess failed to exercise due care and skill in the inspection of the pole and failed to adequately train and supervise its staff. This finding was not surprising given that the Thiess employee who inspected the pole conceded under cross examination that his evidence in chief was a reconstruction (rather than an actual memory) and also that he had never been trained in how to conduct an effective timber pole inspection in his many tears of service for Thiess.
The Court found that the landowner was negligent for failing to ensure the pole (which had been on her property for more than 30 years) was maintained in a safe and serviceable condition. She took no precautions to satisfy herself that the pole was safe (such as having it examined by a pole inspector). The Court also found that both Thiess and the landowner participated in the creation of a nuisance by failing to inspect the pole (adequately or at all) and by failing to replace it when it became unserviceable.
Western Power was cleared of negligence. While Justice Le Miere accepted that Western Power owed a duty of care to the plaintiffs to take reasonable care to inspect the pole prior to the works being undertaken, that duty was found to be delegable. Further, the Court found that Western Power had discharged its duty of care by taking reasonable steps to engage and instruct Thiess to do the work. Western Power’s duty did not extend to checking that people conducting pole inspections on its network were adequately trained.
Liability was apportioned 70% against Thiess and 30% against the landowner.
This case raises a number of important legal principles which may well be the subject of appeal by the unsuccessful defendants. In the event of an appeal it will be interesting to see whether the Court of Appeal agrees that Western Power’s duty of care is so narrow that it was not even obliged to check that people conducting pole inspections on its network were adequately trained.
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Welcome to the March 2019 edition of the Hall & Wilcox Health and Community Law Alert.
In this issue, we explore the challenges of providing care to vulnerable people, provide an update on new sterilization standards for hospitals and changes to retirement village legislation, examine some recent noteworthy medical cases, and look at legal and ethical issues around genomics and genetics, among other articles.
Please feel free to forward this publication to people in your organisation. If you would like to add people to our contact list for future editions, please contact us.

Overcoming challenges of providing care to vulnerable people
By Alison Choy Flannigan, Partner
Caring for the vulnerable, including children, the aged, the disabled, refugees and patients who are unable to consent (whether on a temporary or permanent basis, including the mentally ill) provide a number of challenges for health, aged care and community service providers.
The demand for care is growing, funding is getting tighter and community expectations are higher. It is also becoming more difficult to attract and retain qualified staff.
There has been a number of Royal Commissions into the health, aged care and community sectors, including the following:

the current Royal Commission into Aged Care Quality and Safety (2018/2019);
the current Victorian Royal Commission into Mental Health (2019);
the current Queensland Inquiry into aged care, end-of-life and palliative care and voluntary assisted dying (2019);
the Royal Commission into Abuse in Disability recently announced by the Australian Government (2019); and
the previous Royal Commission into Institutional Responses to Child Sexual Abuse (2017).

Some common issues include:

consent, notably the lack of capacity to consent and substitute decision making;
dealing with alleged abuse;
mandatory reporting;
qualifications and checking of people who care for the vulnerable, including police checks and child protection checks;
corporate and clinical governance and risk management;
guardianship; and
restraint, both chemical and physical – what is reasonable?

The inquiries into the Oaken Older Persons Mental Health Service in South Australia (which involved systematic abuse of aged care persons) resulted in two reports:

The Oakden Report – The Report of the Oakden Review – Dr Aaron Groves, Chief Psychiatrist (April 2017)
Oakden, A Shameful Chapter in South Australia’s History – A Report by the Hon Bruce Lander QC ICAC (February 2018).

The reviews have also resulted in the independent Review of the National Aged Care Quality Regulatory Processes and the announcement of significant reforms.
Oakden dealt with both aged care and mental health.
The Hon. Bruce Lander QC stated in his report on Oakden:
This report offers some salient lessons about identifying and properly dealing with complaints, the consequences of attempting to ‘contain’ issues of concern and withhold information from senior persons and the extraordinary dangers associated with poor oversight, poor systems, unacceptable work practices and poor workplace culture.
Above all, it highlights what can occur when staff do not step up and take action in the face of serious issues.
I appreciate that it is not always easy to step up in such circumstances. But that is what is expected of every person engaged in public administration and particularly so in respect of public officers in positions of authority who have information that might expose serious or systemic issues of corruption, misconduct or maladministration.
This is one of the most salient lessons for directors and managers of health, aged care and community providers caring for the vulnerable – essentially, do you expect, enable and encourage your staff to ‘step up and take action in the face of serious issues’?
Additional lessons can be learnt from the other recommendations from the ICAC inquiry into Oakden, including:

a review of the clinical governance and management of services;
a review of management structures to match those of overall clinical governance structures;
the assignment of responsibilities and the expectations and responsibilities imposed upon each member of staff;
training and reporting obligations for staff;
more frequent inspections and unannounced visits to facilities than in the past;
community visitors more frequently exercising the power to conduct unannounced inspections and visits than in the past;
a review of the community visitor scheme;
a review as to whether resources should be increased;
public reporting on the physical condition of all facilities for the purpose of determining whether the physical condition of those facilities are fit for the purpose for which they are being used and, if not, in what respect the physical condition of any facility is not fit for purpose;
further training in relation to complaints and the reporting of complaints;
new standards in relation to the use of restrictive practices and making the observance of those standards mandatory; and
the review of the level and nature of staff support at facilities at which services are provided to determine whether there is adequate staff to provide the necessary support at such facilities.

The Government has responded by requiring new consumer-based standards including the following:

Aged Care Approved Providers will be assessed by the new Aged Care Quality Standards (based on consumer outcomes) from 1 July 2019: Quality of Care Amendment (Single Quality Framework) Principles 2018.
From 1 July 2018, NDIS providers were required to comply with the NDIS Quality and Safeguarding Framework. The Framework provides a nationally consistent approach to help empower and support NDIS participants in exercising choice and control, ensures appropriate safeguards are in place, and establishes expectations for providers and their staff to deliver high-quality supports: National Disability Insurance Scheme (Provider Registration and Practice Standards) Rules 2018.
Following the Report into the Special Commission of Inquiry: Acute Care Services in NSW Public Hospitals (2008), by Peter Garling SC, the Inquiry recommended a Statewide System for Improving Recognition and Response to deteriorating patients be implemented across NSW. One of the best initiatives following this report was the ‘Between the Flags’ Program, which is a ‘safety net’ for patients. This program assists clinicians to intervene in the process of patient deterioration with two key interventions, namely clinical review and rapid response. Why can’t agencies such as the Clinical Excellence Commission be charged with developing similar programs for the aged, disabled and mental health sectors in terms of identifying and rapidly responding to high-risk clinical issues?
Root cause analysis, sophisticated risk management systems and open disclosure have been in place in the hospital sector for some time, however, are just being developed in some aged care and disability settings.
NDIS has introduced new standards concerning restraint and the government has announced that chemical and physical restraint in aged care homes will be better regulated.

There is certainly a role for technology, for example, clinical software has been proven to reduce medication errors.
It is a challenging time for health, aged care and community service providers. However, hopefully, it is not a lost opportunity and we can learn more and do better for the vulnerable in our community with clearer guidelines to assist providers.
Stop press: the government has just released the User Rights Amendment (Charter of Aged Care Rights) Principles 2019 (Cth).
What hospital operators need to know about the new Sterilization Standards
By Alison Choy Flannigan, Partner
The challenge
According to the press, Australian hospitals face an estimated $1 billion overhaul of their sterilization departments to improve the processing of medical equipment under new Australian Standards – AS/NZ Sterilization Standards 4187:2014 (see ‘Hospitals to improve sterilization processes in push to beat postoperative infections’, The Courier Mail, 22 October 2016).
New sterilization standards for Australia and New Zealand became operational in December 2016 and set out tougher regulations into the reprocessing of reusable medical devices in health service organisations. The changes aim to make the standards be more consistent with European standards. Hospitals are required to comply by December 2021 and the time to implement capital works to comply is drawing near.
The new sterilization standards were prepared by the Joint Standards Australia/Standards New Zealand Committee HE-023, Processing of Medical and Surgical Instruments. They supersede AS/NZS 4187:2003 Cleaning, disinfecting and sterilizing reusable medical and surgical instruments and equipment, and maintenance of associated environments in health care facilities.
Australian hospitals are required to be licensed in the relevant State and Territory and must comply with safety and quality requirements. For example, in Victoria, private health facilities are required to comply with the Health Services Act 1988 (Vic) and the Health Services (Health Service Establishment) Regulations 2013 (Vic). In NSW, hospitals are required to be registered under the Private Health Facilities Act 2007 (NSW) and the Private Health Facilities Regulation 2017 (NSW).
In order to attract private health insurance, hospitals are required to be accredited against the National Safety and Quality Healthcare (NSQHS) Standards: Private Health Insurance (Accreditation) Rules 2011 (Cth).
Health departments (regulators) determine which services must undertake accreditation to the NSQHS Standards. All States and Territories have agreed that hospitals and day procedure services will be accredited to the NSQHS Standards from January 2013.
NSQHS does not specifically refer to AS/NZS 4187:2014; however, that is implied by the term ‘relevant national standards’.
The Australian Standard AS/NZS 4187 is the national standard most commonly used to meet the requirements in Action 3.14.1 (of the 2nd Edition, which is applicable from 1 January 2019).
To comply with the requirements of Action 3.14.1, where health service organisations apply AS/NZS 4187:2014, health service organisations will need to:

complete a gap analysis to determine the current level of compliance with AS/NZS 4187:2014 and document the findings;
document a detailed implementation plan specifying timeframes to enable full implementation of AS/NZS 4187:2014 over a five-year period, from December 2016; and
implement the plan and demonstrate progress toward implementation

