An investment loan is not repayable without proof of the
When Michael Howard invested in the Great Southern 2006
Organic Olives Income Project he took up the loan offer from
the finance arm of Great Southern to fund the total cost of
$24,490. In turn, Great Southern Finance nominated ABL
Nominees, a company associated with the Bendigo and Adelaide
Bank to be the lender.
For three years Michael Howard paid interest on the loan
to Great Southern Finance. Not long afterwards the project
was wound up because it had run out of money to cultivate
the olive trees. He never received one dollar in return from
Seven years later, Michael Howard was served with a
Statement of Claim from the Bendigo Bank to recover the
loan, which by then had grown to $66,569.32 with interest.
He decided to fight the claim.
Last week, he succeeded in defeating the claim, not
because the project failed, but because the Bendigo Bank was
unable to prove that a loan advance had been made. It had a
paper trail - a loan deed and associated documents. But did
not have a money trail to show that the money had been
transferred to Great Southern to pay for the investment.
So in a roundabout way, justice was done. Michael Howard
was not forced to pay the investment loan for a failed
project. And the Bendigo Bank was ordered to pay his legal
This decision has significance far beyond Michael Howard.
He was one of 22,000 investors in Great Southern Projects
who used the finance arm to fund their investment, and one
of several thousand investors who dispute their loan.
Michael Howard's victory shines a light which may help
these investors. For my case note
click on No evidence of a loan advance
sinks the Bendigo Bank's loan recovery action against a
Great Southern investor.
Purplebricks real estate
promises greater fee transparency for sellers
Real estate agents charge sellers a commission, which in
Sydney is currently 1.65% of the price - $16,500 on a $1m
property; plus marketing expenses of about $5,000 which
cover a signboard, photography, listings on domain.com.au,
realestate.com.au and its own website, brochures and auction
Online marketers are disrupting this traditional business
model. They are doing away with shopfronts, and operate
virtual agency models. By doing so, they are able to lower
their cost base and charge less for selling a property.
The most prominent online marketer is Purplebricks real
estate, which charges a fixed fee, instead of a commission,
for selling a property. It advertises prominently a fixed
fee of $5.999 in NSW & VIC, and $4,999 in QLD, WA & SA. The
fixed fee includes the services of a 'Local Property
Expert', photography and write up for listings on the
domain.com.au, realestate.com.au and its own website, a
generic signboard, and inspections booked on the internet.
You might think that the fixed fee includes accompanied
viewings, marketing reviews, marketing upgrades, an auction
and so forth. But you would be wrong! In the fine print, you
will find that these are additional services for which
additional fees are payable.
Consumers complained to the Queensland Office of Fair
Trading that Purplebricks was being misleading in
advertising fixed fees, when additional fees were payable.
The OFT agreed, and as a result, Purplebricks has changed
its advertising to make the additional fees payable more
prominent, and has agreed to pay $10,000 to the OFT as a
When carrying out its investigation, the OFT found that
Purplebricks was in breach of many of the real estate
licensing requirements, and fined Purplebricks another
For more information on the action taken by the OFT,
click on my article Purplebricks
promises no misleading advertising of fixed fees and
additional services, and admits breaches of the real estate
selling your home or investment property? Is a flat fee
online agent better than a traditional estate agent? Is it
the difference in marketing?
Digital disruption has come to real estate agents in
Australian in the form of online agencies which are offering
marketing and sales services to assist sellers in selling
their property for a low fixed-fee. They are undercutting
full service real estate agents which charge a sales
Purplebricks is an online agency. For a look at the
Purplebricks Real Estate operating model, and how it is
attracting owners to list properties in the Australian Real
Don't sign a personal
guarantee to a lease unless you absolutely need to!
When a businessperson negotiates a lease of a shop, their
focus is on the rent, the rent free period, the term, the
options to renew, the security bond and the permitted use.
The personal guarantee for the rent is an afterthought,
unless giving one means a 1 month security bond is
negotiated instead of 3 months security bond without one.
The fact that giving a director's guarantee removes the
asset protection of leasing in a company name is rarely
Fast forward, and for whatever reason, the business is going
bad because it cannot make enough sales. The tenant falls
behind on their rent. The landlord terminates the lease.
What was once an afterthought becomes the major source of
financial stress as the landlord pursues the director's
personal guarantee: for rent up to the lease termination,
then for rent lost until the shop is re-rented, and finally
for make good expenses. Legally, there are few defences to
claims made by landlords under personal guarantees.
Two recent decisions by the NSW Court of Appeal demonstrate
how financially ruinous a personal guarantee can be:
- The directors of the ex-tenant - Panetta Fruits at
Westfield Miranda were ordered to pay $3,674,555.53
under their personal guarantees, which was equivalent to
over 3 years rent.
- The director of the ex-tenant - Circa Newsagency at
CircaRetail Bella Vista was ordered to pay $602,178.35
which was equivalent to several years rent.
What options does a tenant have when the landlord demands a
personal guarantee? The best option is to offer more
security bond - 3 months is common - instead of a personal
guarantee. The second best option is to limit the personal
guarantee to say 3 or 6 months. The third option is to walk
away from the lease.
