Modernising Processes of Incorporated Associations

Modernising Processes of Incorporated Associations

The laws affecting incorporated associations have not been substantially reformed since 2007. Queensland Parliament intends for the Associations Incorporation and Other Legislation Amendment Act 2020 (Qld) (‘Act’) to assist thousands of people involved in community groups by modernising processes. The amendments are aimed to simplify processes, improve internal governance, reduce red tape, and enhance government practice.

Amendments Currently in Force

We draw your attention to the following amendments now in force:

  • Associations can use communications technology to conduct general meetings without provision for technological usage in their rules.
  • An incorporated association has the discretion to adopt or replace the model rules at any time. To effect this change, the association must:
  1. pass a special resolution at a general meeting; and
  2. apply to the Office of Fair Trading (OFT) for registration within 3 months of passing the resolution.
  • Should the incorporated association be experiencing financial difficulty, committee members may voluntarily appoint an administrator to place the association into voluntary administration.
  • An incorporated association may apply to the Office of Fair Trading to cancel the association, thereby avoiding a lengthy winding up process. To be eligible, the association must not:
  1. have any outstanding debts or liabilities;
  2. have any outstanding fees or penalties under the Associations Incorporation Act 1981; and
  3. must not be a party to any legal proceedings.
  • An individual will be eligible to sit on a management committee after 5 years from the later of:
  1. the day the conviction is recorded;
  2. the day the individual is released from prison;
  3. the day any other occur order relating to the conviction or term of imprisonment is satisfied.

Notwithstanding, conviction of any indictable offence or of a summary offence leading to imprisonment may affect that individual’s eligibility.

  • The maximum penalty for breaches of some provisions will be increased to 20 penalty units.
  • Upon an incorporated company being wound up or cancelled, information pertaining to how surplus assets, property or money is vested will be published by gazette notice rather than regulation.
  • Should the Chief Executive determine that property under the Collections Act 1966 is unlikely to reach the intended beneficiaries, they may vest that property to the Public Trustee by gazette notice rather than by regulation.

Expected Amendments: 30 June 2021

Further amendments are expected to take effect by 30 June 2021. It would be prudent for incorporated associations to take note of these amendments now to plan for and accommodate these amendments moving forward.

In the future, using a common seal will be optional and the secretary of an association will have to be 18 years or older. To simplify processes, duplicated reporting requirements for charities on the ACNC register will be removed.

Significantly, management committees and members will be given increased responsibilities and liabilities, notably:

  • Penalties will apply to management committees that fail to carry out their functions in the best interests of the association, with due care and diligence;
  • Members of the management committee will have a duty to prevent the association from trading while insolvent;
  • Penalties will apply to committee members and officers who use their position to gain a benefit or cause detriment to the association; and
  • Management committee members will have to disclose when they have material personal interests in a matter, remuneration or other benefits given to them, to senior staff and to their relatives.

Finally, the powers of Office of Fair Trading inspectors will extend to allow for entry and seizure methods.

Expected Amendments: 30 June 2022

It is expected that by 30 June 2022, incorporated associations will be required to have an internal grievance procedure or dispute resolution process in place. This amendment is aimed at reducing the need to resort to litigation to resolve a matter. The Office of Fair Trading will develop model rules as part of a consultation process with industry bodies that may be used in default. If the association wants to use their own dispute resolution process, they must include it in their rules by passing a special resolution.

If you would like to be part of the consultation process, you can register your interest by emailing [email protected].

How we can help you

If you have any questions or concerns regarding the above amendments, please do not hesitate to contact us. We consider it would be prudent for all incorporated associations to begin discussing the upcoming amendments, particularly those that carry penalties as outlined above.


Written by Claudia Smith , Lawyer

Discretionary trusts now impacted by NSW duty and land tax surcharges

On 24 June 2020, the State Revenue Legislation Further Amendment Act 2020 (NSW) was enacted (“the Act”). The Act is relevant to trustees of discretionary trusts (including discretionary testamentary trusts) who in their capacity as trustee, own or will purchase property under the trust, and also have trust deed which do not prevent foreign beneficiaries of the trust from receiving a benefit under same.

Pursuant to the amendments made under the Act, a Trustee can now be classified as a ‘foreign person’ for the purpose of making payment of NSW Duty and Land Tax surcharges, on property transactions whereby the existing trust deed does not prevent a foreign person from being a beneficiary.


From 21 June 2016, ‘foreign persons’ became liable to pay:

  • a surcharge purchaser duty (currently 8% of the market value of the property) on the acquisition of residential property in NSW (Chapter 2A of the Duties Act 1997); and
  • a surcharge land tax (currently 2% of the unimproved value of the land) for any residential property in NSW owned as at 31 December each year (section 5A of the Land Tax Act 1956 (NSW).

Under the Revenue Ruling G010, the Chief Commissioner had the discretion to exempt liability for purchaser surcharges incurred in relation to duty and land tax. Since the implementation of Revenue Ruling G010 on 13 September 2017, many trustees have seen to the amendment of their discretionary trusts to ensure that foreign persons are excluded from receiving a benefit in accordance with the Revenue Ruling G010.

The Amendments

The Act has now introduced the retrospective legislation that was referred to in paragraph 9 of the Revenue Ruling G010.

The Act has made the following amendments to existing legislation:

  • The Act inserts section 104JA thereby amending Schedule 1 of the Duties Act 1997 (NSW);
  • The Act inserts section 5D into the Land Tax Act 1956 (NSW); and
  • The Act inserts Schedule 2 into the Land Tax Management Act 1956 (NSW).

What this means

The amendments to the Act come into force as of 1 January 2021. This means that up until 31 December 2020, all trustees of discretionary trusts have the opportunity to make amendments to existing trust deeds to ensure that their respective deeds include a provision outlining that the amendments per the Act do not, and will not apply.

