Category Archives: White collar crime

ATO targeting property investors

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ATO targeting Property Investors

A recent taxpayer alert [Trusts mischaracterising property development receipts as capital gains] concerning property development and the use of trusts is significant for property developers.

Taxpayer Alert 2014/1, describes an arrangement whereby a trust undertakes property development activities as part of its normal business. The developed property, which could be either commercial or residential, is subsequently sold and the proceeds are returned on capital account, resulting in access to the general 50 per cent capital gains discount.

The proceeds are not returned as ordinary income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), either on a gross basis (as part of a business of property development, where the underlying property constitutes trading stock for the purposes of section 70-10 of the ITAA 1997) or on a net basis (as part of a profit-making undertaking).

The ATO stated it considers that certain arrangements of this type give rise to various issues relevant to taxation laws.

Property developers may be at risk should they be using a trust to access the beneficial capital gains discount, instead of recording sales income on revenue account. The ATO have declared that they have begun audits in this area.

A mischaracterisation has been identified by the ATO where a property, either commercial or residential, is later sold with the proceeds being classified as a capital gain event (which can attract a 50% discount), rather than as ordinary income. The sale of property by a property developer is classified as ordinary income as this action is considered part of the nature of the business.

If caught deliberately trying to use trusts to ‘disguise’ the proceeds of developments, penalties of up to 75% can be applied.

The specific concerns of the ATO and areas they are targeting:

  • The property constitutes trading stock on the basis that the trust is carrying on a business of property development
  • The gross proceeds from the sale constitutes ordinary income on the basis that the trustee is carrying on a business of property development
  • The net profit from the sale is ordinary income on the basis that, although the trustee is not carrying on a business of property development, it is involved in profit making undertaking


WHO ARE THE ATO TARGETING?


  • Trusts that have been established for the purpose of acquisition, development and sale of property
  • Trusts that have trust deeds stating the purpose of the trust is to hold the development property as a capital asset to generate rental income
  • Activity by the taxpayer is opposite to the stated purpose of treating the developed property as a capital asset
  • Properties that are sold as little as 13 months after purchase
  • Trustees that treat the sale proceeds as being on capital account and claims the general 50% capital gains tax deduction


HOW IS INCOME TAX REGIME APPLICABLE TO PROPERTY TRANSACTIONS


The income tax consequences surrounding dealings with property may be subject to assessment under a number of different parts of the tax law. The result is that dealings in property may have a number of different taxation consequences flowing to vendors of real property.

Identifying the taxing regime is mostly dependent on the determination of two issues, being:

  • the characterisation of the transaction; and
  • the profile of the taxpayer in relation to the transaction.

The taxing regime that may apply in the context of a property transaction can be divided into three possibilities, being:

  • Capital Account – as a gain on the disposal of a CGT asset with taxation taking effect upon the ‘mere realisation’ of an investment in land;
  • Revenue Account (Trading Stock) – as a disposal of trading stock, where land is held for sale in the ordinary course of a taxpayer’s business with taxation taking effect when the Land is sold as part of a property development business (where the property is being held for the purpose of re-sale); or
  • Revenue Account (Revenue Asset) – as part of a profit-making scheme with taxation taking effect when land is sold as part of an isolated or ‘one-off’ transaction. The transaction has been entered into with a profit-making purpose, and in a sufficiently commercial / business-like manner.


LAND AS TRADING STOCK


In the event that property is sold as part of a property development business, then the property will be subject to the trading stock provisions (Division 70 of the 1997 Act). The issue is therefore whether your activities amount to the carrying on of a property development business. The High Court upheld this view in the FC of T v St Hubert’s Island Pty Limited 78 ATC 4104, where it was held that land would constitute trading stock if it has been acquired for the purpose of resale – including land that is purchased for the purpose of subdivision, development and resale.


LAND AS A CAPITAL GAINS ASSET


When property acquired on or after 20 September 1985 is not held as trading stock of the taxpayer or otherwise on revenue account, but rather is held on capital account by the taxpayer, any gain or loss arising upon disposal of the land will be calculated and assessed under the CGT provisions.

Property held by a taxpayer may be characterised as either a:

  • a revenue asset – on the basis that there is an intention by the taxpayer to make a profits on the disposal of the property; or
  • a capital asset – on the basis that the property forms part of the profit yielding structure of the taxpayer therefore its disposal will be subject to CGT.

