One issue that can greatly complicate things is if the executor of the Will dies or is incapacitated. Not having an executor can complicate things and has the potential to lead to court proceedings.

The last thing you want is difficulties in dealing with your Will for your bereaved loved ones. You want the Will to be the last thing they have to worry about at such a sad time.

So, what will happen if an appointed executor is unable to fulfil their duties in handling a deceased person’s estate?

What is an executor?

An executor of a Will is the person appointed to administer the estate of the deceased.

Basically, an executor is a party charged with carrying out the instructions of a Will.

What if the executor dies?

An executor can die at two different times during the lifetime of a Will, and each situation creates its own problems.

If the executor dies before the maker of the Will or is not available

When you appoint an executor, you clearly expect them to outlive you. However, this might not be the case. It may also happen that they are not able to execute your Will for another reason such as distance or mental impairment.

The best thing to do from the outset is to appoint one or more backup executors.

If you have yet to appoint backup executors and your executor dies before you, it is best to update your Will right away with a new executor.

If you don’t appoint a new executor, another party can apply to the supreme court to become the executor. The court will normally agree to a person with a large interest in the estate becoming the executor, but it will be out of your hands and may not end up being your preferred person.

The executor dies shortly after the Willmaker

This is a more complicated situation.

Of course, if you have appointed backup executors, then the job will go down the line to the next surviving executor.

If there is no executor, then someone will need to apply to the court for Letters of Administration With the Will Annexed.

These documents will grant the applicant the authority of an executor.

Normally, the court expects that the applicant is a beneficiary of the Will, has the written consent of other beneficiaries and that the Will is legal and current.

Protecting your Will and your loved ones

There are a few tips for getting your Will right and ensuring you have no trouble with your executor:

• Appoint more than one executor: Have a preferred and a backup executor so there is less stress caused by an executor not being available.
• Review your Will regularly: You may have done your Will long ago and need to remember who you appointed as your executor. Conduct an annual review to ensure your Will is always up to date. You can confirm your executor is alive and well as part of this process
• Make sure your Will is correctly drafted: Work with a legal professional to ensure your Will is valid and has been signed by the right people, including your executor.
• Speak with your executor or update the executor: It’s worth touching base with your Will’s executor from time to time to ensure they are still comfortable with their role. If they aren’t or if you would prefer to have someone else do the job, find someone else and complete the necessary paperwork.

Is your Will up to date?

Having your Will professionally prepared and kept up to date by a lawyer who specialises in this area makes sense, particularly if your Will and estate are more complex.

When you have an up to date and legally binding Will as well as reliable executors, you will have peace of mind about your family being protected and provided for in the event of your death.

Give yourself and your family peace of mind. Reach out to Legal Affairs Lounge to start preparing your Will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

To help you nominate the right person, here’s a rundown of what a Will executor’s tasks include.

What do executors of Wills do?

The executor of a Will has to:

• Administer your estate after you pass away
• Ensure all debts are paid
• Close your accounts
• Oversee the disbursement of inheritances in accordance with your wishes

It is also usually the executor’s job to arrange your funeral. They can use funds from your estate to pay for it.

The Will executor may need to go through the process of probate. This is a court order granted by the Supreme Court of Queensland that confirms:

• the Will is valid
• the executor has permission to distribute the estate

Probate is usually required if you leave behind property and a substantial amount of money. Grants of probate usually take around 20 business days and the process includes:

• gathering supporting documents such as an affidavit
• publishing a probate notice
• waiting 14 days
• submitting a probate application
• responding to Requisitions from the court.

After probate is confirmed, the person responsible for executing your final wishes and finalising your estate will have to answer the following questions:

• What do you wish to happen to your remains?
• Who needs to be notified about your passing?
• What will happen to your property and belongings?
• Who is entitled to what percentage of the money that comes from the sale of property and other assets / who are the will’s beneficiaries?
• How will belongings and funds be distributed?