A trustee must meet the following amendments to comply with the requirements of the Act:

  • no potential beneficiary of the trust can be a foreign person (the ‘no foreign beneficiary requirement’); and
  • the terms of the trust must not be capable of amendment in a manner that would result in a foreign person being a potential beneficiary (the ‘no amendment requirement’).

In the event a trust deed is not amended prior to 31 December 2020, the trustee will be considered a foreign trustee and the following implications will take effect:

  • Surcharge purchaser duty will apply to the purchase of residential property within NSW;
  • Land tax surcharge will apply annually on the residential property in NSW;
  • Land tax surcharge will be applicable for the land tax years of 2017, 2018 and 2019; and
  • The trust will have no entitlement to receive a refund for surcharge duty or surcharge land tax already paid in the transactions undertaken in the aforementioned land tax years.

Should Revenue NSW conduct an audit, a copy of the trust deed or amended deed together with a declaration as to same, may be requested. If a foreign beneficiary has not nor will not intend to benefit from a current trust, then making amendments to a current trust deed prior to 31 December 2020 would be ideal.

No power of amendment or variation?

The majority of trust deeds will include rules that bind a trustee as well as containing broad powers to amend and/or vary the trust instrument. There are trust deeds however which may include limited powers for variation and/or amendments and in this circumstance, those particular trusts require diligent review.

We make reference to the Commissioner’s Practice Note CPN 004, version 2, which specifies that that trusts which cannot be amended and are not covered in the practice note will be dealt with on a case by case basis.

Our recommendation

If a foreign person has never benefited and likely will not benefit from the trust, we recommend that amending the trust prior to 31 December 2020 is the best course of action. We emphasise that any trustee and/or beneficiary to a discretionary trust seeking to make an amendment to same in accordance with the Act, must ensure that the no foreign beneficiary requirement and the no amendment requirements are complied with.

In the event a trust does not allow for a variation and/or amendment clause, we note that the trustee and/or beneficiary should make a request to Revenue NSW for a determination as to how the trust could be amended to guarantee compliance with the Act, prior to 31 December 2020.

If you require any assistance in making amendments to your current trust deeds to comply with the Act or if you would like to discuss your current trust deed with us, our solicitors at JHK Legal are happy to assist.


Written by Elyzia Menounos

FIRB approvals for Business – COVID-19, National Security and Beyond

Australia’s foreign investment rules have recently undergone major temporary changes in response to the economic fallout of the COVID-19 pandemic. The Australian government is considering further permanent changes due to national security concerns. This article considers those changes and the likely impacts on business.

What is FIRB approval?

The Foreign Investment Review Board (“FIRB”) is a body that advises the federal Treasurer on Australia’s foreign investment policy and administration.

Among other functions, FIRB examines proposed investments in Australia pursuant to the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“Act”) and related legislation and provides recommendations as to whether relevant investments should be approved. FIRB is an advisory only and ultimately decisions regarding foreign investment remain with the Treasurer. Nonetheless, the process is usually referred to as seeking “FIRB approval”.

FIRB considers investment by “foreign persons”, which include:

  • individuals not ordinarily resident in Australia;
  • corporations in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government hold “substantial interests”;
  • corporations in which two or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government together hold “substantial interests”; and
  • foreign governments.[1]

A “substantial interest” is an interest of 20% or more.[2] There are also detailed and wide-reaching rules to determine interest held on trust and or through associates of foreign entities.

The Act applies to proposed acquisitions by foreign persons of assets, securities or interests in Australian land (including agricultural land, commercial land, residential land, and mining or production tenement). Generally, an acquisition will be generally be a “notifiable action”, and therefore require FIRB approval, if it involves:[3]

  • a foreign person acquiring either:
    • a substantial interest in an Australian entity;
    • an interest in Australian land; or
    • a “direct interest” in an Australian agribusiness;[4] and
  • it exceeds certain monetary thresholds. These thresholds vary depending on the circumstances and the type of investment.

COVID-19 Response

On 29 March 2020, the Federal Government announced that, as a temporary measure due to COVID-19, all monetary thresholds for the purposes of FIRB consideration were reduced to zero.

Government’s stated concern was that Australian assets and businesses might be subject to acquisition by foreign entities seeking to take advantage of the economic situation created by COVID-19.[5]

The changes were implemented through the Foreign Acquisitions and Takeovers Amendment (Threshold Test) Regulations 2020 (Cth) (“COVID-19 Regulations”). Notably, the COVID-19 Regulations do not have a set end date – the changes will remain until repealed.

The COVID-19 Regulations mean that nearly all transactions involving foreign persons now require FIRB approval. As a result, the timeframe for FIRB processing applications has increased from thirty days to some 6 months.  Notwithstanding this FIRB has indicated that priority will be given to applications relating to “investments that protect and support Australian businesses and jobs”.[6]

Proposed Permanent Changes

On 5 June 2020, the government further announced proposed permanent changes to the Act and related legislation in response to national security concerns. These changes are intended to be made through amendments to the Act this year and to be in force by 1 January 2021.[7] Draft legislation and regulations were released for public consultation on 31 July 2020.[8]

Mandatory FIRB approval will be required for all foreign investments in “national security businesses”, regardless of the value of the investment. The draft regulations define “national security businesses” as including businesses supplying goods or technology to the Australian Defence Force or intelligence agencies, as well as holders of critical infrastructure (such as electricity, ports, gas, and telecommunications).[9]

The Treasurer will also be given a new ‘call-in’ power to review investments that would not otherwise reviewable if he or she believes that the proposed action poses a national security concern. In exceptional circumstances, the Treasurer will also have a ‘last resort’ power to impose conditions, vary existing conditions or force divestment of any realised investment when national security concerns are later identified.[10]

