Norman Waterhouse
   
Norman Waterhouse

Normans Briefly

In this issue

Welcome to the May edition of the Normans Corporate and Commercial Briefly.

Thank you to all clients who attended the recent Employment Seminar held in April at the Crowne Plaza Adelaide. This event generated great feedback regarding the relevant content that was presented on current Employment Law challenges to both the public and private sector.

Normans' next event is the Annual Local Government Conference which will be held on Friday the 9th of August at the Adelaide Entertainment Centre. We will offer half and full day registrations and we encourage you to view the program which will soon be online at normans.com.au.

In this Briefly we give valuable insight into casual employment contracts and important changes to superannuation that are likely to impact your business.

>   Robbing the Honey Pot – Federal Budget confirms changes to superannuation
>   Employment – How casual are your casuals?
>   Contracting – Who are you really dealing with?

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Robbing the Honey Pot – Federal Budget confirms changes to superannuation

Prior to the release of the Federal Budget this month, Bill Shorten (Minister for Financial Services and Superannuation) announced a number of changes to the superannuation law. In the 2013 Federal Budget, the Government has now confirmed many of those changes, which purportedly aim to create “a more equitable and sustainable retirement income system.”

Some of the key changes to the superannuation system are:

  1. From 1 July 2013 to 1 July 2019, the Superannuation Guarantee will be incrementally increased from 9% to 12%. From 1 July 2013, the rate will increase to 9.25%. In the Budget reply speech, the Coalition confirmed that they would not roll-back this increase should they be elected. However, they will freeze any further increases until July 2016;
  2. From 1 July 2012, the Government announced that individuals with income above $300,000 will have the tax rate imposed on their superannuation contributions increased from 15% to 30%. The legislation enacting this change was introduced into Parliament this month and is expected to pass without amendment;
  3. From 1 July 2014, earnings on assets supporting a pension will now be tax free up to $100,000 and be taxed at 15% for earnings above $100,000. This changes the current treatment where all earnings on assets supporting a pension are tax free in the fund. There will be special rules which apply to grandfather the previous tax treatment in respect of capital gains derived on assets acquired prior to 5 April 2013;
  4. From 1 July 2013 taxpayers aged over 60 will have their concessional contribution cap increased to $35,000;
  5. From 1 July 2014 taxpayers aged 50 and over will have their concessional contribution cap increased to $35,000;
  6. The Excess Contributions Tax will be reformed. With effect from 1 July 2013, if a taxpayer makes contributions to a superannuation fund which exceed the concessional contribution caps, the taxpayer will have the option of withdrawing the amount of the excess contribution and having it taxed at the taxpayers marginal rate (rather than at the 46.5% rate currently imposed);
  7. The Government will, from 1 July 2014, provide the same concessional tax treatment to deferred life annuities that superannuation assets supporting superannuation income streams currently receive;
  8. The Government will increase the account balance threshold for lost superannuation held by the ATO from $2,500 to $3,000 from 31 December 2016; and
  9. In order to keep the aged pension “sustainable and fair” (that is, to decrease the amount of pension the Government needs to pay), from 1 January 2015 the Government will extend the normal deeming rules to superannuation account-based income streams for the purposes of the pension income test. All products held prior 1 January 2015 will be grandfathered indefinitely and will not be subject to the extended deeming rules.

For more specific information on any of the material contained in this article please contact Tom Walrut on 8210 1218 or twalrut@normans.com.au or Kale Rigano on 8210 1207 or krigano@normans.com.au.


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Employment – How casual are your casuals?

The Fair Work Commission (FWC) has recently demonstrated a willingness to prefer the provisions of Enterprise Bargaining Agreements (EBA) above general law conventions when determining whether an employee is a ‘casual’ for the purposes of the Fair Work Act 2009 (Cth) (the Act).

The facts and decision at first instance

The FWC Full Bench decision of Telum Civil (Qld) Pty Limited v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434 concerned a group of employees who had been engaged to work on a specific project. Their employment ceased upon the completion of the project. The employees were engaged for over 12 months, and during that time, worked a regular pattern of hours equivalent to full-time employment. The employees were paid a 25% casual loading in lieu of statutory entitlements.

The question to be determined was whether the employees were ‘casual’ for the purposes of the Act and, thus, whether they were entitled to the benefit of the National Employment Standards, including redundancy pay.

The relevant EBA contained the following provision:

Employees under this Agreement will be employed in one of the following categories:

  • Permanent employees; or
  • Casual employees.

At the time of engagement, Telum will inform each employee of the terms of the terms of their engagement and, in particular, whether they are to be a permanent employee or casual employee.

Casual employees will be engaged by the hour. A person engaged as a casual will be paid a loading of 25% on the permanent employee ordinary time wage rates prescribed in clause 6 of this Agreement. The casual loading will be paid in lieu of and compensate for all benefits such as leave, notice, redundancy and any other full-time entitlements that do not apply to casual employees.

At first instance, the FWC held that the employees were not ‘casual’ for the purposes of the Act because the employees’ work patterns meant that, under the general law, they were not casual.

Appeal

The FWC Full Bench took a different view on appeal. It indicated that it was incorrect to presume that the term ‘casual’ in the Act had the same meaning as ‘casual’ in general law. The FWC Full Bench instead determined that the term ‘casual’ in the Act ‘is a reference to an employee who is a casual employee for the purposes of the Federal industrial instrument that applies to the employee’.