Your executor will ideally have access to your accounts after you pass away. If you have a list of providers for them to get in touch with, they will find the process much easier. Consider your:

• Phone and internet provider
• Gas/electricity provider
• Insurance providers
• Subscriptions (e.g. Netflix etc)
• Gym memberships
• Housekeeping services etc

Think about bank, superannuation and investment accounts as well; it can take a long time for your executor to access accounts (executors generally can only access your bank accounts once probate has been granted by the Court.)

Ask your lawyer to hold onto these details for safekeeping.

Who should execute your Will?

Being executor of a Will can be stressful and time-consuming. When you nominate someone, keep this in mind.

Most people choose a family member or trusted friend. Sometimes, two people are nominated, either to execute the Will together or as an alternative if the first choice is unavailable or incapable of taking on the responsibility.

Often, siblings are nominated as joint executors. This can help ensure everything is kept ‘fair’ during the Will execution process.

Some things to consider include:

• You can nominate someone who is a beneficiary
• You can add a clause to your Will to ensure your executor is compensated for their time and efforts
• If you appoint joint executors, make sure they are able to work well together
• You can nominate a lawyer or trustee instead of a family member. Usually, payment for their services will come out of your estate but make this clear when you ask them to act as executor, so they don’t come up against pushback from your family.

If you do nominate a family member, they can work in conjunction with a solicitor to ensure they get everything right.

Make your executor’s life easy

A rushed or unclear Will can make things very difficult for an executor. The more questions you can clearly answer in your Will, the better.

Write down your wishes in a formal Will, store relevant information safely with a lawyer and have everything prepared formally and correctly so you don’t create unnecessary stress for your executor when the time comes.

The right approach to Wills and executors will give you and your family peace of mind. Reach out to Legal Affairs Lounge to start preparing your will today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Here is an explainer, as shared by a Legal Affairs Business Lawyer.

What is a Director Penalty Notice (DPN)?

A director penalty notice is issued by the Australian Taxation Office (ATO) to the director of a business that has failed to pay its tax bill (usually three months or more after the due date) or has not filled out the business’ Business Activity Statement (BAS) on time.

The DPN will tell the business director how much is owed and provide available payment options or other methods to resolve the matter.

It will also outline a new timeline for making repayments. Generally, it will present you with one of two conditions:

• A lockdown DPN: This will make you, as the Director, immediately financially responsible for repayment.
• A set time period to repay: In this instance, the most common time period is 21 days to make the relevant repayments.

What makes a DPN different and extremely important for company directors to know about is that it makes the director directly responsible for tax liabilities. That means that you, as the director, have to find the money or you will face consequences. The notice is arranged this way to ensure that company directors don’t simply dissolve companies to avoid tax debts.

You should also take note that a DPN is valid from the time it is delivered to either the registered business address of your company or your residential address. If you have recently moved, it makes no difference, the date it arrives at your previous address still stands.

Even if you are a former director and have left the company with the overdue tax debt, you could still be liable for the repayments. As a new director who has been in the role for more than 30 days, you may also be held personally responsible for unpaid tax money.

How to deal with a DPN

If you have received a DPN, don’t panic. There are still ways to resolve it.

The first and most obvious is to pay the debt in full, straight away. Maybe you just didn’t get around to paying the bill, or it got lost in a pile of paperwork. Pay it off ASAP and you can move on.

If it’s not feasible to pay the whole bill in one go, contact the ATO right away or ask your Legal Affairs business lawyer to do so on your behalf. More often than not, the tax office will allow you to pay the bill over time using an instalment plan. But before you do, you must get expert advice. If you enter a payment plan, your personal liability does not go away and there will be serious consequences if you chose this path and can’t meet the payment obligations.

Your other options are to:

• Put your company into administration or liquidation
• Work with a professional to restructure your business.
• Present the ATO with a valid reason for late payment

If you can convince the ATO that you had legitimate reasons for failing to pay, like serious illness or some other unavoidable issue, they might relax the DPN. You will still need to pay the money owed at some stage, though.

If you don’t take any of the steps above, you will become personally liable to repay the amount owed in full, and unfortunately, time is not on your side.

When it comes to DPNs, prevention is always better than cure. If you have a good accountant and bookkeeper, they should be able to help you ensure your tax-relevant payments are up to date.

