What is a genuine redundancy for tax purposes?
The ATO has issued a draft tax ruling defining what is a genuine redundancy. Genuine redundancy payments are tax-free up to a limit worked out under section 83-170 of the Income Tax Assessment Act 1997 .
The ruling makes comments about fixed term contracts:
"35. A payment made at the end of a fixed period of employment cannot normally be a genuine redundancy payment.
36. However, some rolling fixed-term contracts may, as a matter of fact, establish an ongoing employment relationship. The completion of a stipulated period of service in these circumstances does not of itself disqualify a payment made at the end of the period from being a genuine redundancy payment. It is therefore possible that a genuine redundancy payment may be paid in these types of cases. "
Parliamentary Progress of Tax Bills
There are 10 Bills. There are also 2 tariff proposals (which increase the excise rate applying to certain alcoholic beverages).
ASIC update on unlisted unrated debentures disclosure
ASIC has released the updated Regulatory Guide 69: Debentures–improving disclosure for retail investors.
ASIC has refined some aspects of the practical implementation in the regulatory guide by clarifying:
- the disclosure benchmarks for: equity capital, liquidity, loan portfolio, valuations, and lending principles;
- the disclosure obligations for issuers who on-lend funds indirectly through a related party;
- that the guide does not apply to debentures that are to be quoted on a financial market, or to debentures that are convertible into listed securities at the discretion of the investors; and
- the auditors’ report on the benchmarks.
When auditing the annual financial report of the issuer, ASIC expects issuers to engage their auditors to provide a separate report in relation to the benchmarks. A pro forma ‘auditor’s benchmark report’ is available to meet this requirement.
Unit pricing good practice guide
The Australian Prudential Regulation Authority (APRA) and ASIC have released an updated Unit pricing - guide to good practice for the life insurance, superannuation and funds management industries in response to continued unit pricing errors.
The joint APRA/ASIC guide has been amended so that scheme operators can elect not to make payments to exited members for unit pricing errors where the compensation due is less than $20.
The amendment does not affect the legal rights of members – this remains a matter for scheme operators to assess. However, the regulators will be satisfied if scheme operators adopt this amendment when determining compensation to individual members.
The $20 minimum would only apply to payments made to exited members; those members still in the fund should expect to be compensated regardless of the amount involved. The aim of the rectification process is to restore all parties to the position they would have been in had the unit pricing error not occurred. At the end of that process, any net cost is to be met by the scheme operator. However, if there is a net benefit from amounts not paid to exited members, that benefit is to remain in the fund - the scheme operator must not benefit from the process. The scheme operator also remains responsible for all administrative rectification costs.
Harmonisation of legal systems within Australia and between Australia and New Zealand
The Commonwealth Government has responded to the House of Representatives Legal and Constitutional Affairs Committee report into the harmonisation of legal systems within Australia and between Australia and New Zealand by announcing that it will act on 22 of the 27 recommendations, including in relation to harmonisation of guardianship and succession law, evidence law, consumer protection, privacy and debt collection.
The Government does not accept the recommendations for the institution of a common currency for Australia and New Zealand and the legal harmonisation of the Australian and New Zealand telecommunications regulation frameworks.
Effect of a breach of the Franchising Code: is the agreement void?
In an important test case for the franchise industry, Master Education Services Pty Limited v Ketchell  HCA 38, the High Court of Australia has decided that a breach of clause 11(1) of the Franchising Code of Conduct did not automatically make the franchise agreement void and unenforceable.
Section 51AD, in Pt IVB of the Trade Practices Act 1974 (Cth) ("the Act"), provides that a corporation must not, in trade or commerce, contravene an applicable industry code. Clause 11(1) of the Franchising Code of Conduct provides that a franchisor must not enter into a franchise agreement or receive non-refundable money under a franchise agreement unless the franchisor has received from a prospective franchisee a written statement that the prospective franchisee has received, read and had a reasonable opportunity to understand the disclosure document and the Code.
Master Education Services Pty Limited, as franchisor, provided a disclosure document and a copy of the Code to Ms Jean Ketchell as required, prior to executing a Franchise Agreement, but it failed to obtain the statement required by cl 11(1).
The question was whether a franchise agreement is unenforceable when it has been entered into by a corporate franchisor which has contravened the Code, by entering into an agreement without receiving the required statement from the franchisee, confirming the receipt of information about the franchise and the franchisor and that the franchisee has had sufficient time to understand that information.
In rejecting that proposition the Court said:
"The detailed provision by the Act for the consequences of non-compliance with an industry code, such as the Franchising Code of Conduct, does not support a conclusion that it was intended that the harsh consequences provided by the common law were to follow upon contravention of s 51AD. The Act provides a more flexible approach. It allows a court to prevent entry into a franchise agreement, to vary the terms of an agreement entered into in breach of the Code, or to terminate such an agreement or provide compensation for loss and damage, if it is shown to have been caused by the contravention.
