An Important Reminder for Property Purchases through your Self-Managed Superannuation Fund

An Important Reminder for Property Purchases through your Self-Managed Superannuation Fund

If you are considering purchasing a property through your self-managed superannuation fund (‘SMSF’), it is essential that prior to entering into any contract of sale you determine whether you need to put in place a custodian arrangement. In this article we provide a brief overview of the Limited Recourse Borrowing Arrangements for SMSFs contained in the Superannuation Industry (Supervision) Act 1993 (‘the Act’).

If you are considering acquiring real property in your SMSF, we urge you to contact us to discuss the purchase terms before you take any steps.

What constitutes a Limited Recourse Borrowing Arrangement?

As a general rule, trustees of a SMSF are prohibited from borrowing money. Pursuant to section 67A of the Act trustees of a SMSF may only borrow money from a lender to fund the acquisition of an asset in certain circumstances.

In order to comply with the Act, the acquisition of an asset by a regulated superannuation fund via a borrowing must comply with the following criteria:

  1. the loan proceeds are used to acquire a single asset only which the trustee of the SMSF is not otherwise prohibited from acquiring.

This not only includes the purchase price under the contract of sale but also the expenses incurred in connection with the acquisition (such as loan establishment costs, legal costs and stamp duty) and expenses incurred in maintaining or repairing the asset to ensure its financial value is not diminished.

  1. the loan proceeds are not applied to improving the acquired asset.

This means that a trustee of a SMSF cannot enter into a Limited Recourse Borrowing Arrangement to purchase a single asset if that asset is:

a.   vacant land and you intend to use part of the loan proceeds to build a residential property on the land;

b.   vacant land and you intend to use money accumulated in the SMSF to build a residential property on the land;

c.   a property made up of a dwelling and land and you intend to use part of the loan proceeds to demolish the existing dwelling and build a new dwelling on the land;

d.   a property made up of a dwelling and land and you intend to use money accumulated in the SMSF to demolish the existing dwelling and build a new dwelling on the land.

If the trustee of a SMSF wishes to improve the property (i.e. through developing, demolishing, rezoning or building) then the loan must be repaid in full prior to the improvements being commenced.

  1. the acquired asset must be held on trust for the trustee of the SMSF by a separate entity, so that the trustee of the SMSF holds the beneficial entitlement to the asset.

This is where the trustee of the SMSF will need to ensure that it has a separate entity which agrees to enter into a custodian arrangement. The crux of the arrangement is that the separate entity will hold the legal title to the asset but the trustee of the SMSF will hold the full beneficial interest to the asset.

The separate entity is often referred to as a ‘custodian trustee’ or a ‘bare trustee’. To ensure that the requirements of section 67A of the Act are met, it is crucial to ensure that all relevant documents to evidence the custodian arrangement have been prepared correctly and duly executed. These documents can include:

a.    a resolution of the trustee of the SMSF;

b.    a resolution of the custodian trustee; and

c.    a Custodian Trust Deed (or Bare Trust Deed).

The custodian documents need to pre-date any contract of sale as the Buyer entity must be the custodian trustee.

  1. the trustee of the SMSF must have the right to acquire legal ownership of the asset from the separate entity by making one or more payments after obtaining the beneficial entitlement to the asset.

If the custodian arrangement is correctly recorded, the custodian trustee will act on the direction of the trustee of the SMSF at all times and will also transfer the legal title to the trustee of the SMSF on request.

Once the loan proceeds have been repaid in full, the trustee of the SMSF can be recorded on title of the property as the legal owner.

  1. the loan to the trustee of the SMSF must be limited recourse in nature, so that the lender’s rights to recourse on default of the loan are limited to rights to the asset being acquired.

This is to ensure that the lender only has a right of recourse against the property purchased and not any other asset of the SMSF. This limitation promotes the overall principle that superannuation funds are for retirement purposes and must be reasonably protected.

It is important to ensure that any loan documents are to the trustee of the SMSF as that is the entity that is borrowing the funds from the lender.

  1. the asset is not subject to a charge other than as provided in respect of the borrowing by the trustee of the SMSF

What is the purpose of the Limited Recourse Borrowing Arrangements?

The superannuation legislation was amended in respect of limited recourse borrowing arrangements so that:

  • superannuation fund assets are better protected in the event of a default on a borrowing;
  • the asset within the arrangement can only be replaced by a different asset in very limited circumstances specified in the Act;
  • superannuation fund trustees cannot borrow to improve an asset;
  • the borrowing is permitted only over a single asset or a collection of identical assets that have the same market value; and
  • the recourse of the lender or of any other person against the superannuation fund trustee for default on the borrowing is limited to rights relating to the acquirable asset.

What are the repercussions of not complying?

If the required conditions of the limited recourse borrowing arrangements are not satisfied, borrowing money under the arrangement will result in a contravention of one or more of the superannuation rules under the Act. A contravention may have civil or criminal consequences.

Practically, a lender may not agree to provide the trustee of the SMSF with a loan which would likely result in any contract of sale being terminated and the consequences of such termination will need to be dealt with. Alternatively, a trustee of the SMSF may be required to sell the acquired asset which could result in a substantial loss.

How can JHK Legal help?

Please contact us as soon as possible if you are considering a purchase through your SMSF. We can provide advice as to the limited recourse borrowing arrangements rules and all other requirements under the Act and also prepare the necessary custodian documentation.