Hospitals are required to comply by December 2021. Accreditation is awarded on a three or four-year cycle, depending on the accrediting agency, so some facilities are coming up for re-accreditation.
We understand that a number of hospitals currently do not meet the new standards and that it will be very expensive to upgrade current facilities to be compliant. We also understand that a number of hospitals are experiencing difficulties complying with the new water quality standard.
It is absolutely mission-critical for hospitals to have properly sterilized equipment and that the equipment is available at all times.
Hospitals would want to avoid issues with the sterilization and non-availability of hospital equipment like those faced at Fiona Stanley Hospital in 2015 when delays were experienced in returning sterilized medical equipment to the hospital (see ‘Serco stripped of control for sterilising Fiona Stanley Hospital’s medical equipment’, ABC News, 24 February 2015).
Hospital operators should be assessing their compliance with the new standards and implement planning for compliance if they are not already compliant.
Retirement village update
By Emma Kulinitsch, Senior Associate
There have been some noteworthy changes to the retirement villages legislation that will not only require compliance but a serious amount of attention to detail.
What is happening in New South Wales?
Laws: The Retirement Villages Act 1999 (NSW), the Retirement Villages Regulation 2017 (NSW) and the Retirement Villages Amendment Act 2018 (NSW) (to commence 1 July 2019).
Commencing 1 July 2019, operators must provide the following services to residents in compliance with the Retirement Villages Act:

Changes required – 1 July 2019 Additional proposed changes
Additional proposed changes

An annual contract ‘check-up’ meeting with residents to discuss their contract. The operator must provide the resident with a written summary of the explanation at the meeting.
The resident is entitled to bring a support person with them or have that support person represent them during the contract ‘check-up’ meeting.
Mandatory conduct rules will prescribe rules of conduct to those staff that are managing or operating the retirement villages. The rules cover professionalism, training, competencies, performance and behaviour when performing their role.

Operators must now develop and maintain customised village-by-village emergency plans, and ensure that both residents and staff are familiar with the plan. Furthermore, the operator is required to undertake a safety inspection at least once a year and report on such findings to residents. Operators will have to maintain an asset management plan for the village’s capital items and make the plan available to current and prospective residents.
Operators will have to maintain an asset management plan for the village’s capital items and make the plan available to current and prospective residents.

Operators must conduct an annual evacuation exercise for residents to ensure familiarity with emergency protocols.
Key safety information must also be displayed in both communal areas and villages, as well as provided to residents.
Operators must obtain the residents’ consent each year before appointing a person as the auditor of the accounts for the retirement village.

What is happening in Queensland?
Laws: Retirement Village Act 1999 (Qld), Retirement Villages Regulation 2018 (Qld), Housing Legislation (Building Better Futures) Amendment Act 2017 (Qld) and Health and Other Legislation Amendment Bill 2018 (Qld).

Required changes – 1 February 2019
Proposed phases

PRIOR TO Retirement Village Living – operators must comply with certain pre-contractual disclosure obligations when engaging, communicating and providing information to prospective residents.
Specifically, operators must provide a Form 3 Village Comparison Document, a Form 4 Prospective Costs Document, the residence contract (eg a lease) and any by-laws for the village at least 21 days before entering into the residence contract.
An entry condition report must also be prepared by the operator prior to the resident occupying the unit.
Additional phases will continue to roll out throughout the year, which will deal with:

redevelopment;
change of ownership;
new standards for residence contracts; and
financial reports and budgets.

DURING Retirement Village Living – operators must make available a variety of ‘operational documents’ to residents who request access to them.

POST Retirement Village Living – operators must provide certain documents to the resident upon exit. These include information about reinstatement, renovation works and statutory buy-back provisions.
An exit condition report must also be provided by the operator to the resident within 14 days of the resident vacating the unit.

What is happening in Victoria?
Laws: Retirement Villages Act 1986 (Vic) and Retirement Villages (Contractual Arrangements) Regulations 2017 (Vic).

Overview
Recommendations

The Retirement Villages (Contractual Arrangements) Regulations 2017 (Vic) commenced on 30 July 2017 and focuses on:

payments that are made to residents on exit;
when financial assistance will be provided; and
how a residential accommodation deposit or daily accommodation payments are calculated.

The Regulations are extremely prescriptive in terms of what content is to be included and prohibited from resident contracts, management contracts, disclosure statements and fact sheets.
Given this, it is advisable for operators to have these documents legally reviewed.

Retirement Village Accreditation Scheme Standards
The Australian Retirement Village Accreditation Scheme (ARVAS) has been created jointly by the Property Council of Australia and Leading Age Services Australia (LASA), two organisations that represent retirement village owners and operators around the country. The draft has been released for comment.
These new standards create a unified accreditation scheme for all Australian retirement villages, which ensure that each village meets minimum quality standards and processes when delivering and operating services.
As part of ensuring that operators, residents and other interested stakeholders have an opportunity to be heard on the accreditation standards, Leading Age Services Australia and the Property Council of Australia have opened a feedback window from now until Friday, 12 April 2019. Feedback can be emailed directly.
Are there proprietary rights in sperm?
GLS v Russell-Weisz & Ors [2018] WASC 79.
By Anne Wilson, Lawyer
Background
There have been a number of cases involving women attempting to access the sperm of their deceased former or ex-partner.
Western Australian law prohibits the use of donated gametes after the owner’s death to impregnate a woman.1
In this case2, the 42-year-old plaintiff3, GLS, was the de facto partner of ‘Gary’ at the time he died. He suffered a cardiac arrest, which rendered him unconscious on 27 January 2016. He was pronounced brain dead on 2 February 2016. After discussions with his family, including GLS, the decision was made to take Gary off life support and allow him to die. Permission was granted to GLS to arrange for sperm to be removed from Gary’s body soon after death, with the intention for her to use the sperm to conceive a child. At the time of the hearing, two years after Gary’s death4, the sperm had been stored (cryopreserved) by a fertility clinic (licence holder5) since extraction.
GLS informed the Supreme Court of Western Australia that a clinic in the Australian Capital Territory was prepared to use Gary’s sperm in IVF procedures in the ACT to assist GLS to fall pregnant. However, Clause 6.5 of the Directions also prohibits a licence holder from exporting (or facilitating export of) ‘donated’ gametes from the State for use in an artificial sterilization procedure without prior approval of the Reproductive Technology Council of WA (RTC). An application by GLS to the RTC to export Gary’s sperm to the ACT was refused.
Application to the WA Supreme Court
GLS sought declaratory relief through an application to the Supreme Court of Western Australia in order to direct the clinic to transfer Gary’s sperm to the ACT. As she (and her legal advisers) was of the view that she did not actually need the approval of the RTC to do so, she also sought a declaration to that effect, or in the alternative, that the Directions were invalid (to the extent approval is required) and should be read down such that approval is not required.
In support of her application, a number of affidavits were prepared in evidence to support the contention by GLS that she was Gary’s de facto partner, and that he had a strong desire to father a child with her. The plaintiff was 42 at the time of the hearing and was anxious to resolve the issues around the export of the sperm to the ACT, so that she could conceive as soon as possible. The defendant (the CEO of the Department of Health, WA) did not raise an issue about the fact that she had waited two years to commence proceedings, and other than a cursory observation by Chief Justice Martin, this issue was not taken any further.
The affidavit evidence was that GLS had met Gary in November 2009, when they were both single. Gary had children from a previous relationship. They were both of limited means, with Gary working occasionally and GLS employed part-time. They started living together in April 2010, and in March 2011, Gary bought GLS a puppy to test how they would cope with parenthood, once they could afford to have children.
Although GLS accepted Gary’s marriage proposal in mid-2012, she deferred the marriage until they had their own home. In October 2014, Gary suggested GLS have his sperm frozen so she could have his children if he died prematurely. The evidence of GLS was that Gary had a fear of dying young like his father and uncle. However, she did not share the fear and, partly due to the cost, she did not act on Gary’s suggestion. Gary also gave GLS a number of baby gifts and raised the topic of having children again in September 2015. In September 2015, GLS applied for a ‘Keystart’ home loan6, which was approved in December 2015. Settlement of a unit as a result of that process took effect in February 2016, about a month after Gary died.
Gary’s son (and executor of Gary’s estate), JDT, consented to the use of Gary’s sperm by GLS on the condition that she did not contact him or his immediate family (with the exception of his mother) or ask for financial assistance. GLS’s mother, her sister and a friend of Gary’s also swore statements, which were attached to the affidavit of GLS, to corroborate her evidence that Gary had suggested freezing his sperm in case something happened to him, and that the topic of having children was discussed regularly between the couple.
Process of applying to RTC
Solicitors for GLS applied to the RTC for approval to export Gary’s sperm to the ACT, even though they did not believe the approval was necessary on the basis that clauses 6.5 and 6.6 of the Directions did not apply, as the sperm was not donated. However, after consideration of further information provided by GLS and her solicitors, the RTC took a different view and refused to grant the approval. Although the RTC’s ruling was not discussed in any detail in this decision, it appears that the thrust of the reasons for the refusal was that using gametes, which were extracted posthumously, could contravene clause 8.9 of the Directions.
The picture painted by GLS about the relationship she had with Gary appeared to be inconsistent with an entry made by a social worker in his medical records at the time of his admission to hospital, after his cardiac arrest. It seems that although they had been in a relationship for six years, Gary drank excessively, was homeless and unemployed and they had not lived together for over two years. However, GLS was noted variously as Gary’s next of kin, girlfriend and partner elsewhere in the records. On that basis, the posthumous removal of Gary’s sperm was approved under section 22 of the Human Tissue and Transplant Act 1982 (WA) (HTTA).
GLS swore to a second affidavit setting out in detail her relationship with Gary from the time they met until his death. They commenced living together in April 2010 at various rented premises until June 2013. After this time, they were forced to live apart for a period due to the difficulty they had finding further accommodation because of the property boom in Perth. However, they continued to socialise and they maintained a sexual relationship. Gary’s financial situation deteriorated to the point that he lived in his car. He moved to a rented room, followed by various temporary places of accommodation, with the financial assistance of GLS over the course of the next 12 months. GLS funded Gary’s accommodation in a hotel when his daughter visited him from the country.
Over the following year, Gary and GLS made an application in the Keystart program, hoping to buy a house in which they could live together. Gary travelled to Karratha (funded by GLS) in an attempt to find work in early 2016, and then returned to Perth just before his death. GLS paid for Gary’s funeral.
Questions the court was asked to determine
Based on the evidence GLS had put before the court, she sought the court’s determination of the following questions:

whether Gary’s sperm could be transferred from WA to the ACT;
if the court determined the sperm could be moved, whether GLS required the approval of the RTC before the move, and in that regard, whether the gametes were ‘donated gametes’ within the meaning of clause 6.5 and 6.6 of the Directions (Directions) issued under the Human Reproductive Technology Act 1991 (WA) (HRTA); and
if approval was required, were clauses 6.5 and 6.6 of the Directions invalid on the basis they are:

inconsistent with section 22 of the HTTA;
inconsistent with section 22 of the Sex Discrimination Act 1984 (Cth);
inconsistent with section 69 of the Australian Capital Territory (Self Government) Act 1988 (or alternatively, contrary to section 92 of the Commonwealth Constitution); or
contrary to section 118 of the Commonwealth Constitution.