Land held on capital account will be a CGT asset (section 108-5 of the 1997 Act). Joint tenants are treated as owning separate CGT assets proportionate to each tenant’s interest in the CGT asset (section 108-7 of the 1997 Act).

A disposal of a CGT asset occurs upon the occurrence of a ‘CGT event’. Some of the relevant CGT Events applicable to property transactions include:

  • CGT event A1 – disposal of a CGT asset by a change in beneficial ownership to another person
  • CGT event E2 – transfer of a CGT asset to a trust
  • CGT event E4 – capital payments from a unit trust to a unit holder
  • CGT event E5 – a beneficiary of a trust becoming entitled to a trust’s CGT asset
  • CGT event K4 – a CGT asset becomes trading stock

For CGT assets acquired before 21 September 1999 and held for at least 12 months, the taxpayer can choose to calculate the capital gain based on either:

  • the indexed cost base (cost base adjusted for the ‘consumer price index’ up to 30 September 1999); or
  • by applying the ‘CGT 50% discount’, which is unavailable for companies (Division 115 of the 1997 Act).

Where the capital gain is made by a trust, the CGT 50% discount is applied and the balance distributed to an individual beneficiary, the beneficiary will ‘gross up’ the distribution apply losses if any then apply the CGT 50% discount to the grossed-up amount. That is the discount effectively flows from the trust to the beneficiary. A similar result occurs when the payment passes through a chain of trusts.


LAND AS A REVENUE ASSET


The disposal of a revenue asset generates ordinary income for the taxpayer. Generally, a ‘revenue asset’ is one that is purchased with a view to profit upon its eventual realization (FCT v Whitfords Beach Pty Ltd 82 ATC 4031). It is more than ‘merely’ realised, but it is not held as an item of trading stock.

The Commissioner of Taxation considered in paragraph 6 of Taxation Ruling TR 92/3 entitled Income tax: profits from isolated transactions that receipts derived from an ‘isolated transaction’ would be assessed as ordinary income under section 6-5 of the 1997 Act if:

  • First – the taxpayer entered into the transaction with a profit-making purpose; and
  • Secondly – a profit was made in the course of carrying on a business or in carrying out a business operation or commercial transaction.

In Taxation Ruling TR 92/3 the Commissioner of Taxation uses a broad approach to characterising business gains from isolated transactions, stating that for ‘… a transaction to be characterised as a business operation or a commercial transaction, it is sufficient if the transaction is business or commercial in character’.

How your Fitbit data can and will be used against you in a court of law

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fuelband fitbit


A legal case in Canada is breaking new ground by using data collected from a Fitbit to assess the relative fitness of a person making an injury claim. The law firm representing the claimant is hoping to demonstrate that their client, who used to be a personal fitness instructor, is not nearly as active as she would have expected to be given her former profession.

The data from the Fitbit is being processed by a company Vivametrica. They will compare the collected data from the claimant with population health data and judge whether it is normal for someone of her former profession.

Although this case raises a number of legal and practical issues about the use of activity tracking data in court, it has opened the floodgate of speculation about how this data could be used in future legal cases. In this particular case, the data will assist the lawyers, presumably in conjunction with expert opinion, with accurately determining what this particular person’s current level of activity is. They will then hope to show how it is significantly less than it should be if it weren’t for the injury she suffered.

Where we are far more likely to see activity data being used in court is for the purpose of discrediting claims of injury which are contradicted by activity data. Attorney Neda Shakoori gives an example scenario of someone claiming injury as a result of a motor vehicle accident whose data from their 5 mile runs is uncovered and used by the defendant’s legal team.

In these cases, the data being used is simple step counting. In the future however, we will be wearing devices that will be able to measure a range of physiological activity continuously. Coupled with GPS data that records the wearer’s location at any given time, the physiological data will document in detail what a person was doing at any given time. It will be difficult to claim for example, that you were relaxing at home watching the television when the data actually showed at the time you were experiencing raised heart rate, faster breathing and elevated levels of stress.

In fact, this data, if it were accessible to criminal investigators, could actually be used to help in tracking possible suspects by placing them at the scene of a crime with an appropriate “physiological profile” of someone committing a crime.

The courts in various jurisdictions will be determining the appropriate use of this data and will need to overcome issues of privacy and in the US in particular, with aspects of the American constitution. The 5th Amendment for example provides protection against self-incrimination and so the question is whether fitness data could be ruled inadmissible on those grounds.