We also assist clients with establishing their self-managed superannuation funds so please reach out if you are wanting to set up your own SMSF.

In addition, our conveyancing subsidiary MKP Property Lawyers, can provide their excellent services to act in the purchase of the property from the initial contract review up until settlement has been effected. Please do not hesitate to give us a call to discuss further!


Written by, Simone Wilson, Senior Associate

Supplier Alert: New Consumer Disclosure Obligations Business Owners Ought to Know

Consumer law is susceptible to constant change and business owners should continuously and actively keep up to date with these amendments to ensure the fulfilment of their obligations and mostly importantly, to avoid any punitive penalties. This article raises some awareness concerning new disclosure requirements indorsed within the Fair-Trading Act 1987 (NSW) as of 1 January 2021.

Do these new consumer disclosure obligations apply to me?

The consumer disclosure obligations will apply to a business that engages in the following conduct:

  1. The business supplies goods and/or services in New South Wales that:
  2. Does not exceed $40,000; or
  3. Does exceed $40,000 but the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption (for example a motor vehicle purchased by a family).
  4. The conduct is in connection to goods and/or services supplied in New South Wales or that affects a consumer in New South Wales or results in loss or damage in New South Wales (regardless of whether the business is from another state).

It is important to keep in mind that the monetary threshold of $40,000 will be increased to $100,000 from 1 July 2021. This means that more business will be captured by the consumer law warranties, guarantees and contractual obligations.

What disclosures do you need to make to consumers prior to completing a sale?

If your business meets the relevant criteria outlined above, you should ensure that you are taking reasonable steps to disclose the following information to your customers:

  1. The substance and effect of any terms which may “substantially prejudice” the interests of the consumer; and
  2. Any commission or referral arrangements with another supplier when they recommend that a consumer buys goods or services from that third party supplier.

Suppliers must make the required disclosures to consumers before supplying the goods and/or services. In practice, this should be done before the consumer signs the contract, makes a payment, or otherwise commits to the supply arrangement.

How can my business assess if the substance and effect of its terms may ‘substantially prejudice’ the interests of consumers?

Section 47A of the Fair Trading Act sheds light on various terms or conditions which may be substantially prejudice.  These terms include those that:

  1. Exclude liability on the part of the supplier; or
  2. Imposes liability for damage to the goods and/or services on the consumer; or
  3. Permits suppliers to provide data about consumers, use date provided by consumers, to a third party in a form that may enable the third party to identify the consumer; or
  4. Requires the consumer to pay a cancellation fee, balloon or similar payment.

These are just some examples that business should familarise themselves with, however, they do not represent an exhaustive list of terms and conditions which may entail the need for consumer disclosure.

Has your business taken ‘Reasonable steps’ to disclose its prejudicial terms?

Businesses need to ensure that they are taking reasonable steps to fulfill their consumer disclosures. Although the requirement to take reasonable steps will differ and depend on the circumstances of each case, Fair Trading has shed some light as to how your business should tackle these requirements.

In summary, your business should:

  1. Be clear, and not require consumers to actively seek out the information;
  2. Be upfront with consumers;
  3. Draw clear attention to consumers of the terms and conditions. Provide explanations about what these terms mean to ensure information is disclosed clearly and effectively;
  4. Explanations should be written in easy to read, plain English;
  5. Should be clearly marked on the front of contacts;
  6. If there is a large set of conditions which need to be accepted online, ensure short summaries are provided and can be easily accessed on payment pages;
  7. Ask consumers for verbal confirmation of their understanding;
  8. Initial the terms and conditions of the certain terms and conditions;
  9. Allow for tick-a-box option on websites.

What Disclosures are Required for Commission and Referral Arrangements?

Businesses must take reasonable steps to make consumers aware of any commission or referral arrangement in which the business receives a financial incentive from a third party supplier. Reasonable steps in this instance does not oblige the business to reveal the nature or value of the incentive, but merely requires the business to advise the customer that a financial incentive exists. Such disclosure must be made prior to the intermediary acting under the arrangement in which they receive the incentive fee. The requirement to disclose includes transactions that occur online where one of the parties to the arrangement is from interstate.

What Penalties Apply If I Fail to Disclose?

The applicable penalties for non-compliance with these new consumer disclosure obligations are rather substantial, so it is crucial that you continue to engage in conduct which is compliant.

The penal penalties include:

  1. $110,000 for corporations; and
  2. $22,000 for individuals.

Key Takeaways

There are presently new disclosure obligations introduced in New South Wales which entail heavy fines for non-compliance. As such, it is essential that you:

  1. Identify any terms in your contracts with NSW consumers which are likely to be significantly prejudicial to consumers and whether you have an arrangement where you receive a financial incentive for referring customers to another supplier of goods or services.
  2. Ensure that these terms are compliant with the unfair contract term regime prescribed by the Australian Consumer Law (ACL) so that they can be lawfully enforced against consumers, to the extent this regime applies to your contract. It is important to keep in mind that there are serious penalties available under the ACL for making false and misleading representations in trade or commerce, including misleading consumers as to their rights and obligations under the ACL.
  3. Update your disclosure processes to ensure that any terms which are significantly prejudicial to consumers, even if they are fair, are clearly explained to customers upfront as well as any financial incentive arrangements which mean you will receive a benefit from a referral.

How we can help you

JHK Legal has extensive experience in reviewing contractual terms, and can advise companies, individuals and third-parties on their consumer law obligations. Please do not hesitate to contact us today to discuss your concerns.