The government’s proposed changes to the Act will also:

  • Provide further powers to enforce conditions imposed on applicants;
  • Create a single Register of Foreign Ownership of Australian Assets. Previously, registers were held only for certain assets such as agricultural land, water and residential land; and
  • Simplify the fee structure for applications.[11]


Due to the COVID-19 pandemic and national security concerns, the Australian government has tightened rules around foreign investment:

  • As a temporary measure due to COVID-19, all monetary thresholds are currently reduced to zero. This means that nearly all transactions involving foreign entities now require FIRB approval.
  • Timeframes for processing have increased from 30 days to 6 months.
  • Further permanent changes are proposed from 1 January 2021, which will require FIRB approval for all foreign investments in sensitive businesses, including those involved in military procurement and infrastructure.
  • The compliance and enforcement regime will be expanded.
  • The Treasurer will be granted new “call in” and “last resort” powers to intervene in transactions on national security grounds.

These changes will impact many businesses proposing to enter into transactions with foreign entities.

How we can help you

JHK is assisting many businesses and individuals affected by COVID-19 and the responses by governments to the crisis. If you are involved in a transaction that may require FIRB approval or if you have any other enquiry, please do not hesitate to contact us.

Written by Matthew Paul, Lawyer



[1] Section 4 Act.

[2] Section 4 Act.

[3] Section 47 Act.

[4] Generally, this is an interest of at least 10%, or 5% if the person who acquires the interest has entered into a legal arrangement relating to the businesses of the person and the entity – section 16 Foreign Acquisitions and Takeovers Regulation 2015 (Cth)





[9] Exposure Draft Regulation (Definition of National Security Business)

[10] Foreign Investment Reform (Protecting Australia’s National Security) Bill 2020 (Cth) Draft Explanatory Memorandum, pp. 13-14.

[11] Draft Explanatory Memorandum, Chapters 3-5.

What are the options you have when your Company is in financial distress?

COVID-19 has had a vast impact upon Global economy and our Australian economy at home, with small to medium sized businesses being some of the ones who have been most effected having to be forced to shut for up to three months with very limited income, or without income at all. Whilst the Government has provided various businesses with economic stimulus packages to keep afloat, in many instances it has not been enough.  If your company has been impacted financially due to COVID-19, this article will provide you with information as to some options to consider for your company including the closing, liquidation, or restructuring of your company.

Your company may have various creditors seeking payment from you and you simply no longer have the ability to pay those creditors even in the near future, once the pandemic passes. As such, you may be considering placing the company into liquidation or administration or simply considering to de-register. It is a director’s duty to ensure that, amongst other things, they act in good faith, avoid conflicts of interest, exercise director powers for a proper purpose, and retain discretion and to exercise reasonable care, skill and diligence. Acting in this way includes ensuring the company does not trade whilst insolvent. While the safe harbour provisions under Section 588GA of the Corporations Act 2001 (Cth), provide some protection for directors who incur debt of the company, due to directors taking a course of action that would lead to a better outcome for the company, one of the options foreshadowed below may be viable to you to avoid breaching the directors duties, if the safe harbour protection provisions do not apply to you.  If you are unsure as to whether you have breached your director’s duties or whether the safe harbour provisions apply to you, see our article “Temporary Changes to Safe Habour Provisions” by Kate Witt HERE.

Voluntary Administration

Voluntary administration may be a viable option for your company if there is a prospect to resolve the company’s existing financial distress with a view to continue to trade in the future. The appointment of a voluntary administrator may be affected by either a secured creditor, a liquidator (or provisional liquidator), or most commonly, by a resolution of directors that the company is insolvent, or likely to be insolvent. In these circumstances, the appointment of a voluntary administrator will place the company’s future in the hands of an external professional and qualified person to take carriage of the company’s financial affairs and navigate the period of financial distress.

The main benefits of voluntary administration for the company may be some or all of the following:

  1. Avoiding liquidation and closing the business long term;
  2. Allowing the administrator to assess and put in place a viable plan for the company for the benefit of the company and its creditors, which ultimately relieves the stress of the director having to do this;
  3. Allowing the company to continue to trade and derive an income;
  4. Provide a return to creditors whilst the company continues to trade;
  5. Reduces the possibility of secured creditors enforcing their security against the company while the company is in voluntary administration.
  6. If voluntary administration is approved, there is a possibility that any alleged insolvent trading carried out by the director, may be eliminated;
  7. At the end of the voluntary administration, the creditors can decide as to the future of the company by voting on the following options:
  • Allowing the director to return to take control the company so that the director can continue carrying on the business; or
  • accept a deed of company arrangement which will particularise repayments of debts owed by the company to creditors; or
  • place the company into liquidation.

Upon the appointment of a voluntary administrator, within 8 days the administrator must hold a first meeting of creditors whereby creditors can vote at the meeting to place the administrator and/or create a committee of inspection. The second meeting of creditors is to take place within 25 days of the appointment where the creditors may make a decision as to the future of the company taking into consideration the options referred to in item g. above. Many companies which enter voluntary administration are able to survive and carry on after the period of administration which makes voluntary administration an appealing option for many directors of companies which are suffering from existing financial distress but have an opportunity to continue to trade long term with good assistance and planning.

Director Initiated Liquidation

If voluntary administration is not a viable option for your company as there may not be future prospect for continual trading of the company, appointing a liquidator to your company will mean that you place the company in the hands of a qualified person to take control and attend to the orderly winding up the company in a fair way for the benefit of all creditors to the company. A director-initiated liquidation will generally a require calling a meeting of members (also known as shareholders) to vote on the winding up of the company and the appointment of a liquidator.  Upon the winding up of the company, it is important for the director to understand that upon the winding up, the director no longer has control over the company and that the liquidator has the power to:

  • carry on the business of the company so far as its necessary for the beneficial disposal or winding up of the business;
  • collect, protect, sell / realise assets of the company to pay creditors;
  • investigate and report to creditors as to company’s affairs;
  • make inquiries as to the reasons why the company has failed. This may include making inquiry with the director, or pursuing the director for breach of directors’ duties;
  • distribute any proceeds recoverable in the liquidation.