What to do if you receive a DPN

The most important thing to do if you receive a DPN is to act quickly.

Get your paperwork in order as much as you can, then contact your Legal Affairs business lawyer and accountant as soon as possible. They will sit down with you to help work out the most suitable solution.

Need to know more about DPNs? Contact a Legal Affairs business lawyer today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

One question we are often asked about at LAL is how tax applies on the sale of a business. There isn’t a black and white answer, but this article will give you an understanding of how it all works.

Paying tax on a business sale

The sale of a business is counted by the Australian Tax Office as part of the business’s taxable income. Think of it as your parting ‘gift’ to the tax office!

The tax rate you pay on the sale of your business depends on the form it takes, with the two most commonly sold structures in Australia being sole traders/trusts and companies.

• Business sale tax for sole traders and trusts

For sole traders and trusts that distribute to individuals, the amount of tax you pay depends on the value of the business at sale. The tax rate is separated into two brackets:

• $90,001 – $180,000: a rate of $20,797, plus 37% on every dollar over $90,000
• $180,001 and above: a rate of $54,087, plus 45% on every dollar over $180,000

Both brackets also incur the Medicare levy fee of 2%.

• Business sale tax for companies

Tax on companies is usually between 25% and 30%, depending on base entity rules.

Capital Gains Tax

Capital Gains Tax (CGT) applies to the sale of all businesses in Australia, regardless of structure because a sale is regarded as a capital gain.

The ATO considers capital gains to be any profit that your business brings in by selling assets. CGT is the tax the ATO charges on that profit.

Therefore, selling a business for more than it was bought for is a capital gain and will be taxed.

Capital gains tax will vary depending on:

• The initial cost of establishing the business
• The sale price
• The businesses tax structure
• Possible tax concessions
• Total income earned over 12 months

Minimising your tax bill

As inevitable as taxes are, there are always ways to make sure you don’t overpay.

Small businesses have the most options available to apply for tax concessions. The ATO classes small businesses in Australia as:

• Having an annual turnover of less than $2 million
• Having net assets worth less than $6 million

If you are a small business, there are a number of concessions you may be able to apply for, including:

• 50 per cent capital gains tax reduction: If you have owned your small business for more than 12 months, you may be eligible for this deduction.
• 50 per cent active asset capital gains tax reduction: An active asset is an asset that has been in use for more than half the time that a business owner has owned them. A business clearly falls into that category, so falls into the eligibility for the 50 per cent active asset capital gains tax reduction.
• 15-year capital gains tax exemption: If you are over 55 and have owned the business for over 15 years, you may be eligible for a complete exemption if you are selling to retire.
• Retirement exemption: You can ignore up to $500,000 of the capital gains tax incurred if you are retiring. If you are under 55, you must place the capital gain amount into an allocated superannuation fund.
• Small business roll-over capital gains tax exemption: It may be possible to roll your capital gains tax over to a new asset. You even have two years to find the replacement asset.

Your lawyer and accountant can help you understand which of these you may be eligible for.

Asset sales or share sales

When you sell your business, you have the option of doing an asset or a shares sale:

• An asset sale means the sale of the entire business, including all physical assets.
• A shares sale is when you sell off enough company shares to move ownership to another business entity.

The best solution

You will always pay tax on a business sale, so the best way to make sure you don’t pay incorrectly is to seek professional help.

An experienced lawyer and accountant will help you understand all the options above so you can structure your business correctly to sell it. This may require several months or even years of planning but it will be worth it.

Don’t forget, there are many other steps involved with selling a business beyond being aware of tax. Your accountant and lawyer can help you ensure it is in great shape so you can sell quickly, easily and for a great price.

Need help to sell your business and maximise your profits? Contact LAL Law today.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

Take a look at some of the options and steps involved with the insolvency process if you are a business.

How do you know if you are insolvent?