In practical terms, it may also be hard to argue that the data being presented in court was actually that collected from a specific individual and that it represents a true record of that person’s activity. It would be extremely easy currently to produce data that reflected a specific pattern of activity. It is also difficult to prove that it was a specific individual that was wearing the tracker when the data was recorded. Eventually however, it may be possible to actually to tie this data unequivocally to a specific individual using their heartbeat data as biometric identification.

Using heartbeats to identify an individual is something that Apple has considered and has even filed for a patent that uses heartbeat data to identify a person in the same way that they currently use fingerprints to unlock mobile devices. In fact, Nymi is already using this approach in a device that will provide access to computers, cars and homes.

Another type of wearable that will increasingly play a large role in legal cases are cameras such as the Narrative Clip that are constantly taking photos. Like activity trackers, the evidence produced by these devices may end up being used to save the wearer in a court of law or damn them.

What the legal case in Canada has highlighted more than ever is the fact that policy and the law is going to struggle to keep up with how rapidly technology is changing what we can now do in terms of evidence. For users of wearables, it is another aspect to consider as we move to completely documented lives.

Taken from ‘The Conversation’. See the original article here The Conversation

If you need advice and legal representation regrading a child custody matter, please contact our offices for some advice over the phone.
Email: ghanna@gmhlegal.com
Tel: (02) 9587 0458.


Woman claims to be ‘Single mum’ in welfare fraud scheme

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Child Custody


A woman who claimed for years that she was a single mother to get Centrelink, tax and health benefits has been caught out after she went to court for a slice of her former “partner’s” property.

The father was not named on the now 18-year-old daughter’s birth certificate. Not was he listed as a contact at her school.

But the mother applied to the Federal Circuit Court for a ruling that she had been in a de facto relationship with the father so she could claim a share of his assets.

In ruling there was no defacto relationship, Judge Joe Harman nevertheless found the father had provided for the girl through childhood. Now the mother, 56, is likely to be reported by the court for welfare fraud because, not only was she not a single mother, she also claimed to have been employed by the father.

Judge Harman said there was a saying: “You cannot have the egg and the half-penny too.”

The daughter had been brought up knowing the man was her father, he was at her birth and he had provided for her since but had no idea until recently that he was not on her birth certificate.

The judge found that, ­although the parents and their daughter lived for many years in the same property, the mother and father had not only separate bedrooms but separate homes — she in the residence and he in the business part of the property.

“The sexual relationship that has existed between the parties has been brief, sporadic and far from reflective of mutual commitment between them,” Judge Harman said.

“In all probability for these parties, engaging in sex with each other met a need and has not implied anything else, be it emotion or commitment.”

When they rented out the residence, the judge found the man lived upstairs while the woman lived downstairs with her daughter.

“During the period the parties were living under the one roof I am not satisfied they lived in a de facto relationship,” Judge Harman said.

He rejected the woman’s evidence the man had been complicit in her claiming single parents’ benefits because they needed the money.

Firearms Licence: Colander head gear not the best idea

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Firearms Licence


A South Australian atheist who successfully had his gun licence printed with a photo of him wearing a colander on his head has been forced to undertake a psychological test to prove he is fit to own firearms.

Guy Albon, a 30-year-old disability support worker in Adelaide had his four guns and his licence confiscated after police became suspicious of his strange photo.

When he had his licence renewed last year, Mr Albon said he decided to “have a bit of fun” when asked about his religion, and declared himself a member of the Church of the Flying Spaghetti Monster, a satirical movement set up in the US with the intention of opposing religion.

Following the lead of a fellow Pastafarian in Europe, Mr Albion successfully argued he should be allowed to wear the colander in his licence photo because it was a religious head piece.

He is believed to be the first Australian to successfully have a licence printed with a colander on their head, a feat also achieved recently by a New Zealand man who this week spoke to media after a photo of his driver’s licence went viral.

“The law stipulates you can have something on your head … but you have to have your entire face uncovered and if the headgear is being worn it has to have some religious significance,” Mr Albon said.

After convincing the woman who took his photo at the transport department he was allowed to wear the colander, Mr Albon finally had his unique licence.

It wasn’t until six months later, in about June last year, when he submitted paperwork to have his licence classification changed that police became nervous about allowing a man with a colander on his head access to firearms.

He said two uniformed officers visited his home and seized his licence and four firearms – two rifles and two handguns worth about $2000 in total – until a psychiatrist confirmed he was safe to own weapons.