The parties to the application agreed that the answer to Question 1 should be answered affirmatively. Chief Justice Martin was of the view that if Question 2 was answered in the negative, GLS must succeed in her claim, and addressing Question 3 became unnecessary. If it was necessary to answer Question 3 (that is, if Question 2 was answered in the affirmative) and Question 3 was answered negatively, the claim must fail.
Chief Justice Martin concluded that clauses 6.5 and 6.6 of the Directions did not apply to the circumstances of the case as they do not involve the ‘donation’ of gametes.
Question 3
On the basis of the affirmative answer to Question 1 (Gary’s sperm could be transferred from WA to the ACT), and the negative answer to Question 2 (the gametes were not ‘donated gametes’ within the meaning of clause 6.5 and 6.6 of the Directions), GLS was entitled to the relief she sought, and it was considered inappropriate to resolve Question 3.
Conclusion
This judgment raises interesting questions of ownership and legal recognition of property rights in human tissue. This particular decision is limited to the unique situation of the plaintiff, GLS.
What is clear is that decisions of this nature will be heavily influenced by the factual context in which such applications are made, as well as the specific legislative framework
in place in the relevant jurisdiction.
A version of this article was first published in the Australian Health Law Bulletin.

1Clause 8.9 of Directions issued under section 5(5) the Human Reproductive Technology Act 1991 (WA) (Directions). Section 5(5) provides that Directions given by the CEO shall have effect, except to the extent of any inconsistency with the regulations or Code. While the Human Reproductive Technology Act provides for the publication of a Code of Practice, this has not occurred.
2GLS v Russell-Weisz & Ors [2018] WASC 79.
3At n 1, at para 10.
4At n 1, at para 10.
5Under Part 4 of the Human Reproductive Technology Act 1991 (WA). A license holder is a person who holds a licence under Part 4 of HRT and is authorised or permitted, in accordance with section 51, to carry on, supervise or manage a reproductive technology practice or specified activities.
6A low deposit home loan available to first and non-first homebuyers in WA.

Are staffing ratios relevant to negligence?
By Rachael Arnold, Partner, and Catherine Blair, Senior Associate
Inquest into the death of Jarrod Wright –  17 December 2018 and 18 January 2019
Mr Jarrod Wright (42) had been admitted and was being treated for cellulitis in his right thigh at Liverpool Hospital on 30 June 2016 when complications arose and ultimately ended in his death on 9 July 2016. The inquest into Mr Wright’s death considered whether Mr Wright’s treatment in the intensive care unit (ICU) and, in particular, the nursing-to-patient ratio in the ICU, had been appropriate.
Facts
On 3 July 2016, Mr Wright was transferred from the orthopaedic ward to ICU after nursing staff had encountered difficulty maintaining intravenous access to administer his antibiotics (which caused Mr Wright to miss some doses on 1 and 2 July) and Mr Wright had become hypoxaemic, with the levels of oxygen in his blood sinking to 60%.
In ICU, it was suspected that Mr Wright was suffering acute respiratory distress syndrome (ARDS), which is respiratory failure characterised by rapid onset of inflammation in the lungs. In order to improve Mr Wright’s respiratory function, he was placed on oxygen support ventilation administered through a mask (CPAP).
However, Mr Wright became increasingly frustrated with his non-rebreather mask and then refused to use it at all. The registered nurse (RN) informed the ICU registrars that he was concerned that Mr Wright’s agitation was adversely impacting his ability to comply with treatment. He secured a dose of Diazepam to help settle Mr Wright.
At around 3pm, Mr Wright became angry and frustrated when he was told he should use a bedpan instead of accessing the toilets. Mr Wright removed his blood pressure cuff and refused to replace it or to take any further Diazepam.
Later, after the RN had returned from his meal break, he found that Mr Wright had disconnected from his monitor again to go to the bathroom and that his oxygen levels had dropped. The RN remained in Mr Wright’s room until he was satisfied that Mr Wright’s oxygen saturation levels had returned to an acceptable level. He called for assistance from the ICU registrars, at which point a sedative of Dexmedetomidine in the form of an infusion was prescribed.
From 7pm, a new RN had taken over the shift and stayed with Mr Wright until 10pm. In that time, Mr Wright remained agitated and continually attempted to remove his oxygen mask, with the result each time that his saturation levels dropped to between 60 and 80%. Also during that time, the senior ICU registrar requested that the RN increase Mr Wright’s ventilation pressure.
When Mr Wright fell asleep at approximately 10pm, the RN left the room to attend to his other patient. Fifteen minutes later, the RN returned and found Mr Wright lying across his bed with the monitoring leads detached. There was a trail of blood and faeces from the bathroom. The RN replaced Mr Wright’s oxygen mask and raised the alarm, noting that Mr Wright’s skin was bluish in colour, he was unresponsive and his breathing was shallow. Mr Wright’s care was escalated to life support.
Although the resuscitation team achieved a return to spontaneous circulation, Mr Wright had received significant brain damage due to his lack of oxygen. On 9 July, Mr Wright’s family made the difficult decision to remove him from life support.
Cause of death
At the inquest, the medical experts generally agreed that the cause of Mr Wright’s death was his failure to receive sufficient oxygen to maintain his cardiac function with the immediate triggering event being the removal of Mr Wright’s oxygen support (likely by himself). It was considered that the reason Mr Wright required oxygen support was most likely related to the effect of the Escherichia coli (E. coli). It was not possible to diagnose a distinct cause for the E. coli septicaemia, although the experts considered it unlikely to have been the thigh cellulitis, which was resolving at the time Mr Wright’s respiratory distress developed.
Appropriateness of nursing ratio
At the time of Mr Wright’s death, the local hospital guideline regarding nurse/patient ratios stated that patients who were critically ill or ventilated, required a 1:1 nursing ratio. This included intubated and ventilated patients, patients who were on non-invasive ventilation and patients who were restless, agitated and clinically unstable. It appeared to the deputy coroner that the guideline had been interpreted in such a way that CPAP ventilation did not always require 1:1 nursing.
In the opinion of Associate Professor Richard Lee (intensive care specialist and anaesthetist), Mr Wright was too agitated to cooperate with his essential oxygen support and, in the circumstances where Mr Wright was suffering a severe hypoxemic lung condition, intubation was justified or, at the very least, continuous nursing observation required.
It was the evidence of the junior registrar and the nursing unit manager that they were not aware of the severity of Mr Wright’s agitation or the extent to which it was placing him at risk. The deputy coroner took this as an inference that, had they been aware, they would have acknowledged that Mr Wright met at least one of the existing criteria for 1:1 nursing, namely that Mr Wright was ‘restless, agitated and clinically unstable.’
Accordingly, the deputy coroner concluded that Mr Wright did not receive appropriate nursing care allocation and that the reason for this was related to a ‘lack of effective communication’ regarding Mr Wright’s nursing needs together with ‘a lack of clarity as to the criteria for 1:1 nursing.’ She adopted as a recommendation a submission from the NSW Nurses & Midwives Association that there would be benefit in upgrading the revised guideline to the status of a policy directive. In doing so, the deputy coroner noted that, where the guideline for the 1:1 ratio that had been in place at the time of Mr Wright’s death and had either not been properly understood or properly regarded by ICU staff, revising the guideline to a policy directive would enhance its importance.
The deputy coroner noted:
It is acknowledged that nursing and medical staff receive training to assist them with such communication issues. Despite this the personal and cultural impediments to effective communication within hospital hierarchies remain a recurring feature in the circumstances of hospital deaths like [Mr Wright’s].
Commentary
This case is particularly interesting because the Coroner had specifically mentioned the issue of staffing ratios as a potential contributor to the adverse outcome.
Social and affordable housing – investing in human capital
By Mark Richards, Special Counsel
Investment in social infrastructure delivers both tangible and intangible benefits such as improvements to health, education and shelter.
There are bi-directional benefits to housing and health, with:

the provision of effective shelter improving quality of life;
improving housing quality standards reducing reliance on health services through reduced doctor and hospital referrals, resulting in a health dividend; and
increased household formation – when young people can leave the family home, this results in savings to the health system.