The liquidator has a number of legal obligations upon being appointed and it is likely the liquidator will require the director’s assistance in being able to fulfil these some of legal obligations. Accordingly, it is important that directors comply with the liquidator’s requests as to the affairs of the company and producing the company’s books and records, otherwise there may be serious penalties, including fines and criminal charges.


An alternative to the above external administration options, if you are in a position where you do not have any creditors, and are simply seeking to close your company you may be considering to voluntarily deregister to your company with Australian Securities Investments Commission (“ASIC”). In order for you to apply to de-register your company with ASIC, the company must meet the following criteria:

  •  all members have agreed to the deregistration;
  • ensure the business is no longer being conducted;
  • have company assets less than $1000;
  • have no pending legal proceedings;
  • declare that there are no creditors to the company (including employees);
  • have no outstanding fees owed by your company to ASIC.

upon confirmation that the company meets the above criteria, you may seek to apply to ASIC for de-registration. ASIC will review the application and process it upon being satisfied that the company fits the above criteria.

The consequences of all types of external administration and/or the deregistration process differ depend upon whether the company is placed into voluntary administration, liquidation or is deregistered, some of which may be consequences imposed upon the directors themselves and can include suspension of directorship, fines or criminal penalty. As such, it is important to obtain independent legal advice and financial advice prior to considering the options foreshadowed above, to ascertain the best option for you, the creditors and the business.

How we can help you

JHK Legal regularly assists various companies in financial distress and with our vast range of expertise having acted for both companies and directors and insolvency practitioners, we can facilitate a legal pathway for you and the future of your company. If you require assistance in relation to determining your company’s future, please reach out to the JHK Legal team.


Written by Hayley Tibbie, Associate

Another win for Small Businesses: Bendigo Bank’s contract terms are declared “unfair”

The November 2016 amendments to Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“ACL”) to extend the definition of “unfair contract terms” to apply to small businesses has again provided for the necessary protections it had set out to achieve in the recent matter of ASIC v Bendigo and Adelaide Bank Limited [2020] FCA 71.

Previously, we wrote on the applicability of the ACL and small business contracts to leases – which can be found here. As discussed, a small business can rely on this legislation if they have entered into a “small business contract” in circumstances where:

  • At least one party is a business that employs less than 20 people – whether that be you or the other party;
  • Upfront price payable does not exceed $300,000, or does not exceed $1,000,000.00 if the duration is more than 12 months; and
  • The contract is a ‘standard form contract’.

The ACL is specific to ‘standard form contracts’ in the areas such telecommunications, utilities, travel industries or commercial leasing.

More specifically to financial products, the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) applies to the provision of financial services including consumer contracts and contracts for credit facilities. Section 12BG(1) of the ASIC Act, states that that a term of a contract will be deemed as unfair where:

  • it would cause significant imbalance in the parties’ rights and obligations arising under the contract; and
  • it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantages by the term; and
  • it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied upon.

Of note, from October 2021, the unfair contract terms regime under the ASIC Act will also apply to insurance contracts under the Insurance Contracts Act 1984 (Cth).

ASIC v Bendigo and Adelaide Bank Limited [2020] FCA 71

In ASIC v Bendigo and Adelaide Bank Limited [2020] FCA 71, ASIC brought proceedings citing concerns that Bendigo and Adelaide Bank Limited (Bendigo Bank) held as many as 15,529 non-compliant loans with values of under $1 million dollars which included bank guarantees, overdrafts and general commercial loans.  While Bendigo Bank acknowledged that the terms were unfair and that Bendigo Bank had not relied any of the relevant terms in a manner that was unfair or caused any borrowers to suffer loss or damage, ASIC chose to pursue for declaratory relief.

ASIC summarised their concerns for small businesses in a statement on 29 May 2020 – “Small businesses, like consumers, are often offered contracts for financial products and services on a ‘take it or leave it’ basis, commonly entering into contracts where they have limited or no opportunity to negotiate the terms. These are known as ‘standard form’ contracts. Small businesses commonly enter into these ‘standard form’ contracts for financial products and services, including business loans, credit cards, and overdraft arrangements.”

Justice Gleeson held, amongst orders to replace provisions contained within the contacts, that Bendigo Bank provide an undertaking to the Court that they would not use or rely upon the provisions.

There were four contentious types of clauses that were considered by the Federal Court:

Indemnity Clauses

Clauses of this nature is where one party (the Borrower) provides an obligation to another party (the Lender) to compensate for any liability, loss or costs arising out of the contact.

The Court considered in this matter the relevant clauses were unfair:

  • as they could cause detriment to the Borrower if applied or relied on by the Lender;
  • as it created a significant imbalance of parties’ rights and obligations in circumstances where:
    • there were no corresponding rights of indemnity provided to the borrower; and
    • the Borrower had no control over the costs that could be incurred and the Lender could control some (if not all) of the circumstances where costs may be incurred;
  • there was limited to no transparency within the terms – ie “legal expenses on a full indemnity basis” and contained numerous cross-references to other terms; and
  • as there was nothing else in the contract to mitigate the unfairness.

Event of Default clauses

This type of clause set out events or circumstances that would constitute a default by one party (the Borrower) and the acts which the other party (the Lender) can take as a result of the default.