The signs you are insolvent are:

• If the number of overdue bills keeps building rather than dropping
• If the total of your business debts is higher than the value of the assets, you own
• If your sales figures and profits have been on a downward trend
• If you don’t have the cash flow to cover your regular expenses
• Your financial team is continually receiving phone calls and letters of demand from creditors

In some circumstances, multiple creditors may take action against a company that doesn’t repay its debts. This can result in what’s known as compulsory liquidation — and an order is issued by the court as a result of the creditors’ actions.

Otherwise, the company’s directors can start the insolvency process themselves, if they feel they need help to take stock of the situation and bring things under control.

Being insolvent doesn’t necessarily mean the end of the business. The first and most important step is to engage a team of legal professionals who are experienced in insolvency and can guide business directors through the process. Once someone is on board to help with the relevant steps and paperwork, here are the potential steps to move through:

Voluntary Administration

When a company goes into voluntary administration, the directors hand control to external administrators who start investigating financial details and working out how to deal with creditors. These experts are sometimes referred to as insolvency practitioners or receivers.

The company can continue trading during this time but there has to be a formal admission to the Australian Securities and Investments Commission, which will make a note that the company is in administration.

Once the administrators have completed their investigation, there will be a clearer picture of whether it is possible to pay creditors and move forward, or if liquidation is the best next step.

Receivership

If debts can be restructured, payment plans can be arranged and assets sold in order to pay off the creditors, or if the company can be acquired by another entity, it may be possible to get back on track and continue trading.

In these circumstances, a receiver is appointed to oversee the management of assets, potentially restructure the company and help take care of financial obligations.

Liquidation

The insolvency professionals you work with may determine liquidation as the best course of action if there is no way to escape the financial difficulties the business is facing.

Liquidation is also referred to as “winding up”. As part of this, items of value (assets) are sold to help repay debts, the company is closed, and it stops trading.

How to recover from insolvency

Recovering from insolvency is possible and many Australian companies have been able to do so. A positive outcome often depends on taking action sooner rather than later.

To avoid the threat of insolvency, careful financial management and a monetary ‘safety net’ are essential. It makes sense to work with a good accountant so you can be aware of spiralling costs before they are out of control.

Would you like more information about the steps to insolvency, contact Legal Affairs Lounge today to discuss your options.

Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.

If someone close to you has died and you believe the Will to be unfair, there may be legal steps you can take to claim money or assets from the estate that you are entitled to.

To find out how to dispute a Will, the first step is to find a legal professional who specialises in this area and believes you have a case. There are specific scenarios under which you may be entitled to a share of a deceased person’s estate.

Take a look at some tips and information from our Legal Affairs Wills specialists:

When can you dispute a Will?

The first step is determining if you are eligible to make a claim. Legal Affairs Lounge Will and Estate Lawyers may advise you to proceed with your claim if:

• It has been less than twelve months since the person passed away.
• You believe the testator (the person who made the Will) did not have the mental capacity to understand what they were doing when they made the Will (you are likely to need medical records to help prove this).
• You believe someone has exerted pressure on the testator to make a Will that was not in their best interests.
• You believe the Will is not valid because it has been forged, or someone has lied to the testator about the contents of the Will.
• You believe the testator did not understand or approve of the contents of the Will.
• You are a close relative of the deceased such as a sibling, parent or child, or you are related to them by marriage.
• You are a grandchild of the deceased and you were dependent on them.
• You have a relationship of significance with the deceased such as a de facto partnership.
• The Will was not signed correctly or was not documented property (e.g. nobody has witnessed the Will being signed)

The steps to dispute a Will

If you want to dispute a Will in Australia and you have professional advice saying your claim is valid, you’ll need to follow some specific steps.

First, you’ll need your lawyer’s help to file a family provision application with the court.

Next, you’ll need to attend a directions hearing.

After that, there will be mediation between you and/or your representative, and the Will’s executor.

If the issue cannot be resolved through mediation, you may need to go to court, where a decision will be applied that reflects the laws around Wills and estates.

Finally, if the dispute is not resolved after the above steps, you have the option to appeal the decision.

The above may sound simple but it will take a lot of work to prepare your notice of objection and be ready for hearings.