Written by, Rania Kassir


Buying a Property in Australia: FIRB Approval

Buying a property in a new country can always come with its challenges. The FIRB regime is a complex area that needs to be considered when foreign persons begin the property process. This article will provide an overview of FIRB and aspects to take note of.

The Foreign Investment review board is a regulatory framework that oversees foreign investment in Australia. The Foreign Investment Review Board (FIRB Board) is a non-statutory government department that evaluates application from foreign individuals who intend to invest or buy property in Australia. The main purpose of FIRB is to provide guidance to foreign persons on the policy and the Act. The Government overlooks foreign investments to ensure they remain consistent with community interests. The general stance of this policy is to welcome foreign investments. The policy is comprised of the following legislations:

  • the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“the Act”)
  • the Foreign Acquisitions and Takeovers Regulations 2015 (Cth) (“the Fee Regulation”)
  • the Foreign Acquisitions and Takeovers Amendment (Exemptions and Other Measures) Regulations 2017 (Cth)
  • the Foreign Acquisitions and Takeovers Fees Imposition Act 2015 (Cth)

The decisions under the above framework are made by the Commonwealth Treasurer, who is advised by the FIRB Board.

Who does and doesn’t require FIRB Approval?

The FIRB administration applies to foreign persons (including holders of TSS visa, work visa or student visa or a corporation or trusts in which foreign person hold a substantial or controlling interest) seeking to invest in Australian land or entities. Prior to entering into relevant transaction an application for an approval of the proposed transaction is required.

As regards residential property, foreign persons would usually be granted approval to purchase already established dwelling provided that the property is to be used as their primary place of residence and further that they dispose of the property when they leave Australia. Investment in existing residential land by foreign persons is otherwise generally prohibited.

If investment is residential property is intended by a foreign person, approval will only generally be granted for new dwellings or vacant land.

Fees apply for any application for approval and additional duty is usually also payable for any foreign acquisition in residential land.

Some exemptions are applicable for foreign individuals, such as, if a relevant property has been inherited, was granted via a court order or if purchasing a vacant land, the property developer obtained an exemption certificate for the property being purchased.

There are also exemption for acquisitions by foreign persons who acquire land with a spouse who is an Australian citizen or permanent resident and the property is acquired by them as their principle place of residence as joint tenants. This exemption does apply to de-facto relationships but does not apply to business partners, longtime friends, parents/child or siblings.

What’s the costs and how do you apply?

Foreign persons are required to pay a fee for each application made under the Act.

The fee for an application will generally depend on the value of the purchase price of the property.

Fees are paid when the application is lodged and the application process does not begin until the correct payment is received.

For residential land, fee tiers increase every 1 million of consideration; fees start at $6,530.00 for purchases of $1,000,000.00 or less rising to a maximum of $500,000 for purchases of more than $40,000,000.00.

Under section 53 of the Fee Regulation, a lesser fee of $2,000.00 will apply where the purchase price is less than $75,000.00.

For further information about these fees, we would recommend referring to the official FIRB application fees page.

The FIRB regime is complex and requires careful consideration. If you need any assistance determining whether any proposed acquisition of land is or would be subject to the FIRB regime, please contact us for appropriate advice.

How we can help you?

If you are seeking to purchase property and are concerned about FIRB, we can assist. JHK Legal’s subsidiary MKP Property Lawyers pride themselves in advising and assisting their clients to ensure they have a smooth process and are available via phone, email or face to face to discuss your concerns.

Written by, Christine Cherian


Application of Presumption of Advancement on the family home

What is the presumption of advancement?

In Australia, the general rule is that in circumstances where property is transferred between people who do not have any of these relationships, it gives rise to a presumption of a resulting trust in favour of the donor (the person who transferred the property).

A resulting trust means that the recipient of the property holds the property ‘on trust’ for the donor.

In some instances however, the relationship of the parties can mean that a ‘presumption of advancement’ applies, and in turn, the recipient is assumed to be the full legal owner of the property rather than simply a trustee.

The presumption of advancement is an equitable principle where a person puts property in the name of their spouse, child or to another person to whom they stand ‘in loco parentis’. The property is transferred with the intention of transferring both the beneficial interest in the property as well as the legal title.

Presumption of advancement v resulting trust

The presumption of advancement applies to transfers of real property and purchases of real property by people who stand in particular relationships. In Australia the presumption of advancement only applies to transfers of property from:

  1. Husbands to their wives[1];
  2. Male fiancés to their female fiancés[2]; and
  3. From parents to their children[3].

These relationships as listed at (a) to (b) above are interestingly only ‘one-way’, in that the respective case law was determined in an era where differing social values saw that only a male would be transferring property to his wife, and not to that of a mistress, nor that of a wife and/or woman ever transferring property to a man with the intention of same being considered a ‘gift’.

Today, the Court’s position remains undecided as to equity presumes a gift was intended by the donor. The Court’s discussions have traditionally circulated around the donor having an equitable obligation to see the advancement of the recipient[4], a recognition of the donor’s maintenance of legal duties[5], natural love and affection between the donor and recipient[6], as well as probability of the donor’s intention[7].