In this matter, the Court considered the event of default clauses to be unfair as the clauses created a significant imbalance of parties’ rights and obligations where:

  • the consequences were disproportionately severe to the default;
  • they did not provide the borrower with an opportunity to remedy any default (where a default can be remedied);
  • the event of default does not create any detrimental credit risk to the lender;
  • there was nothing else in the contract to mitigate the unfairness; and
  • the clauses could cause detriment to the Borrower if applied or relied on by the Lender.

Unilateral variation or termination clauses

Where by one party (the Lender), without the other party’s (the Borrower’s) consent can vary the terms of the contract or terminate without notice.

These clauses were considered unfair as they created a significant imbalance of parties’ rights and obligations in circumstances where:

  • insufficient notice period would be granted to the borrower where the lender seeks to reduce the amount of funds available to them under the facility;
  • the clauses allowed the Lender to vary the terms without consent and no corresponding rights were afforded to the Borrower;
  • the lender was able to terminate the contract if the Borrower did not accept new varied terms, or the Lender would need to pay fees if elected to terminate;
  • there was nothing else in the contract to mitigate the unfairness; and
  • the clause could cause detriment to the Borrower if applied or relied on by the Lender.

Conclusive evidence clauses 

In these clauses one party (the Lender) has the ability to provide a document (usually in the form of a certificate) to the other party (the Borrower) which states the amount outstanding under the contract and that no further evidence is required to substantiate same. It places the evidential burden of disputing the debt on the Borrower.

It was decided these clauses created a significant imbalance of parties’ rights and obligations in circumstances where:

  • the evidential burden is placed on the borrower to provide the primary evidence and, when disputed, there needs to be evidence of a manifest error;
  • the clause could cause detriment if the certificate issued was incorrect and there was no way for the Borrower to disprove it;
  • there were no corresponding rights afforded to the Borrower; and
  • there were additional duties imposed on the lender.

JHK Legal regularly act for both lenders and small businesses in providing advice on unfair contact terms contained in standard form loan agreements. This determination in particular, provides a timely reminder to lenders providing financial accommodation to small businesses to review their contracts in light of the Court’s findings and the possible financial sanctions that could be imposed by ASIC in the event their terms are read to be unfair. Similarly, if you are a small business who have entered into, or looking to obtain finance, please reach out to the JHK Legal team to obtain advice on your rights, interests and obligations and the enforceability of the loans by the lender.


Written by Isabella Matassoni, Associate



Instant Asset Write Off Scheme

The current scheme

The instant asset write-off scheme provides immediate tax deductions for eligible businesses for new or second-hand plant and equipment asset purchases such as vehicles, tools or office equipment used for tax-deductible purposes.

On 12 March 2020, as part of the Government’s stimulus package in response to the COVID-19 pandemic, changes were made to the instant asset write off scheme that would remain in effect until 30 June 2020.

The changes from 12 March 2020 include:

  • the instant asset write off threshold being increased from $30,000 to $150,000
  • the eligibility being expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million)

The above changes apply from 12 March until 30 June 2020 for applicable assets first used or installed ready for use in this timeframe. As such, eligible businesses will be able to claim an immediate deduction for depreciating assets that cost less than $150,000. There are, however, limitations that apply, including a car limit that applies to passenger vehicles: the limit is $57,581 for the 2019–20 income tax year. Further, if your asset is for business and private use, you can only claim the business portion.

It is important to note that the scheme cannot be used for assets that are excluded from the simplified depreciation rules, including:

  • assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease;
  • assets you allocated to a low-value assets (pool) before using the simplified depreciation rules;
  • horticultural plants including grapevines;
  • software allocated to a software development pool (but not other software)
  • capital works deductions – for example new buildings and certain improvements.

Further details on the scheme can be found HERE on the ATO website.

Extension to current scheme

On 9 June 2020, the Government announced that it will be extending the changes to instant asset write-off scheme that was due to end on 30 June 2020 for a further six months until 31 December 2020. The proposed extension is still subject to parliamentary processes and is not currently in force yet.

Without the extension, the $150,000 instant asset write-off threshold would have reverted back to its original level of $1,000 and would only be eligible to businesses with a turnover of less than $10 million from 1 July 2020.

Key considerations

The instant asset write-off scheme can help improve cash flow for your business by bringing forward tax deductions.

  • The threshold applies on a per asset basis, which means that multiple assets can be written off immediately, provided that each asset costs less than the $150,000 threshold – for example the business can purchase 4 trucks each for $150,000 and claim the tax deduction on each truck.
  • The asset must be first used or installed ready for use for tax-deductible purposes during the period 12 March 2020 to 30 June 2020 – to be extended to 31 December 2020.
  • With the extension to 31 December 2020, eligible businesses will have additional time to acquire and install assets so the deduction can be applied in the timeframe with the increased threshold allowance.

Purchasing the Asset

If you have been planning to invest in assets to help grow your business – now is a great time to do it!

If the business does not have the funds readily available, it may be able to borrow to fund the purchase of the assets and still be eligible for the immediate tax deduction.

If the business is utilising a finance facility to buy multiple assets, it will also be able to claim the deduction on each of the assets, provided that each asset costs less than the $150,000.

Please feel free to reach out if you are considering taking advantage of the current scheme and purchasing an asset or multiple assets through finance. We can provide you with advice on the finance documentation and structure of any finance facility to ensure your business’s interests are best protected.

We can also provide assistance and act on your behalf in securing an asset. In particular if second-hand plant and equipment asset purchases are being negotiated and purchased by way of a deed of sale or contract.

Eligibility under the scheme

Determining your eligibility under the instant asset write off scheme and whether the assets you intend to invest in are covered under the scheme is not a straight forward task.  We can provide you with specific advice tailored to your current situation and help navigate through the current scheme under the Tax Laws and the new regimes in place as part of the government’s response to the COVID-19 pandemic.