If your matter does reach court, the decision will be based on factors including:

• Whether or not the Will is ‘fair’
• If it is reasonable to assume you should have been provided for in the Will
• The intentions of the testator and their mental capacity at the time the Will was created
• The level to which you were dependent on the deceased
• The evidence you are able to provide to back up your claims

It’s important to have a good Wills and Estate lawyer when you’re disputing a Will, because the process is complex. An experienced lawyer will be able to help you navigate the process and give you the best chance of success.

Before you decide to proceed, you need to weigh up whether the cost of disputing the Will could outweigh the funds you receive at the end of the process (*sometimes the estate will pay your legal costs). Ideally, you will be able to settle with the other beneficiaries or the executor via mediation rather than going to court. This will allow you to reach an outcome that suits everyone, rather than a verdict being handed down by a judge.

If you’re thinking of disputing a Will and you’re based on the Legal Affairs , contact Legal Affairs Lounge today to discuss your options.

Disclaimer: The content contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

However, starting and operating a business can be complicated. Many people find they have bitten off more than they can chew, especially when it comes to paying taxes.

If you are behind on tax obligations such as filing your BAS, paying GST, paying your staff super and handing over PAYG tax, things can catch up with you pretty quickly. What many business owners don’t realise is that the Australian Tax Office has the option to recover unpaid tax dollars from you personally.

The ATO will start the process to recover money owed by sending you a Director Penalty Notice.

What is a Director Penalty Notice?

A Director Penalty Notice (DPN) is a notice from the ATO that is sent to the director if a business has overdue tax bills (usually around three months after the due date has come and gone), or if Business Activity Statements (BAS) have not been filed on time.

The notice will outline the unpaid amounts and explain the options available to resolve the matter.

The DPN will have a date on it and will outline how long you have to pay the money. It may make you immediately personally liable (this is known as a lockdown DPN) or give you a set time period (usually 21 days) to satisfy the requirements of the notice before you become personally liable.

It’s worth noting that a Director Penalty Notice will be valid from the date of delivery to your registered business or residential address, even if you have recently moved.

You can still receive a DPN if you have left your position as director of a company. An incoming director who has been in the role for more than 30 days may also receive this type of notice.

One of the reasons DPNs exist is to prevent company directors from failing to meet their tax payment and reporting obligations, then dissolving the company and walking away without being personally liable.

What to do if you receive a DPN

If one of these notices makes its way to you, generally your options include the following:

• Pay off the debt in full
• Pay off the debt in instalments within the allocated time frame
• Put the company into administration or liquidation so you can find a way to recover the unpaid money
• Work with a specialist to restructure your business
• Share a valid defence that explains why you should not be liable for the business’s tax debts

If you fail to do any of the above, the amounts the business owes will fall to you personally to repay.

Of course, the easiest solution is to complete your reporting obligations and pay off your debts. If the DPN has been issued because you lost track of time and didn’t pay your bills, you could quickly resolve it by transferring the funds to the ATO. You can work with your accountant and bookkeeper to find the money, or potentially borrow funds to cover the costs, if you are certain you can handle the additional debt.

It gets more complicated when the money is not available to pay off the amounts owing. This is when you will need the help of a legal professional who will either:

• Help you to put your company into administration
• Help with a restructure so you can pay your debts
• Help you confirm that you did in fact take reasonable steps to avoid the situation
• Help you confirm that the reason for not lodging or failing to pay was due to illness or other unavoidable circumstances

Get support to resolve your DPN

The last thing you want is to be personally liable for your business’s GST, superannuation and PAYG debts as it can result in bankruptcy and a great deal of stress for your family.

Once you receive a DPN, you need to take action very quickly. Those 21 days can go very quickly and result in additional problems such as the ATO commencing court proceedings against you to recover the money.

One of the best things to do is immediately call a lawyer who specialises in areas including business, restructuring, bankruptcy and insolvency. This professional will be able to help you figure out the best way forward.

Before you get in touch with your lawyer, do your best to find records of your company’s recent tax payments and evidence of your current financial position. Then you can work together to resolve the situation.

Need help to resolve a Director Penalty Notice? If you’re on the Legal Affairs , contact Legal Affairs Lounge today.