Case law has seen the Courts keep the pool of relationships which give rise to a presumption of advancement quite small. In cases involving transfer of real property from sibling to sibling, the Court in McCregor v Nicol held that the transfer constituted one of a resulting trust, [8] that is, held on trust for the unnamed party. This was similarly applied by the Court in the case of Z & Z which involved transfer of real property from a parent to their children in-law.[9] This is because the equitable law around resulting trusts assumes that the recipient of the property was not intended to receive the property beneficially, whilst the presumption of advancement doctrine presumes there was an intention that the recipient not only receives the legal title but also receives the property as a gift by the donor: the donor no longer has any interest in it.

Recent case law concerning married couples

Due to the nature of the presumption of advancement being applicable to a particular type of relationship, it is common that the real property being transferred is that of a family home. In circumstances where a spouse has creditors (usually in the context of insolvency), there is a chance that the presumption of advancement could apply to prevent creditors claiming an entitlement to the property.

The recent 2021 case of Commissioner of Taxation v Bosanac (No 7) considered the argument of a resulting trust vs the presumption of advancement, The case concerned a wife being the sole registered owner of the home. The ATO[10] had a a money judgment against her husband and had sought to enforce the judgment against the home, on the basis that (the ATO argued) the husband had a 50% interest in the home by way of a resulting trust.

The facts of the case were:

  • the husband and wife jointly obtained a bank loan to purchase the home that was secured by a registered mortgage over the property;
  • when the property was purchased, the wife was registered as the sole owner;
  • they also borrowed further monies secured by the mortgage that was purportedly used by the husband to conduct share trading;
  • they resided in the home for several years;
  • they had shared bank accounts;
  • there was some sharing of other property assets; and
  • no suggestion was made that the wife was registered as sole owner with a view to the husband avoiding creditors.

The ATO in this case argued that there was a resulting trust resulting in the husband being a 50% beneficial owner of the house by way of the fact that the husband had contributed to 50% of the purchase price as a joint borrower under the home loan. The wife argued that the presumption of advancement applied (ie: that she was the sole legal and beneficial owner) and that the onus was on the ATO to prove that there was a resulting trust.

The Court observed that the registration of the wife as sole owner could have been made for many reasons but the evidence as to the intent of either party was limited. The Court, as a result, held that the ATO had not provided sufficient evidence of the intention by the husband to retain a beneficial interest in the property.


If you are a married couple where one party may have commercial risks, it would be necessary to ensure that prior to transferring your home and/or a property into the ownership of your spouse’s name, that all financial documents are in order.

The parties could organise mortgage payments to be made from that spouse’s income particularly, whilst disclosures on loan applications should be consistent with the recipient spouse being the sole beneficial owner of the property. To solidify the transfer giving rise to a presumption of advancement, the transfer of property could be subject to a Deed at the time of purchase, outlining the intentions of the transfer as being that of a gift.

If you are unsure of your position, we would recommend seeking legal advice in order to protect the family home prior to making any transfers of property.

 How we can help you

JHK Legal regularly act for individuals, providing advice on property transfers as well as acting for individuals during property transaction.

The above determination in particular raises a reminder for parties who may be experiencing financial hardship or risk, to seek legal advice prior to transferring the family home to a spouse, child or other relative, as the implications of this transfer may not give rise to the presumption of advancement.

If you are seeking to transfer your family home as a gift, rather than the transfer giving rise to a resulting trust, please reach out to the JHK Legal team to obtain advice on your rights, interests and obligations on such a transaction.


Written by Elyzia Menounos, Lawyer


[1] Re Eykyn’s Trusts (1877) 6 Ch D 115; Nelson v Nelson (1995) 184 CLR 538, 600 (McHugh J). Not de facto spouses: Calverley v Green (1984) 155 CLR 242.

[2] Wirth v Wirth (1956) 98 CLR 228.

[3] Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353; Nelson v Nelson (1995) 184 CLR 538; Brown v Brown (1993) 31 NSWLR 582.

[4] Bennet v Bennet (1879) 10 Ch D 474.

[5] Pecore v Pecore [2007] 1 SCR 795.

[6] Sayre v Hughes (1868) LR 5 Eq 376.

[7] Wirth v Wirth (1956) 98 CLR 228, 237.

[8] McGregor v Nicol [2003] NSWSC 332.

[9] Z & Z (2005) 34 Fam LR 296; (2005) FLC 93–241; [2005] FamCA 996 [32].

[10] Australian Taxation Office.

Heightened Risks for Directors: The End of Temporary Relief

As the challenges of the COVID-19 pandemic continue, many businesses have innovated and adjusted their business models to stay afloat. With the changes came temporary measures and stimulus packages to ease the pressure and burden businesses would face. Many of those measures have now come to an end.

The outlook for 2021 has normality in sight, but it’s not over yet. It is important that now, more than ever, directors and business owners consider their next play and their potential exposure.

Here are a few important changes that directors should take note of:

  1. Insolvent trading protections ended

Under Section 588G of the Corporations Act 2001 (Cth), directors have a duty to prevent their business from trading whilst insolvent.

In March 2020, the federal government introduced the Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (Omnibus Act) to provide temporary relief and protection to directors of financially distressed businesses. The temporary measures ultimately provided a moratorium to directors from being pursued for any insolvent trading claim. As such, directors could not be held personally liability for their business trading insolvent during the pandemic if the debt was:

  • incurred in the ordinary course of the business; and
  • incurred between 25 March 2020 to 31 December 2020.

This protection and safe harbour for directors has inevitably come to an end as of 31 December 2020. Directors are only protected from insolvent trading if the company was placed into liquidation before 31 December 2020. Directors of companies that are liquidated after this cut off will not be protected by the safe harbour. Any debt incurred from 1 January 2021, whilst the company is insolvent, will mean that the director can be held personally liable for those debts.

