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There are some significant changes to the law in the area of property, other than real estate, which are impacting substantially on businesses.
I urge you to familiarise yourself with these changes so as to avoid potential economic loss.
These changes specifically relate to the Personal Propertoes and Securities Act which came into force in January 2012. Many businesses have still not reponded to the changes this brought. It is not to late to respond to this new environment and secure your property.
In addition there are a number of problems you can inadvertently take on when taking on a subcontractor. We have discussed this and some solutions further below.
1. Personal Property Securities Act ("Act")
The Personal Property Securities Act ("Act") was passed in late 2009 and commenced operation in January 2012.
The Act introduced a new national regime governing all types of security interests in personal property and is a dramatic departure from the previous law.
The regime replaced a complex system of state, territory and national laws and registers and consolidated the law and practice through the introduction of one national system supported by one online register of personal property securities.
How Does this Act affect my Business or Investments?
If you have equipment of other property you own, but which is in the possession or on the property of other persons or legal entities (such as a sibcntractor or a clients permises), you should serviously consider contacting us to discuss you putting security over your property.
Otherwise you may be at risk of this property being lawfully taken by a trustee in bankruptcy (in the event of a solvency problem sufferred by this third party who has possession of your property) .
The Act governs interests in personal property which include virtually all forms of property other than land and fixtures and some statutory licences (such as water rights) and includes for example:
- Plant and equipment
- Intellectual property
- Contractual rights
- Live stock.
Under the regime, owners of personal property will no longer be able to rely on the fact that they own the personal property or asset.
If your interest in the your property is not registered on teh national database that has been created for this purpose, it is at risk of being lost through a subsequent transaction in which the personal property is dealt with or an insolvency scenario.
The Act covers a range of security charges (it now governs them)
- Recognized security interests such as charges and mortgages;
- Hire purchase or lease of goods;
- Retention of title arrangements;
- Commercial consignments; and
- Circumstances where security is taken in goods to secure payment of the purchase price.
What Do You Need To Do?
- Terms of trade, financing documents, mortgages, leases of personal property and other security documents will need to be amended to reflect the new regime and protect your interests post the introduction of this regime.
- You also need to consider whether your internal structure means that your assets are at risk of forfeiture and examine your asset protection planning with a qualified expert.
- Consideration should also be given to any arrangements which mean that your assets are in the possession and/or control of another party.
If you believe that you are affected, you should contact our office in order to discuss the impact of this regime on your business and asset protection structures.
2. Subcontractor Problems and Solutions:
For a wide variety of reasons, it is becoming increasingly common for businesses to engage subcontractors rather than employing persons directly.
A major benefit of engaging subcontractors is that it can in some circumstances allow you to grow your business in a simpler way with more flexibility and less built in cost structured and potentially less debt.
Further, with a properly drafted subcontractor agreement, certain obligated payments for employees are not required to be paid to the subcontractor.
However, this requires careful consideration and proper advice from a professional advisor with experience in this area.
Australian Taxation Office Supervision and Review >
Having a valid subcontractor agreement will be one of the first items that the Australian Taxation Office review when undertaking an audit into your payroll tax affairs and or Workcover obligations.
We have recently had experience with a client being subject to such an audit, who had in place subcontractor agreements prepared by Ascendia Lawyers.
The end result was that the ATO was impressed with the agreements and our client had a potential payroll tax and Workcover bill of $250,000 which he was found by the ATO to not be liable for - as a result of having the agreements in place with each subcontractor engaged.
Your subcontractor agreement is a very important agreement to your business. By engaging a professional advisor to prepare the document, important issues whcih need to be dealt with, such as:
- · Termination
- · Payments
- · Confidentiality
- · Policies and Procedures
- · Insurances
- · Responsibility
- · Standards of work
can all be addressed in the one document.
You can also clearly define which party is responsible for payments such as Workcover insurances, PAYG taxes, payment of any applicable industrial awards and agreements, adherence to anti-discrimination legislation and required workplace health and safety legislation.
Superannuation Liability >
The one issue that cannot be contracted around is that of superannuation payments. If your subcontractors invoices are wholly or predominantly for labor, you will still be required to pay the relevant superannuation contributions on their behalf,unless the subcontractor party is a company.
What Happens After I have Updated and Implemented SubContractor Agreement(s)?
You need to continue to be vigilante in maintaining a clear relationship with your subcontractor(s). such that even after such agreement is signed, you do not advertise or give the impression that the subcontractor is associated with your business.
An example may be giving them a business card with your logo or driving around in a car with your business logo. Even with a subcontractor agreement in place, if all actions of the parties make it appear as if it is an employment relationship, you will be held to be an employer and required to provide all the usual insurances, payments and other obligations required of an employer.
Can Ascendia Lawyers Assist Me?
For the initial upfront cost of having Ascendia Lawyers prepare you with a compliant subcontractor agreement, your savings can be substantial, in terms of less disputes with contractors, lowers liabilities in payments, lower taxation costs and smaller amounts of statutory required payments
In order to obtain further assistance in this area or to have your subcontractor agreements prepared or reviewed, please contact Ascendia Lawyers.
We are able to provide a fixed fee quote in writing for subcontractor agreements and advice where the scope of work is clear.