Despite passing the test, he was told the licence with the colander photo had been destroyed and he would have to be photographed again, this time without the headpiece.

A frustrated Mr Albon maintains he is legally allowed to wear the colander in his licence photo. But, at the risk of losing his licence again, he conceded to having a normal photo taken for the renewal.

Mr Albon said he followed the Pastafarian movement in part as a gimmick but also to highlight the freedoms allowed to religions.

He continues to subscribe to the Church of the Flying Spaghetti Monster and has even agreed to help moderate a social media group dedicated to the movement.

In the next few months, Mr Albon will need to renew his driver’s licence and has vowed to wear a colander on his head for that photo, too.

Traffic Law Update: License & Speeding Appeals

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traffic law GMH Legal lawyers

At GMH Legal, we have acted for many drivers who have been at risk of having their license suspended for speeding and other traffic offences. Our traffic lawyers will represent your interests in a way that ensures the best possible outcome in the situation.

Which decisions can be appealed?

The following decisions of the RMS (RTA) and police can be appealed in the Local Court:

  • A decision by the RMS (RTA) to suspend your licence for exceeding the speed limit by more than 30 kilometres an hour if you have a provisional license or more than 45 kilometres an hour if you have an unrestricted license.
  • A decision by the RMS (RTA) to suspend a P1 or P2 provisional driver’s licence for loss of demerit points.
  • A decision by the police to suspend your licence (on the spot) for exceeding the speed limit by more than 45 kilometres an hour.

Which decisions can’t be appealed?

The following decisions cannot be appealed:

  • A decision by the RMS (RTA) to suspend an unrestricted drivers licence for loss of demerit points.
  • A decision by the RMS (RTA) to suspend your interlock drivers licence.
  • Where a driver on a good behaviour bond licence breaches the bond.

However, the RMS (RTA) is not to impose demerit points where a court orders that a person not be convicted of a traffic offence under Section 10 of the Crimes (Sentencing Procedure) Act 1999. This means that you can elect to take a traffic infringement notice to court and ask the court not to convict you.

If you are successful in persuading the court to order a “section 10” you will not accumulate demerit points for the traffic offence and therefore your licence may not be suspended. We have successfully obtained a “section 10” for many of our clients who have been charged with traffic offences and will do our utmost to ensure you receive the best possible outcome in the circumstances.

Licence Appeals – What You Have To Prove

There is no real test that the court applies when deciding the appeal. However, the court does not permit a review of your guilt or innocence of the offence or the imposition of the fine. Generally the court will make a decision based on 3 main areas:

  • The circumstances of the offence.
  • Your traffic record/character.
  • Your need for a licence.

You need to lodge your appeal quickly

You only have 28 days after receiving the letter from the RMS (RTA) notifying you of the suspension to lodge your appeal. The law assumes that you received the letter 4 working days after it is posted (even if that is not the case in fact).

Generally the last day to lodge the appeal is the day before the suspension is due to start. If you do not lodge your application in time the court cannot hear your appeal, and you must serve the suspension.

If you have been charged with a traffic offence and are at risk of losing your license, call the experienced traffic lawyers at GMH Legal for a FREE consultation:

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

Traffic Quirk courtesy of Lord Mayor Quirk

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Queenslanders will be able to turn left on a red light at up to 50 more intersections across Brisbane by July next year, with council moving ahead with plans to expand its trial of the congestion-busting road rule.

Picture3


Lord Mayor Graham Quirk yesterday announced about $1.1 million would be spent over the next 12 months on the initiative after a trial at five intersections this year found it shaved an average of up to 30 seconds off waiting times.

“This improvement hasn’t come at the cost of road safety and to date the Queensland Police Service has not reported any incidents due to the introduction of this project,” he said.

The 50 intersections to be included in the expansion have yet to be revealed.

“We have done a desktop study at this stage only around those intersections,” Cr Quirk said as the Brisbane City Council budget was brought down yesterday.

“We have to do more technical, detailed work to make sure that those left turn at reds will work.”

RACQ safety spokesman Steve Spalding warned that the council must ensure it selected the right sites and ran an education and awareness campaign so drivers were not caught out.

“To some extent the jury is still out on just how effective or safe left turn on red intersections are,” he said.

Mr Spalding said use of the road rule was being rolled back in other states rather than expanded.