If a director suspects that their company may be trading insolvent, it is important to seek legal advice to avoid being held personally liable and to take steps to protect themselves and the future of the company. The traditional safe harbour regime may still offer some protection to directors in certain circumstances, or alternatively, a restructure or deed of company arrangement may be considered.

  1. Illegal phoenixing

With the increase in restructuring and directors in survival mode, there is no doubt an increase in directors turning to illegal phoenixing to attempt to recover their businesses and avoid paying debts.

Illegal phoenix activity is where a company deliberately liquidates its assets and transfers them to a new company for no value or below market value to avoid paying debts, including taxes, creditors and employee entitlements.[1]

In an effort to tackle illegal phoenixing, ASIC has introduced new “director identification numbers” for all directors (“DIN Regime”). The DIN Regime, is expected to be implemented by about 22 June 2022 (or earlier, if a date is set).

Previously, a director could have multiple records with ASIC due to minor variations with their details such as a middle name not being included on one record, or a different address. Now, directors will be required to keep the same director identification number and it cannot be issued to anyone else. It will mean that directors will need to apply for a director identification number prior to being appointed as a director or will be required to apply for one within the timeframe directed to do so. The implementation of the DIN Regime has inevitably been delayed due to the uncertain challenges of COVID-19, but when it does come into effect, it will have a significant impact in combatting illegal phoenixing by ensuring directors can be tracked across multiple companies. It will also allow directors and their corporate history to be tracked more efficiently.

Directors should be aware of their duties and obligations not to engage in illegal phoenixing in order to avoid exposure and being personally sued for such action. Feel free to reach out if you need advice about your obligations or the new director identification number requirements. It is important directors stay up to date with these changes to ensure compliance.

  1. The end of JobKeeper

Since COVID-19, the federal government supported a number of businesses and employees with the introduction of the JobKeeper package.

JobKeeper ended on 28 March 2021. What does this mean for businesses? This has meant that many businesses have needed to re-adapt and stand on their own without the government’s support. It is predicted that small-medium sized businesses will be the most impacted, particularly those with minimal funding options. Businesses may look to solutions such as the inevitable reduction of staff, negotiating rental payments, restructuring or closing down permanently.

It is important for directors to identify whether the business is just experiencing a short term cashflow problem or whether there are indicators that the business is facing a bigger insolvency issue. Upon looking at the business more broadly, if there are underlying insolvency issues, it is important to reach out for advice, particularly if the business is struggling to meet overheads without JobKeeper. Dealing with these issues early and formulating a plan might help the business to recover and come out stronger on the other end.

  1. The end of the Rental Moratorium

From 28 March 2021, a landlord can now take action against a lessee for any failure to pay rent under the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020 (NSW).

This relief gave lessee’s financial ease for some time, but it has unfortunately come to an end. As with the end of JobKeeper, it is important for directors to identify whether the business is able to continue to maintain rental payments and if these payments are causing short term cashflow problems or potentially an underlying insolvency issue.

The solution? Negotiate with your landlord – although there is no longer an obligation for your Landlord to engage in negotiations, there is nothing to lose. Your landlord is likely to offer something if you can show your business has been affected, rather than lose their current lessee. This will allow the business to cut its fixed costs. With the phasing out of JobKeeper, this may be an avenue to look at if your business has been impacted. We have been able to assist many businesses re-negotiate their lease in the current climate.

  1. Improper use of stimulus

Directors further have a duty to avoid transactions that are not in the best interests of the company. Such transactions are voidable and a liquidator may have a right to make a claim against the director under Section 588FE of the Corporations Act 2001 (Cth) to ensure that assets are distributed fairly amongst creditors. The transactions must also be insolvent transactions, i.e. must have occurred at a time when the company was insolvent.

Whilst the stimulus packages have helped businesses deal with short term cashflow issues, these measures have not relieved directors from the voidable transaction provisions. Directors need to ensure they are not tempted to deal with the stimulus packages received inappropriately, for example, drawing the funds for personal loans and expenses. Although these payments may boost business agility, ironically, if not used appropriately, these payments can cause even more financial distress and are at risk of being clawed back by a liquidator if the company unexpectedly goes into insolvency.

It is the liquidators’ job to ensure that the assets of the company are maximised and available for fair distribution to unsecured creditors. Directors need to ensure company debts are paid first prior to spending the funds on personal use or otherwise, to avoid a personal claim being made against the director for their use of the funds if the company becomes insolvent.

  1. ATO Debt

The ATO has confirmed that it will officially be resuming its compliance activities from April 2021 to pursue and enforce debt recovery action. The resumption will be on a case by case basis, where taxpayers have failed to comply with their obligations. They will be collecting unpaid tax debt, including issuing Director Penalty Notices (“DPN”). This means that if the business has an unpaid tax debt, the director can be held personally liable for the debt under certain circumstances by way of a DPN.

It understood that firm action will not be taken if attempts are made to reach out to the ATO and do the right thing. It is important to get on the front foot and deal with any demand letters received from the ATO immediately. Further, all lodgements must be up to date and lodged within the required timeframes to avoid becoming personally liable under a DPN.

There are avenues available for businesses to deal with their overdue tax debts, with the most common being to negotiate a payment plan. This will ease the pressure and allow you to pay back the debt within a longer timeframe of a year or so.