For my detailed comments on the two Court of Appeal
click Two retail tenancy failures expose directors who gave
their personal guarantees to the landlord to ruinous losses
car parking spaces add value to a home?
Along with the number of bedrooms and bathrooms, the number
of car parking spaces is one of the three standard criteria
commonly used in marketing a home.
Click here to read more
about their value
Is it a good idea to switch from a
family trust to a company to save tax?
With family trusts under threat as a tax shelter, are
companies looking like an attractive tax effective
The tax effectiveness of a family trust is that profits
are distributed to members of the family, as you choose,
every year. This means diverting the profit distributions
away from high income earners to low income earners (such as
adult children) to take advantage of the tax free threshold
of $18,200, and the 19 per cent tax bracket up to $37,000,
so as to avoid distributions to high income earners who have
tax brackets of 37 per cent from $87,000 up to $180,000 and
45 per cent above.
The threat (currently the federal opposition policy) is
for family trust distributions to be taxed at a rate of 30
per cent. For example: if the low income earner is earning
wages (from casual or part-time work) of $15,000 pa, then
that is tax free because it is earned income. But on every
dollar of trust distribution which tops up income up to
$37,000, the tax rate is proposed to be 30 per cent. Trust
distributions which top up income above $37,000 will be
taxed according to the tax bracket, which is 32.5 per cent.
Company profits are kept by the company - they do not
need to be fully distributed each year - unlike profits from
a family trust which must be distributed. After paying
company tax, the profits do not need to be paid out as
dividends. Therefore, if the shareholders are high income
earners, they can avoid receiving income which is taxable in
a high tax bracket.
The icing on the cake is the recent company tax rate
cuts, which for a company with an annual income of less than
$25 million, means a tax rate of 27.5 per cent instead of 30
per cent. This means that small company can retain more of
But the 27.5 per cent tax rate is available only if 20
per cent or more of the company's income is from business
activities. That is, pure investment income does not
qualify, such as rent, interest, dividends, capital gains
and trust distributions
Conclusion: If a flat tax rate of 27.5 per cent is
attractive, then it's a good idea to switch to using a
company for a new active investment or business.
For more information,
click - Real estate investment companies must
pass the 80% passive income test to qualify for the company
tax rate cut
If you are moving out of a shop or
office, do you repaint or leave it as is?
If you own or rent a shop, office, warehouse or factory,
the ‘make good’ covenant in the lease usually requires the
tenant to repaint the inside. The question is, can the
landlord recover what the cost of repainting would be,
without actually doing the repainting?
click - If you are moving out of a shop or
office, do you repaint or leave it as is?
Does Airbnb give Boutique Hotels
and B&Bs a competitive edge?
Traditional hotel chains and large resorts have long
dominated the accommodation industry because of their strong
brand marketing and distribution channels.
But as with so many other industries, the internet is
disrupting the traveller accommodation industry. Through
internet booking platform operators such as Airbnb, Stayz,
eDreams and Bookings.com, the internet is providing small
accommodation providers with easy and cheap access to a
global market for travellers, whether it is for business or
There are four services which Airbnb provides, which give
Boutique Hotels and Bed & Breakfasts a competitive edge over
traditional hotels and resorts, and which allows them to
by-pass the traditional travel agents (brick & mortar or
online) in making bookings:
- Bookings Management
- Payments Platform
- Property Damage & Injuries cover
These services are increasing lodging occupancy and
pricing power for small accommodation providers.
For more information about how Airbnb is
empowering Boutique Hotels and B&Bs to build their business,
Click for more
The law is catching up with Airbnb
Until now, many Airbnb hosts have flown under the radar.
That all they are doing is making a little extra money by
renting out a spare room in their home.
But as it becomes more like a short-term holiday letting
business, as promoted by Airbnb, Stayx, eDreams and others,
it becomes more mainstream and widespread, and the
government has taken an interest in regulating it. The NSW
Parliamentary Inquiry has now issued its report, and the
Victorian Parliamentary Inquiry is currently considering
submissions on how to regulate it.
These trends are emerging as the law develops:
- Town Planning Law - If more than 2 or 3 rooms
are rented, and if breakfast or cooking facilities are
provided, it is a commercial use and a planning approval
or a licence as Bed and Breakfast Accommodation is
necessary. If a whole house or apartment is rented,
planning approval may be necessary either as a separate
dwelling on the ‘home block’ or as Serviced Apartment if
it is in a strata apartment block.
- Insurance - Renting a room in a home is the
same as having a home office for insurance purposes -
both are a business use which is not covered by a
standard Home Owner policy when it comes to coverage for
injuries. It is different for Landlords policies, where
coverage is provided for property investments.Malicious
property damage is not covered by any policy.
Airbnb fills these gaps by providing “Host Protection
Insurance” to cover injuries and a "Host Guarantee" to
cover property damage by guests.