To render void every franchise agreement entered into where a franchisor had not complied with the Code would be to give the franchisor, the wrong-doer, an opportunity to avoid its obligations , and at the same time to place the franchisee in breach of obligations to third parties. A preferable result, and one for which the Act provides, is to permit a franchisee to seek such relief as is appropriate to the circumstances of the case. Some cases of non-compliance with cl 11 might involve substantial non-disclosure; others may only involve a failure to obtain the written statement, confirming that the franchisee has read and understood the disclosure document and the Code. This is such a case.
Section 51AD does not in its terms prohibit the making of a franchise agreement where a franchisor has not complied with the Code. That section and the Code are concerned with the regulation of the conduct of participants in the franchising industry; in particular the conduct of franchisors. It is not to be inferred from a purpose which promotes or prescribes better and fairer business practices that contractual relations between parties will be affected."
Privacy, spam and electronic marketing
The Australian Privacy Commissioner, Karen Curtis, has released an information sheet (pdf) to assist organisations who seek to engage in electronic marketing and explaining the different purposes of the Privacy Act and the Spam Act:
"Under the Spam Act, an individual‟s consent must always be obtained for commercial electronic messages unless the message is exempt. This consent may be "express‟ or "inferred‟.
In the Privacy Act, section 6 states that consent may be "express‟ or "implied‟. Express consent is given explicitly, either orally or in writing. Implied consent is agreement that can be inferred from an individual's conduct. In either case, the individual must actively indicate their consent to the act or practice in question. To be valid, consent must be fully informed and freely given."
The guidance materials discuss:
- the coverage of the Privacy and Spam Acts, and how they interact
- whether businesses have to get people's consent when sending electronic marketing messages
- what businesses must tell people when marketing or sending other information by email
The Office of the Privacy Commissioner has also produced a set of FAQs for consumers on spam and privacy.
Dealing with privacy complaints
The Australian Privacy Commissioner, Karen Curtis, has published an information sheet to assist organisations in investigating privacy complaints they receive.
A step-by-step guide to internal investigations of privacy complaints by organisations (pdf) covers a number of steps to undertake when dealing with a privacy complaint, such as:
- determining if the complaint is about "personal information" as defined by the Privacy Act
- identifying the Privacy Principle the complaint relates to
- applying the law to the facts of the case
- communicating effectively with the complainant
- looking at any systemic procedural or policy issues the complaint raises.
Mutual recognition arrangement between Australia and the United States
A mutual recognition arrangement between Australia and the United States has been signed by Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, Mr Tony D’Aloisio, Chairman of the Australian Securities and Investments Commission (ASIC), and Mr Christopher Cox, Chairman of the U.S. Securities and Exchange Commission (SEC), at a signing ceremony at the SEC’s head office in Washington D.C. (PDF copy of signed arrangement)
The arrangement will provide greater access to U.S. markets for Australian investors, while maintaining strong investor protection and ensuring market integrity. It will also make Australian markets more attractive and accessible to investment from the United States.
Successful appeal by a HIH director against disqualification by APRA
The Administrative Appeals Tribunal has set aside the disqualification of Mr Charles Abbott by the Australian Prudential Regulation Authority (APRA): Abbott and Australian Prudential Regulation Authority  AATA 641
Mr Abbott, who was an alternate director at HIH Limited (HIH) from August 1995 to May 1997, a non-executive director from May 1997 to 2001 and Deputy Chairman from January 2001, was disqualified by APRA from being or acting as a director or senior manager of a general insurer on 18 February 2005.
APRA’s view was that Mr Abbott’s conduct as a director of HIH satisfied it that he was not a fit and proper person to carry out the roles of a director or senior manager of a general insurer. APRA alleged non-disclosure of certain consultancy fees and commissions.
The AAT concluded that on the facts the APRA decision was wrong:
"it is appropriate to proceed on the basis that APRA’s Statement of Facts and Contentions, in so far as it sought to impugn Mr Abbott’s conduct “in the months before 15 March 2001", lacked a sound factual basis. In truth, the substance of APRA’s criticisms really turns on Mr Abbott’s conduct on the tumultuous days of 13 and 14 March 2001. Most specifically they turn on an assessment of his conduct in encouraging the pre-emptive payment of the Ashkirk invoices on 14 May 2001.
I have found that Mr Abbott’s conduct in encouraging the pre-emptive payment of the Ashkirk invoices on that day was improper. Nevertheless, his conduct in encouraging and receiving payment in these circumstances did not breach any law or involve any misuse of his position as a director of HIH. I do not consider that Mr Abbott’s conduct on that day indicates a lack of good character. Neither do I consider that it leads to satisfaction that he is a person who is not fit and proper to act in a senior insurance role...
I am fortified in the conclusion to which I have come by a consideration of two further matters. The first is the narrow compass of the criticisms that were advanced by APRA of Mr Abbott’s conduct as a director of HIH. ...
The second consideration that fortifies my conclusion is the evidence of Mr Abbott’s exemplary background and good repute. ...
Mr Abbott does not wish to return to involvement in the insurance industry. He has not held any insurance role since he resigned from the HIH Board on 15 March 2001. He has no intention of pursuing any future role in the insurance industry. "