Key takeaways: So what next?

The next few months will be pivotal for medium and small businesses. Directors should keep a close eye on cashflow and the general financial position of their businesses in order to mitigate their losses as much as possible.

There are a number of avenues available for directors and businesses facing difficulties and it is important to seek advice to discuss your options.

How we can help you

JHK Legal can provide advice or general assistance in safeguarding the future of your business and avoiding personal exposure. Please reach out to the JHK Legal team to see how we can help you and your company.


Written by Kristina Ghobar, Associate


[1] Australian Taxation Office, Illegal phoenix activity; Australian National Audit Office, Addressing illegal phoenix activity

A Decade of the Competition and Consumer Act 2010

2021 marks the 10-year anniversary of the commencement of the Competition and Consumer Act 2010 (Cth) (“CCA”), which came into effect on 1 January 2011. With an increased focus on greater consumer and small business protection, the CCA has been heralded by the Australian Competition & Consumer Commission (“ACCC”) as a milestone achievement in Australian consumer protection laws since its inception.

The History of the CCA

Replacing the Trade Practices Act 1974 (“TPA”) the CCA, which includes the Australian Consumer Law (“ACL”), replaced 13 separate Acts across Australia that represented a disjointed, outdated and overly difficult regime across the different Australian jurisdictions.

The paramount goal behind updating the country’s consumer laws through the ACL was to bolster consumer protection by enacting provisions which were reflective of the fast-changing technological, social, and economic advancements that were shaping our marketplace and, consequently, consumer needs.  An important step forward to achieving this goal was the introduction of a new consumer guarantee regime and unfair contract terms, both of which attract higher pecuniary penalties.

Consumer Guarantees

The CCA’s predecessor included implied terms which were criticised for being impractical, uncertain and hard to apply.  The new consumer guarantee regime under the CCA operate as statutory rights acting independently of the parties’ contract which raise threshold requirements, shift the onus from consumers to suppliers, and introduce express warranties.  Those consumer guarantees provide consumers with more certainty and entitle the ACCC to take enforcement action against suppliers who do not comply with the ACL regime.  This noteworthy change meant that consumers no longer need to rely on contract law to provide redress for failure to comply.

Unfair Contract Terms

Another significant achievement was the introduction of unfair contract terms which rendered a term void if it was contained in a consumer contract of a standard form and the term was ‘unfair’.  A term will be deemed void if it would cause a considerable imbalance in the parties’ rights and obligations under the contract, is not reasonably necessary to protect the benefiting party’s legitimate interests, and would cause detriment to the reliant party.   Similarly to the consumer guarantees, unfair contract terms enable greater consumer protection and place a more stringent burden on businesses to contract fairly with its consumers.

Pecuniary Penalties

Arguably the most powerful change under the CCA was the introduction of civil pecuniary penalties, which strengthened the ACCC’s ability to take enforcement action and provide greater deterrence against contraventions of the ACL. Not only did the ACL increase compliance, but it also provided consistent product safety standards, product recall mechanisms and mandatory reporting requirements aimed to improve public awareness and safety.

The CCA today

The implementation of the CCA was one thing, but the true litmus test of an effective piece of legislation is whether it works in practice at achieving its goals.

The CCA in Practice

According to the ACCC, the Federal Court of Australia has imposed nearly $400 million in civil pecuniary penalties, including the well-known Volkswagen emissions scandal, since the CCA was enacted.  The ACCC has also issued 281 infringement notices against 140 businesses over the past decade, proving the CCA is a useful mechanism to deter contravening conduct, increase compliance and promote public awareness of consumer protection laws. Arguably two of the most publicised cases were the Coles and Volkswagen controversies which highlighted the powers of the ACCC under the CCA in holding businesses accountable for their conduct.


Following a lengthy investigation, the ACCC ordered Coles pay $10 million for engaging in   unconscionable conduct in 2011 by misusing its bargaining   power to manipulate over 200 suppliers for its own benefit.  This case was one of the first findings of unconscionable conduct in a business-to-business (“B2B”) context under the ACL and acted as a powerful warning for other businesses engaging in B2B transactions.


This case gained world-wide attention when the Federal Court condemned Volkswagen for breaching the ACL by making false representations about its supposed compliance with Australian diesel emissions standards and ordered it pay $125 million in penalties.  Not only did this case involve the highest penalty ever ordered for contravening the ACL, but the relentless media coverage showcased to consumers the ability of the ACCC to investigate and penalise a company who intentionally deceived regulators and consumers.


In addition to the ACCC’s ability to penalise companies, it can also ban individuals from running corporations or engaging in specific conduct where they have been known to operate a business that breaches the CCA. In one case, the director of the company, We Buy Houses, was personally penalised $6 million for his involvement in the misleading and deceptive conduct of the company.

The CCA Tomorrow

As with any new piece of legislation, there have been many amendments to the CCA, including amending the misuse of market power provision, introducing new industry codes of conduct and class exemption processes. The most recent, and arguably most significant from a consumer’s perspective is the impending amendment to the definition of ‘consumer’.

Prior to the amendment, a person or business will be a consumer if; they purchase goods or services that cost less than $40,000, or the goods and services are over $40,000 but are of a kind ordinarily acquired for domestic, household or personal use or consumption, or the goods are a commercial road vehicle or trailer used primarily to transport goods on public roads.