Should you require assistance as to your eligibility for the instant asset write off scheme or have any general enquiries, please do not hesitate to contact us.

Written by Kristina Ghobar


Legislative and practical relief to bankrupts during COVID-19

On 13 March 2020, the World Health Organisation categorised COVID-19 as a pandemic.

In recent JHK Legal articles we have outlined the relief for individuals and businesses during the COVID-19 era and the temporary changes to safe harbour provisions. View those recent articles here:

Relief for individuals and Businesses during the Covid-19 era

Temporary Changes to Safe Harbour Provision

This article deals with the relief provided to bankrupts during the COVID-19 crisis and considers the position of the trustees in bankruptcy during this period.

AFSA Guidelines

As at the date of this article, there are no legislative restrictions on trustees of bankrupt estates in carrying out their powers as a result of the COVID-19 pandemic. Notwithstanding this, the Australian Government have been vocal with their expectations, that parties work together to obtain short-term agreements (including extensions of time or delay of payments).

As a result of the government’s position, the Australian Financial Security Authority (AFSA) have released general guidelines for trustees[1]. Overall, AFSA recommend a degree of leniency should be afforded to bankrupts where appropriate however the needs of creditors should remain a priority and the estate should otherwise be administered in a timely manner.

Some of the AFSA guidelines include:

  1. Where an estate can still be administered, it is expected that it will be administered in a timely manner;
  2. There may be some estates that cannot be progressed and the reasons need to be documented on file in sufficient detail to satisfy any parties seeking access to the estate file that any delay is reasonable;
  3. Trustees are expected to continue to take the necessary steps now to secure assets but only to the extent that they are able to do so without exposing staff to risk;
  4. While there may be delays in being able to deal with a property (for example restrictions on real estate agents conducting open house inspections), it is important that actions to secure property are not delayed, if this can be safely completed.
  5. As the Australian Government has announced a nationwide six-month moratorium on evicting renters, trustees should avoid evicting parties from properties. It may be difficult for such parties to find alternative accommodation particularly where their income has been reduced (either partly or wholly), where they have become unwell or have unexpected caring responsibilities at this time.
  6. Trustees must be conscious that bankrupts may not be able to provide information as quickly as requested.
  7. Any renegotiation of payment schedules with contributors must be balanced with the bankrupt’s need to repay their liability, noting they may be in a less favourable position to repay the liability at a later time. At the same time, the trustee must be mindful that some creditors, particularly small creditors, may be relying on dividends from a bankrupt estate to keep their business operating.

Practical relief for bankrupts

So, what does this mean for bankrupts? There may be the ability to discuss and attempt to negotiate extensions of time or variations to payment schedules with a trustee in bankruptcy if a bankrupt is affected by COVID-19.

Reasonable evidence that a bankrupt has been affected by one or more of the following will likely be required (please note this list not exhaustive):

  1. Loss of employment;
  2. Reduction in income;
  3. Tested positive for COVID-19;
  4. Been in mandatory self-isolation; and/or
  5. Increased and unexpected caring responsibilities.

Practical effects for bankruptcy practitioners

While a trustee must be mindful of certain parties being affected by COVID-19, a trustee still needs to continue performing their obligations under the Bankruptcy Act 1966 (Cth).

Trustees should try to obtain written evidence of any temporary or permanent loss of employment or reduction in income to able to document sufficiently the reason for any leniency provided to bankrupts.

If any Court applications are commenced by trustees to seek to obtain orders to deal with the assets of a bankrupt estate, it is likely that trustees will need to evidence to the Court that a level of reasonableness has been provided to bankrupts who have been affected by COVID-19 and sufficient evidence of the same has been provided. Depending on the situation, a trustees may consider allowing bankrupts with longer periods of time than usual to complete certain steps.

There is no question that applying the AFSA guidelines and completing the trustee’s obligation of administering a bankrupt estate in a timely manner will be a difficult balancing act for bankruptcy practitioners.

How can we help you

Whether you are a bankrupt or a bankruptcy practitioner, JHK Legal can assist you with any queries you may have.

JHK Legal has an extensive knowledge in the insolvency area and we can provide legal advice based on your specific circumstances. If this article may be relevant to your circumstances or if you have any general enquiries, please do not hesitate to contact us.

Written by Simone Wilson




Update regarding commercial lease negotiations

Regulations to give effect to the National Cabinet mandatory code of conduct announced by Scott Morrison on 7 April 2020 have been released and taken effect in Queensland.

Generally speaking, the regulations provide that parties to “affected leases” are provided with additional rights.

An affected lease is any binding retail shop lease or lease of premises used wholly or predominately for business activities under which:

(a)       the lessee is an SME entity, i.e. has an annual turnover of less than $50,000,000.00; and

(b)       the lessee or, in some limited cases, an affiliate of the lessee) is eligible for the jobkeeper scheme.

The new obligations and rights include:

  • A general obligation on the parties to act reasonably and in good faith between each in discussions and actions associated with mitigating the effect of the COVID-19 emergency;
  • Restrictions on the rights of lessors to enforce and terminate leases and guarantees and securities provided under affected leases during the period 29 March 2020 to 30 September 2020;
  • Deferral of rent increases under leases required during the period 29 March 2020 to 30 September 2020;
  • Rights for lessors to reduce services to premises during any period of closure by a lessee;
  • Mechanisms for the negotiation and renegotiation of rent reductions and waivers during the period 29 March 2020 to 30 September 2020 which include mediation and QCAT proceedings where there is dispute or enforcement is required.