On the flip side, loss of shelter is the primary cause of mental health issues among the homeless, resulting in increased government expenditure across health, justice and other welfare systems.
Is this why the Scottish Government are building 50,000 affordable homes before 2021?
Do we need to build more social and affordable housing?
An Australian Housing and Urban Research Institute (AHURI) report in 2017 estimated 1.3 million households were in a state of housing need, whether unable to access market housing or in rental stress, with this figure estimated to rise to 1.7 million by 2025.
More recent research estimates that 730,000 new social housing dwellings will be required over the next 20 years to address the current deficit and future need.
While Labour have pledged to build 250,000 affordable homes over 10 years, one can only imagine the productivity benefits and health dividend to be derived from having over a million households lifted out of rental stress and afforded the opportunity to focus on more entrepreneurial endeavours.
How do we rectify the current imbalance?
Sustainable and inclusive social infrastructure asset growth requires assistance from both government and the private sector.
To deliver the high volumes needed to close the current housing gap, Australia need only look overseas to leverage new ways to deliver social infrastructure assets. The Scottish Futures Trust HubCo model, for example, enables the development of co-located social infrastructure facilities, made up of area partnerships between councils, health authorities and the private sector. These partnerships agree on a long-term strategic development plan, enabling the construction of targeted developments to cater for localised need. The Scottish Government is leveraging the HubCo model to deliver its 50,000 affordable homes target.
At a recent forum, we were fortunate to have Martine Letts, Committee for Melbourne CEO, who advised that the Committee for Melbourne has identified “Housing Mix” as a Strategic Need which will guide the Committee’s future agenda with a series of tangible policy initiatives. This has been identified as a priority due to the high cost of living – of which housing costs are a major determinant – which has a detrimental effect on a city’s creativity and innovative capacity. Expensive cities make self-employment and entrepreneurship more difficult. In addition, without affordable housing, emergency and public service workers will be unable to live near their place of work.
The Committee for Melbourne’s Housing Mix Taskforce project scope has been agreed and the Taskforce will now map out how to achieve affordable housing outcomes for Greater Melbourne.
Clearing the way for justice:  NSW removes barriers to redress for victims of organisational child abuse
By Ahranee Vijayaseelan, Partner, and Erin Doyle, Lawyer
Following the profound and often shocking revelations that came to light during the Royal Commission into Institutional Responses to Child Sexual Abuse, the NSW Government has acted swiftly to adopt a range of measures designed to assist future victims of institutional child abuse to gain access to legal redress.
Previously, survivors of organisational child abuse faced numerous legal hurdles when attempting to seek redress for the immeasurable harm they suffered.
On 26 October 2018, the Civil Liability Amendment (Organisational Child Abuse Liability) Act 2018 (NSW) (Act) was enacted. The new legislation introduces a statutory duty on both public sector agencies, private organisations and unincorporated organisations to prevent the abuse of children. Relevantly, the Act applies only to child abuse perpetrated after the enactment date.
In brief, the key changes implemented by the Act are as follows:

a statutory duty of care is imposed on organisations that exercise care, supervision or authority over children to prevent child abuse perpetrated by individuals associated with the organisation;
the duty of care owed by an organisation to protect a child from abuse is non-delegable such that the organisation will be responsible even where it has delegated care, supervision and authority of
the child to another organisation;
the usual onus of proof that applies in negligence cases is reversed so that the organisation must establish that it took reasonable precautions to prevent the abuse; and
vicarious liability is extended to include child abuse perpetrated by non-employees whose relationship with the organisation is ‘akin to employment’ – closing the ‘loophole’ where organisations would escape liability simply because the perpetrator was not technically an ‘employee’ of the organisation.

It is yet to be seen how effective these measures will be at achieving their purported outcomes, given the Act’s relative infancy. Nevertheless, organisations that routinely work with or around children should ensure their child safety policies and risk management procedures are regularly reviewed, updated and implemented. Organisations will need to review their staff recruitment and management policies and procedures. In particular, position descriptions should be developed for positions and volunteer roles of people who work with children unsupervised that identify the requirements and training needs for the role.
If in doubt as to how the provisions in the Act may affect your organisation, legal advice should be sought as soon as possible.
Genomics and genetics: legal and ethical issues
By Alison Choy Flannigan, Partner
Genetics is the study of heredity, whereas genomics is defined as the study of genes and their functions, and related techniques.
The main difference between genomics and genetics is that genetics scrutinises the functioning and composition of the single gene, whereas genomics addresses all genes and their inter-relationships in order to identify their combined influence on the growth and development of the organism.
Genomics can assist in personal health profiling, disease diagnostics, research and precision medicine.
Legal and ethical issues arise in relation to genomics, including equity of access, consent, confidentiality, availability for the greater good versus privacy, patient choice and ownership.
Currently, gene technology is regulated in Australia through a number of laws including the following:

Gene Technology Act 2000 (Cth), specifically section 32 which prohibits a person from dealing with genetically modified organisms without a licence or other authority under that legislation;
human tissue legislation, such as the Human Tissue Act 1983 (NSW); and
Prohibition of Human Cloning for Reproduction Act 2002 (Cth).

While genomics brings the prospect of benefits for patients and the potential to revolutionise diagnosis, screening, prevention and treatment, it also raises a number of ethical challenges, including:
Equity of access: should access only be available to those who can afford to pay for it?
Consent: can a person consent without knowing the full implications of what they are consenting to? With genomics, the boundaries of the possibilities are constantly expanding.
Confidentiality: the sharing of patient information is vital in order to assess the significance of individual genetic variants by comparing them to the norm. Genomics may test the boundaries of consent, particularly when information is known about one person, but could be of significant value to their family members and their health care providers.
Availability for the greater good and adequate protection of genetic data: what if something is discovered of clinical significance to humanity? The uniqueness of our genetic data means that it can never be truly anonymous. Protections need to be put in place to reduce the risk of discrimination based on genetic characterisations.
Patient choice: many patients have suffered several years of delayed diagnosis. Genomics may result in significant improvement in patient outcomes. In the future, should genomic testing be mandatory for the population to assist with health planning? However, people should have a right to privacy and many people may make the conscious choice not to be provided with information concerning their mortality. Ultimately, the challenge is to enable patients to have the choice. If they have the choice, then are they stealing from their family members their choice as well?
Ownership: what if a particular individual’s genome is so unique as to unlock a key in medical discovery? Should pharmaceutical companies own intellectual property rights and therefore monopoly rights involving the fabric of a person’s genome?
Ethics and religion with selection and genomic manipulation: at what point does genomic manipulation become acceptable? To save a life? To save many lives? To save a population? What religious and cultural considerations should be taken into account? How far should patient choice go? For example, medical science is used already in some cases in relation to the non-selection of embryos with defective genes, or testing for the risk of birth defects. What about using it for choosing the sex of a baby and/or physical or mental attributes?
The time is fast approaching where the development of technology is testing the boundaries. The question is whether or not the law (and legal protection) will keep pace?
Changes to modern health and community awards: what you need to know
By Kylie Groves, Partner, and Louise Chen, Lawyer
Both employees and employers need to be aware of changes made to modern awards in the health and community services sector over the past six months. Not only do the changes impact on employee entitlements and employer obligations, but they can also have an impact on current workplace practices and policies. Failure to comply can give rise to employees making underpayment claims and/or penalties for breaching the award.
Modern awards in this sector include the:

Health Professionals and Support Services Award 2010 (HPSS Award);
Aged Care Award 2010;
Medical Practitioners Award 2010;
Nurses Award 2010; and
Social, Community, Home Care and Disability Services Award. (Awards).

Recent changes that have been made to all modern awards include the following:
Family and domestic violence leave: In the middle of last year, awards were amended to provide employees with five days’ unpaid leave to deal with family and domestic violence. The full five days of unpaid leave is available at the start of each 12-month period but does not accumulate from year to year. This change is now also reflected in the NES following amendments to the Fair Work Act 2009 (Cth), which took effect on 12 December 2018.
Right to request casual conversion: A new clause was inserted into awards in September 2018 so that regular casual employees can now request in writing for their employment to be converted to full-time or part-time. The employer may only refuse this request on ‘reasonable grounds’ after consultation with the employee.
It is also now a requirement that an employer must provide a casual employee with a copy of the relevant award clause within the first 12 months of the employee starting work. Casual employees already employed as at 1 October 2018 had to be provided with a copy of the clause by 1 January 2019. If you have not yet done this as an employer, it is important you do this as soon as possible.
In addition, the following amendments were made to the awards late last year:
Individual flexibility arrangements (IFA): If the employer proposes to vary the terms of the award with the employee’s agreement (by making an IFA) and they are aware, or reasonably should be aware, that the employee has limited understanding of English, then they must take reasonable steps to ensure that the employee understands the proposal. Employers are now required to take ‘measures’ to ensure the employee understands the proposal if they are made aware the employee has a limited understanding of English.
Notice of termination by an employee: A change to the Termination of Employment clause now makes it clear that an employer cannot deduct more than one week’s wages from an employee who fails to provide the requisite amount of notice. Furthermore, employers must not make any deductions from the employee’s wage if the employee is under 18.

Payment on termination of employment: The awards have also been amended so that it is now a requirement that an employer must pay an employee their termination pay/entitlements within seven days after the termination of employment.
Request for flexible working arrangements: Before responding to a request for flexible working arrangements, employers are now required to discuss with the employee their request, with regard to certain factors such as the needs of the employee arising from their circumstances. Any reasonable business grounds for refusing the request must also be discussed. If the employer refuses the request, their written response must address possible alternative options.

In addition to the above changes that were made to all awards, further award-specific amendments have been made. For instance, the following changes have been made to the HPSS Award:

Rostering: The amendments enable a roster to now be altered at any time without consultation to enable the functions of the hospital, facility or organisation to be carried on, due to the absence of another employee because of personal/carers’ leave, compassionate leave, ceremonial leave and leave to deal with family and domestic violence. This was previously restricted to ‘on account of illness or in an emergency’.
Meal breaks: An amendment of the meal breaks clause means an employee who works less than six hours may choose to skip their meal break with the consent of their employer.
Shift work: Casual employees working shift work will now be paid a loading of 40% of their ordinary rate of pay instead of the casual loading of 25%. The shift loading of 15% (which applies to shifts that start and/or finish late) does not apply to shift work performed by an employee on Saturday, Sunday or public holidays where the extra loading for those days already apply.