Commencing 1 July 2021, the threshold amount will increase from $40,000 to $100,000, the first amendment to the threshold since it was introduced in 1986. This change was a push from the ACCC in 2018 to reflect inflation rates as well as ensure consumer laws capture a greater range of goods and services.

The past 10 years has seen the harmonisation of Australian consumer laws with a clear focus on promoting public awareness and holding businesses accountable. It is undeniable that these changes brought about more stringent, concise, and uniform provisions and it will be interesting to see what the next 10 years holds for the CCA.

How JHK Can Help

In consideration of the upcoming amendment to the definition of ‘consumer’, it is important for businesses to review their contracts, warranties and terms and conditions to ensure they are complying with the CCA now and in the future.

If you are unsure whether your business is complying with consumer laws or want a second opinion as to whether current internal practices will capture these amendments, you can contact JHK Legal for a free consultation on (07) 3859 4500. You can also read more about the CCA on the ACCC’s website here.


Written by Sabrina Austin, Lawyer

Business Interruption Insurance: A Potential Shining Light for Insureds Amidst a Year of Difficulty

The Covid-19 pandemic caused an array of difficulty for Australian business both small and large. One of these difficulties in the current pandemic landscape is the loss of earnings to a business as a result of temporary closure to their business premises. Often these business closures were unavoidable and/or forced upon traders by the Government. Nonetheless, Australian businesses may be able to lodge a review with their insurer and claim any loss which may have resulted from such closure.

What claim may Insureds have available?

Some insurers have left themselves open to reviews from insureds due to an oversight in insurance policies. Business Interruption Insurance (‘BII’) is often used to cover situations where business premises are closed due to a Human Biosecurity Declaration. The current legislation that deals with the ability to declare a disease quarantinable is the Biosecurity (Consequential Amendments and Transitional Provisions) Act 2015 (Cth) (“Biosecurity Act”) which repealed the former legislation, being the Quarantine Act 1908 (Cth) (“Quarantine Act”).

Where an insurance policy makes specific mention to the Quarantine Act rather than the Biosecurity Act, an insured of that policy may claim that the exclusion does not extend to the listed human diseases within the Biosecurity Act, more specifically and relevant to the current climate, does not extend to COVID-19.

Therefore, if an insurance policy reads something similar to the below passage, then an insured may have a claim for BII:

“….. Premises but specifically excluding losses arising from or in connection with highly Pathogenic Avian Influenza in Humans or any Diseases declared to be Quarantinable Disease under the Quarantine Act 1908 and subsequent amendments”

As can be seen within the above provision, it makes specific mention of the Quarantine Act and any subsequent amendments to the legislation. The issue with this is that as mentioned above, the Quarantine Act was repealed rather than amended. Therefore, this leaves room for insureds to successfully challenge an exclusion clause as being one that does not include COVID-19.

Recent developments in Business Interruption Insurance

There have been recent cases both in the UK and in Australia which have created a framework for insureds to work through before deciding whether they have a plausible case.

The UK test case, being The Financial Conduct Authority v Arch Insurances & Ors [2020] EWHC 2488 outlined that general exclusions for pollution cannot apply and that general public health information was sufficient to show that an outbreak of the pandemic either at or close to a business came under the banner of an exclusion.

A little closer to home, the Australian test case, being HDI Global Specialty SE v Wonkana No. 3 Pty Ltd trading as Austin Tourist Park [2020] stipulated that reference to the Quarantine Act did not have anything to do with the Biosecurity Act. Essentially, insurers who referred to the Quarantine Act, would not have successfully included Covid-19 as an exclusion.

The Framework (Questions Australian businesses should ask themselves before pursuing a claim):

  1. Was there a closure of all or part of your business premises?
    • For a majority of businesses, the answer will be yes.
  2. Was this as a result of Government, Public or Statutory Authority?
    • Yes, in accordance with the relevant State Act.
  3. Was he closure as a result of an infectious disease?
    • Yes, likely due to coronavirus.
  4. Was the infectious disease (in this instance, Coronavirus) within 20km of your premises?
    • Most businesses will be able to establish a case of Coronavirus within 20km of their business using public health records.
  5. Does the insured’s insurance policy refer to the Quarantine Act?
    • If the insurer refers to the Quarantine Act in their insurance policy, and the insured has answered ‘yes’ to the above questions, they will likely have a plausible case for BII.

More to come in Business Interruption Insurance

Having already been appealed in the NSW Court of Appeal and being upheld, it is likely that the Insurance Council of Australia (‘ICA’) will again challenge the decision through an appeal in the High Court of Australia. In fact, the board of the ICA has agreed that an application for special leave is to be made to the High Court of Australia to appeal the NSW Court of Appeal decision.

The ICA claims that the insurance industry is sympathetic to Australian businesses throughout the pandemic but that it is of their view that Covid-19 was not contemplated for coverage under most Australian policies and that the Quarantine Act exclusion serves to exclude Covid-19 related claims. As such, it seems that there remains to be life and movement in the BII area.

There is still likely to be major developments in the area which will come as a result of the High Court Appeal which could alter the current landscape of the insurance industry. The position in Victoria at this point in time is most favourable for insureds. Where an insurance policy refers to the Quarantine Act and insureds can substantiate business loss in line with the above framework, they have a high likelihood of success in a BII claim.