Take aways 

  •  Clarity of the rights of the parties and process to reach resolution has finally be released;
  •  Clarity has now been given as to what financial information lessors and lessees are required to provide each other regarding their negotiations;
  • Landlords can initiate the negotiation process and bring a tenant to account and ultimately procure resolution by QCAT order if a tenant has not been acting reasonably or in good faith or has simply been refusing to pay rent;
  • Landlord’s can take their own circumstances into account in negotiation rental waivers and deferrals;
  • Clarity has been given on the timing and term for payment of any deferred rent;
  • An enforcement process exists for both parties in the event of any default on any negotiated outcome;
  • Bank guarantees and security bonds are able to be held and used a security for payment of deferred rent;
  • To avoid argument and the enforceability of the parties’ respective rights, any agreement regarding negotiated outcomes should be properly and appropriately documented between the parties
  • The parties can make agreement outside the requirements of the regulations.

Ultimately, there is now finally some certainty for lessors and lessees regarding their respective rights arising from the announced of the National Cabinet mandatory code of conduct announced on 7 April 2020.

We have prepared and have ready low cost processes and documents to help bring lease negotiations arising under the regulations to a swift conclusion.  Should you require any assistance with any of the matters arising from the regulation of COVID19, please do not hesitate to contact us.

Written by Niall Powell, Special Counsel.

 A more detailed summery of the regulations can be downloaded here

Relief for individuals and Businesses during the Covid-19 era

Whilst the world watches on at the shocking impacts of the COVID-19 pandemic (Covid-19), people are quickly becoming aware of the harsh realities that many face, both now and in the years to come.

Individuals and businesses who are financially distressed due to the impacts of Covid-19 have recently been met with temporary relief thanks to amendments made to both the Bankruptcy Act 1966 (the Bankruptcy Act) and the Corporations Act 2001 (the Corporations Act).

On 24 March 2020, Royal Assent was given to the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (the Act), with the Act being passed by both Houses of Parliament on 23 March 2020. The Act outlines the relevant amendments made to both the Bankruptcy Act and the Corporations Act and provides changes to bankruptcy proceedings (individuals) and statutory demands (companies).


A bankruptcy notice is a formal demand for payment based on a final judgment or order of the court. Before the Act came into force, individuals were required to respond to the bankruptcy notice within 21 days, failing which they were committing an act of bankruptcy. The creditor then has the right to make the individual bankrupt by way of a creditor’s petition which is presented at court.

 Key Changes as set out in the Act

The key amendments to the Bankruptcy Act are outlined below:

  • The statutory minimum to issue a bankruptcy notice has increased from $5,000.00 to $20,000.00;[1]
  • The statutory period for the debtor to respond to the bankruptcy notice has increased from 21 days to 6 months;[2]
  • The amendments are repealed at the end of the period of 6 months starting on 25 March 2020[3]; and
  • If the debtor is served with the bankruptcy notice in Australia, the bankruptcy notice must specify that the period for compliance is 6 months from the date that the debtor is served.

Impact of the Act on Individuals

Individuals who are issued with a bankruptcy notice now have a 6-month protection period whereby they are not obliged to comply with the bankruptcy notice. This allows an extended period of time for debtors to seek financial advice, negotiate a payment plan with the creditor and/or consider formal insolvency options.

For creditors, these changes make it difficult and significantly less useful to issue a bankruptcy notice due to the extended period that individuals are now afforded to comply with the notice. During this time, creditors are encouraged to re-consider alternative methods of enforcement if they do not wish to wait the 6-month period to recover monies owing.



A statutory demand is a written demand which is served by a creditor on the debtor company pursuant to section 459E of the Corporations Act.[4] Ordinarily, the debtor company would have 21 days to respond to the statutory demand, failing which it is presumed insolvent and the creditor has the right to make an application to wind up the debtor company.[5]

Key Changes as set out in the Act

The most significant amendments to the Corporations Act and the Corporations Regulations 2001 (the Corporations Regulations) are as follows;

  • The statutory minimum to issue a statutory demand has increased from $2,000.00 to $20,000.00;[6]
  • The statutory period for the debtor company to respond to the statutory demand has increased from 21 days to 6 months;[7]
  • The amendments are repealed at the end of the period of 6 months starting on 25 March 2020; [8] and
  • The wording in Form 509H, being the statutory demand must be amended so that it complies with Schedule 12, part 2 of the Act.[9]

It is important to note that the Act provides for legislative changes to come into play the day after the Act received the Royal Assent. This means that if a statutory demand was served on a company on or before 25 March 2020, the Act would not apply and the company would have 21 days to respond to the statutory demand. Furthermore, the amendments made to the Corporations Act only apply to statutory demands that are served on or after the commencement of the Act.[10]

Impact of the Act on Businesses

Likely one of the biggest impacts of these changes will be a large reduction in the use of statutory demands by creditors who believe there is a debt due and payable by the debtor company.

We may see a shift towards more creditors using other court processes, i.e. issuing a statement of claim, which is normally viewed as a more timely and expensive process.

The difference for debtor companies is that they will have an extended period of time to comply with the statutory demand. Short term, these changes will provide breathing space for debtor companies and an opportunity to re-evaluate their financial situation and options moving forward. The long-term effects however remain unknown.


Whether you are a creditor or a debtor, JHK Legal can assist you with any queries you may have in relation to the proposed changes of the Corporations Act and the Bankruptcy Act. Our solicitors are well versed in all legislative changes and are able to provide legal advice based on your specific circumstances.

JHK has extensive knowledge in the area of insolvency and can assist in all areas including statutory demands and bankruptcy proceedings, as well as general enquiries you might have.

If you are based in New South Wales, please don’t hesitate to call our Sydney office on (02) 8239 9600 for further information.

Written by Anna Hendriks, Lawyer



[1] Bankruptcy Regulations 1996 (Cth) s 4.02AA(1).

[2] Bankruptcy Regulations 1996 (Cth) s 4.02AA(2).

[3] Bankruptcy Regulations 1996 (Cth) ss 4.02AA(3), 4.10A.