It is important to keep up to date with variations that apply to your organisation because a failure to comply with an applicable award can give rise to employees making underpayment claims and/or the imposition of a penalty for breaching the award. It is also important because sometimes amendments are made to an award to provide greater flexibility for the benefit of the employer.
What are the tax advantages for charities, public benevolent institutions and health promotion charities?
By Peter Murray, Partner
Non-profit organisations in the health and aged care sectors may be entitled to taxation benefits such as an income tax exemption, fringe benefits tax (FBT) concessions and stamp duty exemption.
Registration as a charity with the Australian Charities and Not-for-profits Commission (ACNC) is generally a requirement to obtain these benefits. Charities registered with the ACNC as a Public
Benevolent Institution (PBI) or Health Promotion Charity (HPC) may access additional benefits such as deductible gift recipient (DGR) status.
Specific requirements apply for registration as a HPC or PBI. Broadly, a PBI must be a charitable institution whose principal purpose is to relieve poverty, sickness, suffering or disability. A HPC must be a charitable institution whose principal purpose is to promote the prevention or control of diseases in human beings.
Charities should keep in mind their approvals and charitable objects in making decisions to expand their operations to ensure that they do not put their charitable tax approvals at risk. For example, expansion into childcare services for the general community is not a PBI activity unless incidental to the charity’s approved purpose.
Income tax exemption
Registered charities, including PBIs and HPCs, can obtain an income tax exemption. An endorsement from the Australian Taxation Office (ATO) is required to access this exemption.
FBT concessions
An FBT exemption is available for registered PBIs and HPCs, public and non-profit hospitals and public ambulance services. For each employee, the exemption is capped at $30,000 for registered
HPCs and PBIs and $17,000 for public and non-profit hospitals and public ambulance services.
Charities ineligible for the FBT exemption may be able to access a FBT rebate. The FBT rebate is available for institutions that are registered as charities with the ACNC. Certain other non-government or non-profit organisations may also qualify for the FBT rebate. The FBT rebate is currently 47% of the grossed up value of benefits provided.
For both the FBT exemption and FBT rebate, a $5000 capping threshold applies for salary packaged meal entertainment and entertainment leasing expense benefits.
Payroll tax exemption
Wages paid by non-profit organisations, PBIs and health care service providers may be exempt from payroll tax. Payroll tax is a State-based tax and it is necessary to consider the requirements for each relevant State or Territory.
Stamp duty exemption
Charities may also be entitled to an exemption from stamp duty. Again, stamp duty is a State-based tax and it is necessary to consider the requirements for each relevant State or Territory.
DGR status
Registration as a charity does not of itself provide an organisation with deductible gift recipient (DGR) status, allowing certain donations to be tax deductible for the donor. Only certain categories of entities are entitled to DGR status, which requires a specific application and endorsement with the ATO. Registered PBIs and HPCs may obtain an endorsement for DGR status.
Hall & Wilcox has a very experienced charity and not-for-profits service offering, which can assist organisations in the health and aged care sectors to determine their eligibility for the above tax concessions.
Emma Kulinitsch
Senior Associate, Sydney
We are delighted to announce Emma Kulinitsch has joined our Health and Community team as a Senior Associate based in our Sydney office.
Emma has experience across a range of industries, including aged care, technology and commercial. She has also worked with research and development corporations and in the not-for-profit environment.
Emma’s previous experience includes in-house roles with a major NSW-based residential aged care and home care services provider and retirement living operator and a provider of innovative e-health solutions for pharmacists.
Chris West
Special Counsel, Brisbane
Chris West specialises in medical defence litigation defending hospital operators and medical practitioners.
After studying science at Canberra University and nursing studies at Sydney University, Chris has had a career in government (predominantly with the Federal Department of Health); unforgettable times at St Vincent’s Hospital; midwifery at the Royal Women’s Hospital (RWH) Brisbane; community nursing; work in NICU; out-of-hours nurse manager at the RWH; and post-grad study and work at Kings College London neonatal intensive care, which at the time was at the forefront of fetal medicine and pioneering ECMO for babies.
He has practised in health law since 1999.
Chris’s clinical background assists his relationships with clinicians and administrators, and his ability to quickly understand clinical scenarios and distil the pertinent issues. He can contextualise care, and empathise and relate to clinicians, as well as patients/claimants.
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Key learnings from the Parliamentary inquiry
In early 2018, a Parliamentary inquiry was established to address alleged systemic issues within the franchising sector. On 14 March 2019, the Parliament released its report on the operation and effectiveness of the Franchising Code of Conduct.
The recommendations of the report are comprehensive and, if adopted, could result in significant amendments to the Franchising Code of Conduct, as well as changes to the law.
Please join Jacqui Barrett and Fay Calderone from Hall & Wilcox to learn more about the key recommendations from the inquiry and what the long-term implications for franchisors and franchisees may be.

Event details

Date
Tuesday 16 April 2019

Time
3:30pm – 5:00pm

Venue
Parkroyal Parramatta
30 Phillip Street
Parramatta 2150
Map

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

RSVP

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‘Whereas it is essential, if man is not to be compelled to have recourse, as a last resort, to rebellion against tyranny and oppression, that human rights should be protected by the rule of law.’
– Preamble to the Universal Declaration of Human Rights
It has been more than 70 years since the proclamation of the Universal Declaration of Human Rights and Australia remains the only western democracy without some form of a national bill of rights. But the states and territories are taking matters into their own hands and, in February, Queensland became the third jurisdiction in Australia (behind Victoria and the ACT) to protect human rights in law when the Human Rights Act was passed through the Queensland Parliament.
Twenty-three vital human rights, including freedom of association, freedom of expression, the right to education and health services, the right to humane treatment in detention and the cultural rights of Aboriginal and Torres Strait Islander people, will now be better protected in Queensland law. This Act is the strongest model of human rights protection yet seen in Australia, as it includes an accessible complaints mechanism, which allows anyone who considers their human rights have been infringed by a public entity to go directly to the Queensland Human Rights Commission to have their issue heard and responded to.
In passing this Act, the Queensland Government has provided a vital tool to not only protect the human rights of Queenslanders but to also better deliver social justice.
Core to international human rights law are the principles of equality and non-discrimination. Recognition of those rights is the foundation of justice.1 Fairness and equality are concepts inherent to any understanding of ‘social justice’.2 Part of social justice is providing an equal opportunity to obtain social goods such as health care, housing, employment and education. Ensuring the recognition and protection of human rights in law means that Queenslanders will now enjoy improved social justice outcomes, as have people in other jurisdictions before them.3
The Human Rights Act will allow Queenslanders to hold public authorities to account through formal dispute mechanisms and also to challenge decision making and negotiate better outcomes based on human rights principles. In the ACT, the government noted a positive impact on political debate and consideration of policy issues as well as an impetus for agencies to consider human rights issues.4 In Victoria, the Human Rights Charter has played an important role in ensuring human rights are appropriately considered by government, leading to improvement in public service design, delivery and outcomes.5 The Charter drives important human rights initiatives to address systemic issues.6
People that have the most difficulty accessing social resources are most in need of a Human Rights Act to enforce their rights. They also often require pro bono legal services. Those who provide pro bono legal services in Queensland are well advised to properly understand the Act and how it can be used to deliver better outcomes for clients and social justice in Queensland.

1Preamble of the Universal Declaration of Human Rights and Art 1 and 2.
2The Macquarie Dictionary defines ‘Social Justice’ as: ‘a concept of justice which requires there to be a fundamental fairness in the way in which individuals can be active and productive participants in a society which thus enables its individual members to participate fully.’
Baldry describes social justice as ‘ensuring systemic and structural social arrangements to improve equality’ – Eileen Baldry, ‘The Revival of Social Justice’ (Speech delivered at the Marg Barry Memorial Lecture, Alexandria Town Hall, 16 September 2010) 7.
3Nathan Kennedy, ‘How a Human Rights Act would make a Practical Difference to Improve Social Justice in Australia’, Court of Conscience, Issue 11, 2017, 16.
4ACT Justice and Community Safety Directorate, Government Response: Australian National University Human Rights Research Project Report The Human Rights Act 2004 (ACT): The First Five Years of Operation (March 2012), 2 and 26.
5Human Rights Law Centre, “More Accessible, more Effective and Simpler to Enforce: Strengthening Victoria’s Human Rights Charter, HRLC Submission to the 2015 Review of the Victorian Charter of Human Rights” (June 2015), 1.
6Victorian Equal Opportunity and Human Rights Commission, 2014 Report on the Operation of the Charter of Human Rights and Responsibilities (June 2015) at 1, .
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Leading independent business law firm Hall & Wilcox is pleased to announce 49 lawyers have been recognised in the 2020 Best Lawyers in Australia list, as published in today’s Australian Financial Review.
Best Lawyers is a peer review guide to the legal profession worldwide. Lawyers are reviewed by their peers based on professional expertise and likelihood to refer work and are divided by location and practice areas.
Hall & Wilcox would like to congratulate the following people:

Tony Macvean, Managing Partner – Commercial Law, Corporate Law
Jane Baddeley, Partner – Leasing Law, Real Property Law
Alison Baker, Partner – Employee Benefits Law
Natalie Bannister, Partner – Real Property Law
Paul Baxter, Partner – Commercial Law, Insurance Law, Personal Injury Litigation, Shipping & Maritime Law, Trade Law, Transportation Law
Fay Calderone, Partner – Labour and Employment Law
Drew Castley, Partner – Ethics and Professional Responsibility Practice, Insurance Law, Litigation, Professional Malpractice Litigation
Deborah Chew, Partner – Corporate/Governance Practice
Alison Choy Flannigan, Partner – Biotechnology Law, Health & Aged Care Law
Aaron Dearden, Partner – Labour and Employment Law
Mark Dessi, Partner – Project Finance and Development Practice
Graydon Dowd, Partner – Litigation, Product Liability Litigation
Mark Dunphy, Partner – Labour and Employment Law
Heather Gray, Partner – Funds Management, Investment Funds, Superannuation Law
Ben Hamilton, Partner – Intellectual Property Law
John Hutchinson, Partner – Corporate Law, Corporate/Governance Practice, Equity Capital Markets Law, Funds Management, Investment Funds, Mergers and Acquisitions Law
Mark Inston, Partner – Asset Finance Law
Wayne Kelcey, Partner – Litigation
Terry Killian, Partner – Insurance Law, Personal Injury Litigation
Stephen Klotz, Partner – Alternative Dispute Resolution, Litigation
Andrew Lyle, Partner – Insurance Law, Personal Injury Litigation, Product Liability Litigation
Anne MacNamara, Partner – Superannuation, Wealth Management / Succession Planning Practice
Jason McMahon, Partner – Personal Injury Litigation
Peter Murray, Partner – Tax Law
Harry New, Partner – Corporate/Governance Practice
Matthew Needham, Partner – Litigation
Andrew O’Bryan, Partner – Tax Law
Michael Parker, Partner – Tax Law
Ed Paton, Partner – Commercial Law, Corporate Law
Mark Petrucco, Partner – Alternative Dispute Resolution
Martin Ross, Partner – Defamation and Media Law, Entertainment Law, Sports Law
Joel Sheldrick, Partner – Insurance Law
Rhett Slocombe, Partner – Insurance Law
Kelli Stallard, Partner – Insurance Law, Personal Injury Litigation, Product Liability Litigation
Nicholas Studdert, Partner – Personal Injury Litigation
Joanna Turnbull, Partner – Insurance Law
Adrian Verdnik, Partner – Funds Management
Ahranee Vijayaseelan, Partner – Insurance Law
Noel Batrouney, Consultant – Litigation
John Coldham, Consultant – Personal Injury Litigation
Andrew Fairley AM, Consultant – Superannuation Law
Keith James, Consultant – Tax Law
Steve Aitchison, Special Counsel – Leasing Law, Real Property Law
James Deady, Special Counsel – Commercial Law
Peter Jenkin, Special Counsel – Leasing Law, Real Property Law
Nathan Kennedy, Special Counsel – Insurance Law
Katherine Payne, Special Counsel – Alternative Dispute Resolution, Insolvency and Reorganization Law, Litigation
Graeme Scott, Special Counsel – Alternative Dispute Resolution
Sean Sullivan, Special Counsel – Insurance Law, Labour and Employment Law, Occupational Health & Safety Law

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Home care service provider found to be a non-profit organisation despite commercial dealings with related entities
In KinCare Community Services Limited v Chief Commissioner of State Revenue [2019] NSWSC 182, the Supreme Court of NSW (Court) allowed the taxpayer’s application, finding that KinCare Community Services Limited (KinCare) was a ‘non-profit organisation’ during the relevant period and that certain wages were therefore exempt from payroll tax.
KinCare, a provider of home care services to aged people, people with disabilities and Aboriginal and Torres Strait Islander people, is part of a broader group which includes ‘for profit’ entities (Group).
The primary issue was whether KinCare was a ‘non-profit organisation’ or ‘public benevolent institution’ within the meaning of clause 12 of Schedule 2 of the Payroll Tax Act 2007 (NSW) (Charitable Exemption). The secondary issue was whether wages paid by KinCare were paid to persons engaged in charitable work or work of a public benevolent nature.
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The Court applied the two-limb test set out in Grain Growers Ltd v Chief Commissioner of State Revenue [2015] NSWSC 925 to determine whether KinCare met the definition of a ‘non-profit organisation’. Broadly, this required both of the following questions to be answered in the affirmative:

Does the organisation’s constitution prevent profits from being distributed to members?
Is the organisation being carried on for the benefit or gain of particular individuals?

The Court found that KinCare was prohibited by its Constitution in making a distribution to its members because of its objects clause and by virtue of section 125 of the Corporations Act 2001 (Cth).
In respect of its related, for-profit entities, the Court noted that KinCare paid a market rate to its related entities for the provision of field staff so that KinCare could give effect to the home care plans it had devised.
It found that despite a level of interdependency between KinCare and the other members of the Group, KinCare only dealt with these “for profit” entities to the extent necessary to provide its charitable services. Therefore, KinCare was not being carried on for the benefit of these related entities and they did not taint KinCare’s status as a ‘non-profit organisation’.
Further, the Court found that KinCare’s field workers were exclusively engaged in work of a charitable nature. Therefore, wages paid to them were exempt from payroll tax.
Additionally, wages were paid to administrative staff, whose time was split into supporting the charitable purposes of the Group and providing administrative services to KinCare’s related entities. At the end of each financial year, an allocation was made based on an apportionment of administrative services provided and a charge levied by KinCare and paid by the related companies for those administrative services.
In this respect, the Charitable Exemption permits a partial exemption from payroll tax for employees engaged in charitable and non-charitable work.
However, because there was insufficient evidence before the Court as to a reasonable method of apportionment of activities of the administrative staff, the Court could not apply a partial exemption to these wages. In particular, the Court stated:
[the] apportionment, conducted in different ways in different years, broadly on a percentage of revenue basis, does not demonstrate on the civil standard the time spent by KinCare’s administrative staff on KinCare’s own work, which I have concluded was the only charitable work of the non-profit organisation that I am satisfied KinCare undertook.
Ultimately, this decision strengthens the position of organisations with charitable objects, as a mere interdependency or dealings with for-profit, related entities do not necessarily disturb the organisation’s non-profit classification.
Nevertheless, this case also provides a warning for employer groups using employees, such as administrative staff, for exempt and non-exempt purposes. Clear and reasonable record keeping that supports an apportionment of the amount of time spent working on the different types of work is necessary in order to qualify for a partial exemption.
For more information about whether your organisation qualifies for a payroll tax exemption, please contact Joel Benjamin or Anthony Bradica.

New whistleblower regime for tax avoidance matters
The Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018 (Bill) passed both houses of Parliament and received royal assent on 12 March 2019. It introduces new protections for tax whistleblowers not previously available under the Corporations Act 2001 whistleblower provisions.
The Bill amends the Tax Administration Act 1953 (Cth) to create a regime for the protection of individuals who report information about tax avoidance or other tax misconduct.
Among other things, the Bill:

broadens the scope of the individuals eligible for protection and the individuals to who a protected disclosure can be made;
allows for anonymous disclosures to be made;
makes it an offence for a person to victimise a whistleblower or another person by engaging in conduct that causes detriment, where the conduct is based on a belief or suspicion a person has made, may have made, proposes to make or could make a disclosure that qualifies for protection; and
provides greater access to remedies including compensation.

Under the new provisions, self-incriminating information provided through a protected disclosure may not be admissible against the whistleblower in criminal proceedings or in proceedings for the imposition of a penalty.
However, this immunity does not prevent the Commissioner from issuing an amended assessment or imposing an administrative penalty. The Commissioner will treat the disclosure as a voluntary disclosure on the part of the whistleblower as to their personal tax affairs.
For more information, please contact Andrew O’Bryan or Jim Koutsokostas.
Insurance settlement payout not income, not CGT exempt
In JSLG and Commissioner of Taxation (Taxation) [2019] AATA 336, the Administrative Appeals Tribunal (Tribunal) set aside the Commissioner’s decision to treat a lump sum paid to JSLG (Taxpayer) by his insurers to settle claims against them as fully assessable in the relevant income year.
The Tribunal held that the lump sum amount in question ($803,000) was not paid exclusively to settle a claim relating to non-payment of income protection benefits (IP Claim). However, it was precisely because the mixed payment constituted a ‘single undissected payment’ that it was not exempt from CGT on the basis of being paid as compensation for injury.

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Facts
The Taxpayer commenced proceedings against two companies for non-payment of policy benefits and, among other things, ‘inconvenience, mental anguish, personal insecurity and distress’ (Personal Harm Claim). These companies agreed to pay the Taxpayer $1,100,000 under a release agreement (Agreement). Pursuant to the Agreement, $803,000 was not expressly paid in relation to a specific claim. Instead, the Taxpayer agreed to release and discharge the companies from all actions and claims which he had or might have against them.
The Taxpayer argued that the $803,000 could not be assessable income because it was a ‘single undissected lump sum’ comprising amounts not only for the release of the IP Claim but also for all other possible claims, including the Personal Harm Claim. As a mixed payment, it was, therefore, capital in nature.
The Taxpayer also argued that the $803,000 was not only capital in nature, but that it was also exempt from CGT because it related ‘directly to compensation or damages for a wrong, injury or illness’ under s 118-37(1)(a) of the Income Tax Assessment Act 1997 (Cth).
Tribunal’s decision
In arriving at its decision, the Tribunal relied on Sommer v Federal Commissioner of Taxation (2002) 51 ATR 102 (Sommer), where Merkel J stated that:
The true nature and proper characterisation of the settlement amount is to be determined by having regard to the policy, the applicant’s claims under the policy, the terms of settlement which, inter alia, settled those claims and the rights the applicant will be surrendering upon the cancellation of the policy.
In this case, the relevant evidence as per Sommer was held to be the release agreement and the Statement of Claim. These documents revealed that the insurers were unmistakably seeking to release themselves from all present and future claims, including the Personal Harm Claim, and not only the IP Claim.  The $803,000 was therefore not exclusively attributed to the IP Claim.
This meant that the $803,000:
(a)         constituted a single undissected lump sum; and
(b)        as a mixed payment, was, therefore, capital in nature.
Unfortunately for the Taxpayer, the fact that the $803,000 was characterised as a ‘single undissected lump sum’ paid in the settlement of all other claims meant that it was not possible to dissect the amount which was attributable to the Personal Harm Claim.  It could not therefore be said that the payment (or any part therefore) directly related to compensation for injury.
Implications
Ultimately, the case is a win for the taxpayer as the amount, although not CGT exempt, was not assessed as income. Practically, the case draws attention to the need for careful drafting when preparing or considering agreements in the context of settling disputes, as the tax treatment of any settlement payout will depend upon whether the payment is made in respect of one or more claims as well the nature of those claims.
For more information, please contact Andrew O’Bryan or Jim Koutsokostas.