Written by Rod Lindquist, Consultant


Unregistered Leases are Not Enforceable – A Ridiculous Notion

For most, entering into a lease of any sort is an exercise in the basics of contract law.  There will be an invitation to treat from the Lessor consisting of the premises or land and subsequent rental amount.  This invitation will be met with an “offer” from the Lessee (often recorded in a “non-binding” Offer to Lease or Agreement for Lease document), which generally includes any desired special conditions being presented to the Lessor.  The Lessor would then cause the lease to be prepared and sent to the Lessee and the parties then negotiate until the terms are accepted, with each party finally signing and exchanging the lease to communicate their intention to create a legal relationship. Consideration is generally in the form of the monthly rent; however, a security bond is usually required prior to taking possession. It is at this point that a valid and binding contract between the lessor and the lessee is usually formed.

Notwithstanding the foregoing, the creation of a lease also creates an interest in land.  As such, and in Queensland to be enforceable between the parties, s 59 of the Property law Act 1975 (Qld) requires that the lease be in writing and signed.

Further, to be enforceable against the interest being leased the lease would also usually be required to be registered against the title to the land on the Queensland Land Title Register.  In the absence of such registration, the lease would amount to an equitable lease.

Notwithstanding the registration point above, a written lease would generally be enforceable against:

  • the granting lessor pursuant to s 185(1)(a) of the Land Title Act 1994 (Qld);
  • if the lease is a “short term lease” (i.e. a lease for a term, including options, not exceeding three (3) years), the granting lessor and any successor in title pursuant to s 185(1)(a) of the Land Title Act 1994 (Qld).

Registration of the lease confers the benefit of “indefeasibility” to the Lessee and notifies all who search the Land Title Register of the Lessee’s interest and priority against other regarding the title to the land.

Finally, s 71 of the Land Title Act 1994 (Qld) makes clear that “an unregistered lease … is not invalid merely because it is unregistered”.

Notwithstanding the seemingly simple operation of the above provisions, in Contempree v BS Investments Pty Ltd & Anor [2020] QCA 255, Queensland Court of Appeal was recently asked to consider whether failure to register a lease could render a long-term lease unenforceable against the lessee?

Contempree was the appellant and the director of a company called Bemon Pty Ltd (“Bemon”) which ran a backpacker hostel from a commercial building it also owned.  BS Investments Pty Ltd and Tirley Holdings Pty Ltd as Trustee (“BS”) purchased the land and premises from Bemon and leased them back Bemon so they could continue to operate the backpacker hostel (the lease was not originally registered due to an oversight). Bemon then sought to sell the business and assign the lease to Foxworth Pty Ltd (“Foxworth”) 3 years later, however the sole director of Bemon (“Contempree”) remained as a guarantor under the lease.  Foxworth registered the original lease and the transfer of that lease to it, but subsequently failed to pay rent and fell into arrears. This resulted in BS commencing proceedings against Contempree as guarantor for the arrears of rent, outgoings, costs and interest.

At trial Contempree argued that there was no valid lease because it was not a registered lease at the time of the assignment and therefore there was no performance to guarantee. The basis of this argument was that the lease was not valid at law until it was registered and that BS’s failure to have the lease registered amounted to a repudiation of the agreement to lease, which gave Bemon the right to rescind, with the rescission being affected by vacating possession (to allow the assignment to Foxworth). BS responded in turn claiming the lease was at the very least an equitable lease from the date of execution of the deed of assignment.  BS further argued that nothing was done to bring the lease to an end, as it was capable of being assigned and was assigned with that assignment being perfected by registration.

Bemon also submitted that the deed of covenant used for the assignment only related to a lease that was already registered, although clause 2.8 of the deed recognised that the lease may not be registered. It was subsequently ruled that Bemon had not demonstrated that an assignment of the equitable lease was inconsistent with the deed of covenant, on the contrary, the subject matter of the agreement to assign the lease was apt to include an equitable lease and recognized that the lease may not be registered. On this basis, Bemon’s argument that the deed did not contemplate an equitable lease was rejected.

At paragraph 31, Lyons SJA states:

“The appellant’s [Contempree] arguments ignore the effect of the registration of the lease, and the subsequent registration of its transfer to Foxworth.  Under s.64 of the Land Title Act 1994(Qld) (“LTA”), a lot may be leased by registering an instrument of lease for the lot.  Under s.182 of the LTA, on registration of an instrument that is expressed to create an interest in a lot, the interest is created, and vests in the person identified in the instrument as the person entitled to the interest.  It follows that on the registration of the lease, it created a leasehold interest in the property, which vested in Bemon.  Under s.184(1) of the LTA, Bemon then held that interest, subject to registered interests affecting the lot, but free from all other interests. An exception to the effect of s.184(1) of the LTA is created by ss 184(3) and 185(1)(a) for an equity arising from the act of the registered proprietor. No doubt Bemon held the lease on its registration subject to an equity in favour of Foxworth.”

Contempree was not successful with his appeal, the lease was ruled to be a valid contract which created an equitable lease over the land until registration was effected.  The exception provided for in s.185(1)(a) of the LTA was sufficient to allow the equitable lease to be transferred to Foxworth and crystalize upon registration of the lease and subsequent transfer documentation.

What we have learned from the apparent waste of the Court’s time is that the basic principles of contract law and property law will continue to apply to ensure that unregistered leases remain binding between the parties to them.

How we can help you

JHK has extensive experience in dealing with leasing and can advise individuals, companies, creditors and third parties on any issues that may arise.  Please do not hesitate to contact us today to discuss your situation.


Written by JHK Legal lawyer, Cody Niezgoda