[4] Corporations Act 2001 s 459E.

[5] Corporations Act 2001 s  s459C(2)(a) and s459P.

[6] Corporations Regulations 2001 (Cth) s 5.4.01AA(1).

[7] Corporations Regulations 2001 (Cth) s 5.4.01AA(2).

[8] Corporations Regulations 2001 (Cth) s 5.4.01AA(3).

[9] Coronavirus Economic Response Package Omnibus Act 2020 (Cth) s 1669

[10] Coronavirus Economic Response Package Omnibus Act 2020 (Cth) s 1669.

Temporary Changes to Safe Harbour Provisions

Covid19 has seen sudden and unforeseen changes to the way in which business is conducted in Australia and globally. We have seen some businesses readily adapt and transition into new ways of trading, but others have been left feeling the financial crush of no longer able to continue as “business as usual” for the foreseeable future. As a result, many companies and directors are having to consider the operation of the insolvent trading provisions, and specifically the “safe harbour” provisions of the Corporations Act 2001 (Cth) (“the Act”).

Temporary amendments to legislation impacting companies has evolved seemingly on a daily basis. Accordingly, it is more important now than ever before for directors to keep abreast of these critical changes given the effects to their personal liability.

This article briefly summarises the recent changes to the safe harbour provisions ensuring directors are:

  • Aware of changes to statutory protections;
  • Able to remain compliant with statutory obligations; and
  • Access and utilise temporary measures available to assist in appropriately operating a company through the pandemic.

Existing Safe Harbour Provisions – Section 588GA of the Corporations Act 2001 (Cth)

The existing safe harbour provisions outlined in section 588GA of the Corporations Act 2001 (Cth) (“the Act”) provide protection for directors in their taking a course of action reasonably likely to lead to a better outcome for a company. In order for the safe harbour to apply, the debt incurred by the company needs to be ‘directly or indirectly’ in connection with that course of action taken by the director.

Importantly, the reasonableness of a course of action is to be considered contextually. However, the factors likely to be taken into consideration by a Court in determining the reasonableness include but are not limited to steps taken to:

  • inform themselves of the company’s financial position;
  • ensure proper financial records are maintained;
  • restructure the company to improve the financial position;
  • prevent misconduct by company officers and employees adversely affect the company’s ability to pay its creditors and debts;
  • obtaining appropriate advice from qualified persons (for example lawyers, accountants and/or financial advisors);

Critically, directors may not be able to rely on the safe harbour provisions in section 588GA of the Act if at the time the debt is incurred the Company is in arrears of its usual obligations including its taxation reporting obligations and/or employee entitlements.

Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (COVID Act) (“the CERPO Act”)

The introduction of the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (COVID Act) (“the CERPO Act”) has bolstered the existing safe harbour provisions.

The CERPO Act has temporarily amended the safe harbour provisions for company directors and the duty to prevent insolvent trading. Effective from 25 March 2020, section 588GAAA of the CERPO Act now provides an additional ‘safe harbour’ from insolvent trading liabilities for debts that were incurred during the 6 months beginning 25 March 2020 in the ordinary course of the company’s business.

This additional measure will provide much needed relief and reprieve to company’s and their directors dealing with unprecedented changes to business and operating conditions and provides an attractive opportunity of time to properly assess a company’s financial position before otherwise pursing an insolvency administration.

What does this change look like in practice?

The introduction of this temporary measure is by no means a “green light” for directors to engage in or undertake transactions or risks.

It has been introduced specifically to protect necessary transactions or debts incurred to “…facilitate the continuation of the business during the six month period…”. This means, the protection only presently lasts from 25 March 2020 to 25 September 2020.

Whilst it is unclear as to exactly what will constitute a debt incurred “in the ordinary course of business”, the explanatory memorandum implies that the “ordinary course” may be considered widely and more broadly than before: that is to say, it could capture diversifying outside existing operations (for example production of new products). Further examples include loans taken out to facilitate continued operations, introduce/streamline technological integration, adapt production processes and/or pay employees will likely fall within the scope of the new temporary measures.

Importantly, these new temporary measures differ from existing safe harbour protections in that the exemption from insolvent trading is not preconditioned on the compliance with taxation reporting lodgements or employee entitlements being up to date. However, it is clear that the evidentiary burden of proving the debt will rest squarely with directors to demonstrate whether the debt(s) were reasonably incurred

Duties and penalties to remain

Notwithstanding these measures, directors must be mindful that:

  • This new temporary safe harbour provision does not change a director’s duties owed to the company itself in a period where the company is reasonably suspected to be or is already trading insolvently;
  • While a debt may be reasonably incurred in accordance with these provisions, directors still owe a due to consider the impact of the debts on creditors;
  • Other directors’ duties and liabilities will remain in place (for example personal liability attaching to unpaid taxation liabilities, uncommercial transactions, unfair loans and unreasonable director related transactions).

Considering utilising the Safe Harbour Provisions

It is clear that this provision has been introduced to provide avenues or options to companies and their directors facing times of financial uncertainty, who would otherwise be faced with having to make decisions on more serious measures including voluntary administration or liquidation.

However, reliance on these safe harbour provisions should be used only in appropriate circumstances. Transactions during the temporary period should only be undertaken with reference to proper financial and legal advice.

If you are a company director considering using the safe harbour provisions, we strongly urge you to seek timely legal advice, before entering the transaction or incurring any debt.

How we can help you

JHK Legal’s insolvency team can assist in respect of all changes to the Corporations Act (Cth) 2001 and all associated legislation, including advising on transactions and referring to reputable advisors. If you consider this advice relevant to your circumstances, please call us on 07 3859 4500  or Contact us to discuss how we may be able to assist.

Written by Kate Witt, Lawyer