This article was written with the assistance of Norberto Rodriguez

The post Talking Tax – Issue 153 appeared first on Hall & Wilcox.

Funds and financial products
Further Royal Commission fallout
The fallout from Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry continues with proposals for legislative reform to implement some of the recommendations.
Treasury is currently consulting on a number of initiatives, namely:

draft legislation ending the grandfathering arrangements for conflicted remuneration in relation to financial advice provided to retail clients;
a consultation paper on including the handling and settling of insurance claims as a financial service;
the Terms of Reference for the capability review of APRA; and
a consultation paper on the enforceability of financial services industry codes.

Consultation periods close on 22 March, 29 March, 10 April and 12 April respectively.
In addition, on 27 February Treasurer Josh Frydenberg issued Australian Securities and Investments Commission (Investigation into Grandfathered Conflicted Remuneration for Financial Advice) Direction 2019, which is a direction to ASIC under the ASIC Act to investigate the extent to which persons who are giving or accepting grandfathered conflicted remuneration, as at the commencement of this instrument, are (a) changing their arrangements to end the payment of grandfathered conflicted remuneration prior to 1 January 2021; and (b) passing the benefit of ending the payment of grandfathered conflicted remuneration on to clients, whether through direct rebates or otherwise.  According to the Explanatory Statement accompanying the legislative instrument, the Direction is designed to ensure that the benefits of industry renegotiating current arrangements to remove grandfathered conflicted remuneration ahead of 1 January 2021 flow through to clients.
Australian Labor Party’s response to the Banking Royal Commission is here. Labor has also introduced legislation into Parliament to end the payment of grandfathered commissions, legislating for the coverage of funeral expenses policies as financial products under the Corporations Act and ASIC Act, and the removal the financial service exemption for handling and settling insurance claims.
ASIC remakes class order about warrants and out of use notices
On 14 March, a new legislative instrument re-making Class Order [CO 08/781] Warrants: Out-of-use notices was registered.  This class order was due to expire on 1 April 2019.
ASIC states that the new instrument, ASIC Corporations (Warrants: Out-of-use notices) Instrument 2019/148, continues to provide issuers of warrants relief from the requirement in the Corporations Act to notify ASIC when a warrant ceases to be available in certain circumstances. The relief is provided only to issuers of warrants offered under a PDS or Supplementary PDS covering two or more warrant products.
ASIC states that, under ASIC Corporations Instrument 2019/148, a warrant issuer will only need to lodge an out-of-use notice with ASIC when all the warrants to which the PDS or Supplementary PDS relates are no longer available.
The new instrument will continue the effect of the previous instrument with some minor amendments, which include simplifying the drafting to give greater clarity.
Whistleblower protections legislation receives Royal Assent
On 12 March, the bill that has become the Treasury Laws Amendment (Enhancing Whistleblower Protections) Act 2019 received Royal Assent.  The legislation is described in issue 20 of Financial Services in Focus.
ASIC Enforcement Review Taskforce legislation receives Royal Assent
On 12 March, the bill that has become the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 received Royal Assent.
As previously reported in Financial Services in Focus, the legislation introduces a stronger penalty framework in the Corporations Act, ASIC Act, National Consumer Credit Protection Act 2009 and Insurance Contracts Act 1984 dealing with corporate and financial sector misconduct.
Financial product advice
FASEA releases Program & Provider Accreditation Policy
On 15 March, FASEA released its final FPS002 Program & Provider Accreditation Policy.
The policy provides guidance to Higher Education Providers and Professional Associations on the approval requirements for a range of education pathways in the FASEA Education Pathways Policy.
Financial markets
ASIC Derivative Transaction Rules (Reporting) amendments
On 13 March, the ASIC Corporations (Amendment) Instrument 2019/169 was registered.
The instrument amends the ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844 to extend some elements of the existing relief under that instrument to address ongoing implementation issues.
Market Integrity Rules amended
On 8 March, each of ASIC Market Integrity Rules (Securities Markets) Determination 2019/175 and ASIC Market Integrity Rules (Securities Markets) Repeal Instrument 2019/176 were registered.
According to the Explanatory Statement, the purpose of the Determination is to determine, for the purposes of paragraph 6.2.1(1)(c) of the ASIC Market Integrity Rules (Securities Markets) 2017 and with effect from its commencement, the Tier 1 Equity Market Products and the Tier 2 Equity Market Products.  The purpose of the Repeal Instrument is to repeal a superseded Determination.
Corporations Act transfer provisions amended by ASIC to accommodate Chi-X trading of MIS interests
On 4 March, the ASIC Corporations (Amendment) Instrument 2019/45 was registered.
According to the Explanatory Statement, the instrument expands the operation of the transfer provisions in Part 7.11 of the Corporations Act to cover interests in registered managed investment schemes that are quoted on the financial market operated by Chi-X Australia Pty Ltd (‘Chi-X’), because Chi-X is proposing to expand its secondary trading services to include interests in registered schemes that have been admitted to quotation on the financial market operated by Chi-X.
To give effect to the above arrangements, the instrument amends ASIC Corporations (Division 4 Financial Products) Instrument 2015/1030.
Anti-money laundering
AML/CTF Rules amending Chapter 10 (Casinos) registered
On 25 February, the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2019 (No. 1) was registered.
According to the Explanatory Statement, these amendments to the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) reduce the period within which a reporting entity is required to carry out the applicable customer identification procedure in relation to online wagering accounts from 90 days to 14 days as part of the implementation of the National Consumer Protection Framework.
Other financial services regulation
ASIC consults on coverage of ePayments Code review
On 6 March, released a consultation paper seeking feedback on the proposed coverage of its review of the ePayments Code.
Consultation Paper 310 Review of the ePayments Code: Scope of the review (‘CP 310’) is the first of two papers ASIC plans to issue in 2019 in its review of the ePayments Code. CP 310 seeks feedback from stakeholders on the effectiveness of the following areas in the Code:

complaints handling;
unauthorised transactions;
data reporting; and
mistaken internet payments.

Submissions are due by 5 April.
Treasury releases draft legislation on superannuation tax reform technical amendments and amendments to running balance accounts
On 27 February, Treasury released draft legislation designed to:

Correct an error in the way that market-linked pensions are valued under the transfer balance cap when they are commuted or rolled over, resulting in a nil debit.
Ensure that death benefits that include life insurance proceeds are not subject to tax when they are rolled over to a new superannuation fund.
Fix the valuation of defined benefit pensions under the transfer balance cap to reflect when pensions are permanently reduced following an initial higher payment, such as for some public sector defined benefit reversionary pensions.
Change the definition of life-expectancy period for innovative income stream products to account properly for the number of days in a leap year.
Maintain the capped defined benefit treatment of market-linked pensions under the transfer balance cap where they have been rolled over as a result of a successor fund transfer.

Consultation closes on 27 March.
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Australian Small Business and Family Enterprise Ombudsman to look into ATO pursuing early recovery of tax debts
Minister for Small and Family Business Michaelia Cash, has asked the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) to look into the extent and impact of early recovery of tax debts on small businesses who are in dispute with the Australian Tax Office (ATO). Minister Cash cited the potentially devastating consequences of the practice, with some small business being forced to close their doors as a result even if they are subsequently successful in the dispute.
The ASBFEO will research past cases and determine whether the ATO has been treating small businesses fairly.
This follows the establishment of a small business concierge service run by the ASBFEO, which will provide:

information on Administrative Appeals Tribunal (AAT) procedures for reviewing a decision;
subsidised access to legal advice;
access to support including a reduced AAT application fee and fast-tracked processing; and
ongoing support and assistance until a decision is reached.

Increased penalties and enforcement measures against Directors
The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 (Cth) (Bill) has been moved in the House of Representatives and is currently before the Economics Legislation Committee for inquiry and report by 26 March 2019. Among other things, the Bill proposes to extend the Director Penalty Notice (DPN) regime to GST, luxury car tax (LCT) and wine equalisation tax (WET).
Hall & Wilcox previously covered some of the potential changes mentioned during the Federal Budget announcement in 2018. That article can be found here.
A more detailed article on the Bill will published shortly, and posted on our website and social media.
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The Bill:

Introduces new phoenixing offences to prohibit creditor-defeating dispositions of company property, penalise those who engage in or facilitate such dispositions, and allow liquidators and ASIC to recover such property (Schedule 1).
Ensures directors are held accountable for misconduct by preventing directors from improperly backdating resignations or ceasing to be a director when this would leave the company with no directors (Schedule 2).
Allows the Commissioner to collect estimates of anticipated GST liabilities and make company directors personally liable for their company’s GST liabilities in certain circumstances (Schedule 3).

Authorises the Commissioner to retain tax refunds where a taxpayer has failed to lodge a return or provide other information to the Commissioner that may affect the amount the Commissioner refunds (Schedule 4).