- Taxation - For income tax purposes, all rents
are income and expenses are deductible. For capital
gains tax purposes, there may be a partial loss of the
main residence exemption because the property has a
For GST purposes, GST does not apply unless the use is a
- Strata Law - The Courts have ruled that any
strata by-law which restricts the use of apartments for
short-term holiday letting is invalid. Body Corporates
cannot bar Airbnb lettings, but can control noise and
damage to the common areas. The rest must be left to the
planning authority - the Local Council
For more information about the current status of
the law in these areas, click: What laws apply to an Airbnb
host in Australia?
Click for more
Passionate about property - Property as a superannuation investment
Does property have a place in a super fund? As discussed
in chapter 6 of the book
'Super Rich: How to create a tax-free income for life'',
there are arguments for and against. The chapter looks at the advantages of property as a super
I’ll explain how property works as a tax shelter
outside and inside an SMSF, and how to ﬁnd and acquire
Click for more.
Without liability insurance, home
owners are exposed to million dollar law suits
Personal injury law suits represent the
single largest threat to a home owner's and landlord's
Compensation awards can exceed $1 million for head injuries
or spinal cord injuries caused by falling from a ladder,
slipping on stairs, and tripping over.
For this reason, it is essential for home owners and
landlords to have Liability insurance cover as part of their
Home Insurance / Landlord's Insurance policy.
The importance of having Liability insurance cover was
recently highlighted in a decision of the Supreme Court of
Tasmania. The court ordered the home owner (i.e. their
insurer) to pay their roofer over $1.1 million in
compensation for his severe head injuries because they owed
him a duty of care for his safety while working on the roof.
Without Liability insurance, such an award would have been
devastating for the home owner. They would have been forced
to sell their home to pay the award, and face bankruptcy for
For more information,
click - Roofer
falls off ladder set up by home owner; Court orders home
owner to pay $1.1m
How liable are you if a visitor slips
or trips when entering your property?
VERY LIABLE according a Victorian Supreme Court decision
of Scott v Wanklyn.
Of course, liability is not automatic. The property
owner/tenant must be at fault (i.e. negligent) in some way.
There is little or no liability if the visitor is at
fault, for example, if they are not looking where they are
stepping because they are texting on their phone or are
wearing slippery footwear.
But if the owner has done something like digging a
shallow trench which is hidden by fallen leaves (as in the
Victorian decision) or has not repaired a wobbly step or
uneven paving, then they are liable.
Public liability insurance covers owners and occupiers
liability for injuries to visitors. It is often called the
forgotten insurance because it is packaged into the main
- For home owners and landlords, it is in their home
- For business owners, it is in their business
- For tenants / renters, it is in their contents
With court awards of hundreds of thousands or even
millions of dollars, if a visitor is seriously injured and
loses their income, it is public liability insurance that
could save your house and save you from bankruptcy.
To read my summary of the Victorian decision,
click - Occupier's liability - Aged visitors
and uneven access ways are a recipe for injury
SHOULD YOU SELL THE FAMILY HOME WHEN
YOUR PARENTS MOVE TO AN AGED CARE HOME?
A son, seeking to protect his inheritance, used his power
under his mother’s Enduring Power of Attorney to transfer
her home unit into his name. This left the mother without
assets or funds to pay for her aged care costs.
See Full Article
VENTURE AGREEMENTS WITH
MONEY PARTNERS (INVESTORS)
REAL ESTATE INVESTMENT
See Full Article
THE EFFECT OF THE GST UPON
What impact will the GST have on real estate? In this
article, we will examine the impact of the GST on
residential and commercial real estate, and end with some
views on its impact upon the real estate market.
See Full Article
HOW DOES PROPERTY
FIT INTO SUPERANNUATION?
Property investment strategies suitable for Super.
Creative ways to get existing property into Super.
See Full Article
TREE DISPUTES BETWEEN NEIGHBOURS
If a tree grows on your property, you can prune and remove
it if it is likely to damage a wall, a fence or paving,
provided you obtain a Council Permit.
But what can you do
if the tree grows on your neighbour’s property, and the
branches or the roots are causing damage, or are likely to
cause damage to your property, or a high hedge is planted
inside a boundary seriously obstructing your sunlight or
In NSW, the Trees (Disputes Between Neighbours) Act
gives you the right to take action against the neighbour’s
trees – and makes the neighbour legally responsible for
See Full Article
VENDOR FINANCE FOR PROPERTIES
With the GFC heralding demise of the sub-prime lenders and
the Banks tightening up their lending criteria, between 10%
and 20% of potential homebuyers no longer have access to
traditional finance to buy their own home.
This gap in the
marketplace is gradually being filled by non-traditional
financiers, who offer what is known as vendor finance or
seller finance to help homebuyers to buy their own home.
Selling homes using vendor finance helps sellers as well
as buyers. Sellers can broaden their property’s appeal
because the buyers don’t have to find their own finance, and
can sell at the price the property is worth.
several different kinds of vendor finance, all of which use
traditional legal documents.
There is Rent to Buy, Rent to
Own, Instalment Contracts, Second Mortgage Carry Backs,
Deposit Finance, and Delayed Completion Finance.
See Full Article
information, visit our other website