Modern Awards define casual employment as an engagement under the label ‘casual’ and where the employee receives a payment of a 25% loading as compensation for a range of entitlements, which would otherwise be provided were the employment not casual. As an EBA must provide terms to employees that are ‘better off overall’ than the relevant Modern Award, an EBA casual categorisation provision must contain these elements.

The FWC Full Bench held that the clause of the relevant EBA contained these elements: it provided that the label ‘casual’ will be applied from the time of engagement; it provides for a 25% loading; and it provides that the loading is paid as compensation for entitlements which apply to full-time workers but not casuals.

What this decision means for your business

If a clause of an EBA contains all of the above elements then it appears that the clause can be relied upon to validly categorise employees as casual within the meaning of the Act, even if those employees work regular, full-time equivalent hours and would not be considered as ‘casual’ under general law. It also appears that employers without EBAs will be able to rely on the casual categorisation provision of their relevant Modern Award/s in the same way.

However, employers must still have regard to the remainder of provisions in any relevant Modern Award or EBA. For example, the principle in this decision cannot be used to employ a person permanently as a casual if that employee seeks to exercise a right to elect to have their contract of employment converted to permanent employment.

For more specific information on any of the material contained in this article please contact Sathish Dasan on 08 8210 1253 or sdasan@normans.com.au.


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Contracting – Who are you really dealing with?

After a few recent queries it may be timely to provide a reminder about legal entities, in the context of preparing and executing documents.

While these queries arose in the context of property documents specifically, the below information is generally relevant to all agreements.

Business names

It is common for companies and natural people to operate businesses under business names.  A business name must be registered unless it is an entity’s own name.  Business names are now managed by the ASIC as part of a national scheme and are contained in a register that may be searched.

For example, Snow White operates a landscaping business under the registered business name “Blooming White”.

In this instance, the legal entity operating the business is Snow White in her personal capacity.  The business name “Blooming White” is not a legal entity.  It will be the name “Snow White” that must appear in agreements such as leases or services contracts and Snow must execute these documents.  However the business name will appear on invoices and often on other documents.  You might see it written as “Snow White T/A (trading as) Blooming White ABN 12 345 678 901”.  

Trusts

In basic terms, a trust is a device by which one person holds property for the benefit of another person.  It is a construct of equity, which is a body of law that has developed over time based on ethical concepts and that supplements and corrects the common law. 

A trust is not a legal entity in its own right and cannot own property or enter into contracts.  Rather, it is the company or person who has been appointed as the trustee of the trust that is the entity that legally owns the property (albeit on behalf of the beneficiaries of that trust) and can enter into contracts relating to that property.

The trust deed establishing the trust will specify the trustee and their powers.  Trusts and trustees are also governed by legislation.

For example, the trustee of The Three Bears Family Trust is Goldilocks Family Trust Company Pty Ltd.   In this instance, the relevant legal entity is Goldilocks Family Trust Company Pty Ltd not The Three Bears Family Trust.  You will sometimes see this written as Goldilocks Family Trust Company Pty Ltd ATF (as trustee for) The Three Bears Family Trust.  It is Goldilocks Family Trust Company Pty Ltd that will be listed on the title to any land held by the trust and must execute contracts relating to trust property, in accordance with the  execution requirements for a company (see below under the heading “Execution”).  It will generally not be evident from a title search that the land is held on trust – although sometimes you will see the words “with no survivorship” appear after the names of the registered proprietors, which means the estate or interest is held by them as trustees.

Partnerships

A partnership is a relationship that exists between people carrying on a business in common with a view to profit.

For example, Jack Horner, Jack Beanstalk and Jack Flash have formed a partnership (known as “The Goose Brothers”) and own and operate a vet clinic under the terms of a partnership agreement they have entered into.  The partnership leases the clinic site from Jack Horner, who owns the land in his personal capacity.  In this instance, the lease is in the names of Jack Horner as the lessor and all three of Jack Horner, Jack Beanstalk and Jack Flash as the lessee.

Execution

Following on from the legal entities is the issue of how an entity may validly execute documents.

A company may execute in several ways:

  • Pursuant to Section 127(1) of the Corporations Act 2001 a company may execute a document without using a common seal if the document is signed by:
    • Two directors of the company; or
    • A director and a company secretary of the company; or
    • For a proprietary company that has a sole director who is also the sole company secretary - that director.
  • Pursuant to Section 127(2) of the Corporations Act 2001 a company with a common seal may affix the seal to the document and the fixing of the seal must be witnessed (in accordance with the above execution requirements). There is no longer any legislative requirement for a company to have a seal.
  • Pursuant to Section 126 of the Corporations Act 2001 a company may execute a contract through an agent acting with the company’s express or implied authority. Such agents could include CEOs, managing directors or operations managers, but care should be taken when relying on this section.
  • Under a power of attorney, where the company has appointed a person in writing to be its attorney for particular purposes. If a document executed under power of attorney is going to be registered with the Lands Titles Office (LTO), that power of attorney must first be registered.
  • Pursuant to a resolution of the directors giving authority to a person to execute (this is fairly uncommon).

The signature of a natural person is usually witnessed, with the witness signing and printing their own name.

If the document is going to be registered with the Lands Titles Office, there are strict requirements in relation to how a person must execute.  The witness is required to include their name, address and daytime telephone number as well as their signature.  In witnessing the signature they are required to declare that they either know the person or have been satisfied as to their identity and there are strict penalties (noted on the document) in relation to improper witnessing.

A natural person may also grant a power of attorney and the same registration requirements apply to the power of attorney if the document being executed by the attorney is to be registered with the LTO.

For more specific information on any of the material contained in this article please contact Yari McCall on 8210 1265 or ymccall@normans.com.au.


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