Review of Tax Practitioners Board
On 5 March 2019, the Government announced an independent review into the effectiveness of the Tax Practitioners Board and the operation of the regulatory regime for tax practitioners in Australia – which is found in the Tax Agent Services Act 2009 and the Tax Agent Services Regulations 2009.
Hall & Wilcox consultant (and Hall of Famer) Keith James will lead the review as an independent expert. Broadly, the review will consider whether the Tax Practitioners Board meets its policy objectives of ensuring that tax agent services are provided in accordance with appropriate standards of professional and ethical conduct.
The closing date for submissions is 12 April 2019.
Workers’ compensation payments are assessable as ordinary income
In Keys and FCT [2019] AATA 238, the Administrative Appeal’s Tribunal affirmed the Commissioner’s decision that regular payments made under Western Australian workers’ compensation laws were assessable as ordinary income.
The Taxpayer’s submission that the payments were not assessable as ordinary income was based on the fact that he had an obligation to repay those amounts if he received a lump sum compensation payment awarded to him by a court and did, in fact, make those necessary repayments. On this basis, the Taxpayer (somewhat ambitiously we think) sought to argue that the regular payments he received could be characterised as a loan.
The Tribunal did not accept the Taxpayer’s submission. It found that:
Tax was properly payable on the compensation payments representing his weekly earnings. The fact that there has been a subsequent payment of a lump sum in settlement of the applicant’s damages claim does not change the correct characterisation of those periodic compensation payments as taxable income.
…
In any event that argument must fail because s 59-30(3) of the ITAA 97 specifically excludes repayments made out of lump sum compensation payments for a wrong or injury from being treated as not assessable income under ss 59-30(1) or (2) of the ITAA 97.
The Tribunal did not specifically consider whether the lump sum payment received by the Taxpayer was capital rather than income.
This article was written with the assistance of Norberto Rodriguez, Law Graduate.

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On 14 March 2019, the Parliamentary Joint Committee on Corporations and Financial Services (Committee) released its report on the operation and effectiveness of the Franchising Code of Conduct (Report). The Parliamentary inquiry was established in early 2018 to address alleged systemic issues within the franchising sector.
The Report found that:

‘the current regulatory environment has manifestly failed to deter systemic poor conduct and exploitative behaviour and has entrenched the power imbalance’.

The Report proposes that a two-pronged approach be adopted, being:

to implement changes to the law to afford the ACCC more responsibilities and give (in some cases) greater enforcement powers and to introduce more substantial penalties for offending Franchisors; and
to make substantial amendments to the Franchising Code of Conduct (Code).

Key Recommendations
Set out below is a summary of some of the key recommendations of Committee as set out in the Report.
1. Establishing a Franchising Taskforce
The Report recommended that a Franchising Taskforce be established to monitor the feasibility and implementation of the recommendations in the Report. The Taskforce will consist of various stakeholders, including representatives from the Department of Treasury, Department of Jobs and Small Businesses, and the Australian Competition and Consumer Commission (ACCC).
2. Greater disclosure of information in the pre-contractual stage
The Report focusses on increasing the disclosure obligations of Franchisors, including:

requiring Franchisors to provide the information statement as a separate document that is subject to disclosure and cooling off period provisions in the Code; and
requiring vendors in sales of franchises to provide prospective purchasers the prior two years’ Business Activity Statements, and profit and loss statements balance sheets and an assessment of labour costs for that particular franchise.

3. Introducing greater protections against third line forcing
The Report criticised third line forcing (being the practise of requiring Franchisees to purchase goods and services from either the Franchisor or a mandated supplier) as facilitating conflicts of interest where financial incentives exist for Franchisors. The Report recommended that:

the ACCC be given greater power to investigate these conflicts of interest; and
Franchisors be obliged to disclose in percentage terms the financial incentives attached to the supply of goods and services to Franchisees.

4. Introducing civil penalties and infringement notices
The Report recommends introducing new law to impose various civil penalty and infringement notice provisions that primarily impact Franchisors, including:

introducing civil pecuniary penalties and infringement notices for all breaches of the Franchise and Oil Codes. The penalties are to be in alignment with penalties for breach under the Australian Consumer Law; and
imposing civil penalties and infringement notices on Franchisors for the use of unfair contract terms.

5. Enhancing the powers of the ACCC

The Report recommended that the ACCC be given greater powers of enforcement and investigation, including:

granting ACCC the power to intervene and prevent Franchisors from marketing and selling franchises where they have a record of churning (repeated sale of a failed franchise to new Franchisees) or burning (continually opening new franchises which are unlikely to succeed in order to benefit from upfront fees); and
the Australian Government providing the ACCC with sufficient resources to investigate all whistle-blower reports or complaints about unfair contract terms.

6. Establishing Franchisee termination rights under certain circumstances
Conclusion
Overall, it appears from the Report that Franchisors will be the most significantly impacted by the proposed changes to the law and to the Code arising from the Committee’s recommendations.
Specifically, Franchisors will need to be ready to respond to amendments to the law and the Code including, review and amendment of Franchise Agreements, changing disclosure practises and, to the extent necessary, changing their operational model.
Hall & Wilcox will continue to monitor how the finding of Report will be implemented and provide updates on any proposed changes to the law and to the Code as they arise.
Hall & Wilcox will be running round table discussions on the outcomes of the Report nationally in the coming weeks. Click here to register your interest for these sessions.
This article was written with the assistance of Ashlee Johnson, Law Graduate.
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Smart contracts, which are computer protocols intended to digitally facilitate, verify or enforce the negotiation or performance of a contract have the potential to radically change the way in which parties interact by allowing the safe performance of transactions without the need for a third party intermediary using blockchain technology.
One area which would be revolutionised by the introduction of smart contracts is the highly regulated and complex derivatives trading industry. However, given its complexity, there are many challenges which need to be overcome in order to make this a reality.
From Concept to Construction
The International Swaps and Derivatives Association, Inc. (ISDA) has over recent years actively explored the use of smart contracts to improve the efficiency of the derivatives market. In October 2018, ISDA and King & Wood Mallesons jointly published a white paper entitled Smart Derivatives Contracts: From Concept to Construction. This paper discussed what is required to practically apply and use smart contracts – including the legal, technological and operational requirements and standards.
In doing so, the paper established four fundamental principles for the development of smart derivative contracts:

smart derivative contracts should be compatible with existing standards
only those parts of a derivative contract that are capable of being automated should be considered
effective automation should be based on legal validation
only those parts of a derivative contract where there exits sufficient benefit in automating should be considered for automation.

ISDA uses the ISDA Common Domain Model (ISDA CDMTM) and creates a framework that it suggests could be used to construct smart derivatives contracts. The framework is as below:

Select the parts of a derivatives contract for which automation would be both effective and efficient
↓

Change the expression of the legal terms of a derivatives contract into a more formalized form
↓

Break the formalized expression into component parts for representation as functions
↓

Combine the functions into templates to use with particular derivatives products
↓

Validate the templates as having the same leal effect as legal terms of derivatives contracts
↓

The paper addresses each step in detail, highlighting potential issues, but also potential solutions.
Legal guidelines
In 2019, ISDA has continued its rapid consideration of smart derivatives contracts by publishing the first two papers in a series entitled Legal Guidelines for Smart Derivatives Contracts.
The first paper, titled ‘Introduction’ and published in January 2019, is intended to explain the core principles of ISDA documentation and to raise awareness of important legal terms that should be maintained when a technology solution is applied to derivatives trading. The most recent paper, published in February 2019, summarises the main elements of the ISDA Master Agreement and sets out possible considerations for technology developers. Further papers are set to follow providing more detailed analysis on other ISDA documents.
What next?
ISDA’s rapid development of a framework to support the use of smart contracts has the potential to transform derivatives trading.
Further papers on the application of legal guidelines to other ISDA documents are set to follow, but there is still a long way to go to transform ISDA’s general guidance and principles into practical applications for the derivatives market.
The post Smart derivative contracts – closer than you think? appeared first on Hall & Wilcox.

A steel product manufacturer has been ordered to pay its former employee $130,000 for pain and suffering caused by sexual harassment experienced in the course of her employment (jointly with the perpetrator of the harassment). In addition to this, the company is to pay $20,000 to the employee in the form of aggravated damages.
Ms Kerkofs worked at Parker Manufactured Products Pty Ltd (PMP) in the office within the factory for only 12 days before she left and never returned. Ms Kerkofs claimed that she was sexually harassed by Mohammed Abdallah when he:

addressed her using nicknames such as ‘sexy’, ‘honey’, ‘baby’ and ‘sweetie’;
made sexual comments about her body and stared at her;
approached her from behind and gave her uninvited massages on the neck and shoulders; and
(and other male employees) rated her out of ten based on her appearance.

Additionally, Ms Kerkofs alleged she was sexually assaulted by Mr Abdallah when she became unwell at work and her manager asked Mr Abdallah to drive her home. When they arrived at her house, Mr Abdallah went inside with her and climbed into her bed. He then massaged her neck and breasts and made sexual advances towards her.
Ms Kerkofs had made complaints about the sexual harassment to various people, including her manager. She also complained about the sexual assault to one of the directors of PMP. PMP undertook an investigation of sorts into the complaint but decided it was baseless after using Google to conduct research about sexual assault and formed the view the allegations were false.
Since leaving PMP, Ms Kerkofs was diagnosed with an ongoing condition of post-traumatic stress disorder as a result of the sexual harassment she experienced. In addition to seeking general damages, Ms Kerkofs sought aggravated damages on the basis that PMP failed to conduct an impartial investigation and the arrangement between PMP and Mr Abdallah (PMP agreed to indemnify Mr Abdallah in respect of all costs and any award of damages in this case), as well as the ‘gruelling’ cross-examination of Ms Kerkofs.
Judge Harbison was satisfied that each of the acts complained of by Ms Kerkofs was committed by Mr Abdallah and PMP was held to be vicariously liable for that harassment. Judge Harbison found it ‘alarming’ that no proper and independent investigation was carried out by PMP. PMP and Mr Abdallah were unrepresented at the hearing and rather than relying on the defence that PMP had taken all reasonable precautions to prevent the alleged conduct occurring, PMP attempted to establish that the conduct alleged did not occur at all. PMP was clearly unable to do it.
This case highlights, yet again, the importance of employers taking complaints of this nature seriously and undertaking robust independent investigations. It also highlights the importance of seeking legal advice when defending any claim, as the way in which a case is conducted can have implications particularly for awards of aggravated damages.
Kerkofs v Abdallah (Human Rights) [2019] VCAT 259
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