Cr Quirk said a customer feedback survey conducted at the trial sites found that 95 per cent of residents understood how the initiative worked and 85 per cent wanted the trial expanded.

He said peak hours delays were reduced by 20 to 30 seconds during a trial of left turn on red at the intersection of Hellawell Road into Gowan Road, Sunnybank Hills and by about 15 seconds at the intersection of Bowen Street and Lutwyche Road, Windsor.

Anyone outside of Queensland should still always abide by the traffic lights.

If you have found yourself in a traffic quirk, call the experienced traffic lawyers at GMH Legal for a FREE consultation:

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

Our Legal Fees & Services

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Family Law, Criminal Law, Immigration, Traffic Law

At GMH Legal we believe that client relationships matter more than time sheets which is why we offer a range of alternative fee arrangements to best suit your needs.

Our focus is on client service and establishing mutually rewarding relationships with our clients. We think that billing by the hour does not encourage the most efficient and effective delivery of legal services.

We strive to be innovative and eliminating the inherent inefficiencies of the billable hour means that we can focus on achieving the best possible result for our clients.

However, we do recognise that not all matters lend themselves to an alternative fee arrangement. That is why we offer a range of alternative fee arrangements, including straight time based billing if that is what works best for you.

We will work in collaboration with you to determine your specific legal requirements and then develop the most effective strategy and fee arrangement for your needs.

What we offer

GMH Legal can offer you the following fee arrangements, or a combination of these, as an alternative to time based billing. These options can be customised to suit your needs. No matter what fee arrangement you prefer, providing you with certainty by scoping and pricing our work upfront is our priority.

Fixed and value pricing

GMH Legal can charge you a fixed price for any matter. We will quote you a price and stick to it. If there is a change in the agreed scope of work, we will send you a variation detailing the new scope and the price for that change.

Value pricing is a fixed price that we agree up front with you that reflects your legal requirements and the service we provide. With value pricing you don’t pay for our time – you pay for the work we do and the value you receive.

This ensures you receive more value for your legal spend. Value pricing can also include fee incentives to achieve your goals and for results that exceed expectations. These incentives align our interests with yours, making your success our success.

Flexible retainers

With a retainer agreement, GMH Legal will charge you a fixed periodic fee for the provision of legal services. A retainer provides the budgetary control and certainty that hourly billing can’t.

We determine the periodic fee by calculating the average value of our services over the time taken to conduct the matter. A retainer means you know exactly what you will pay for the result you desire.

We will regularly review the terms of the retainer with you to ensure it remains fair to both parties.

Event-based pricing

GMH Legal can charge you a fixed price for each stage of a matter. We work with you to properly scope the matter, determine the stages involved and then agree a fixed fee with you for each stage.

Want to know more? Contact us to discuss how we can tailor a fee arrangement to best suit your needs.

George Hanna
Director Solicitor

Tel: (02) 9587 0458
Email: solicitors@gmhlegal.com

The Fallibility of DNA evidence

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A slew of recent cases has brought DNA profiling into question as criminal evidence. The Australian reports on the case of Benjamin James Forbes, whose appeal on a solely DNA-based rape conviction in the ACT will be heard by the High Court. Victoria alone has had three contamination cases, including the rape conviction of Victorian man Farah Jama, overturned after likely DNA contamination came to light. In Perth, evidence was contaminated with the DNA of a police forensic investigator.

The Australian Institute of Criminology has released a report showing that jurors are 23 times more likely to convict when DNA evidence is present. With all this confusion, it’s hard to know who you should allow to swab you, and what trouble you might end up in. With the assistance of University of Melbourne Associate Professor Jeremy Gans, an expert in DNA criminology, Crikey has done the legwork for you.

What does a “match” mean?

A “match” doesn’t mean that two sets of DNA are identical. Each person carries a vast quantity of DNA, and matching the whole thing would be a human genome project of its own. The best that current testing procedures can manage is to compare specific small sections. By matching unrelated sections, and comparing the data to patterns in DNA databases, forensics officers arrive at a “likelihood match probability” — an estimate of how likely it would be for a random person on the street to have matching results. To stretch a metaphor, it’s like looking up a dozen streets in a street directory and comparing the number and colour of the houses to work out if you’re in Newcastle.

How does it work?

The standard method for most forensic testing, STR, involves copying the DNA to create a sample big enough for testing. This process, called PCR, is a blessing and a curse — any contamination will be replicated along with the real DNA, but it’s extremely useful for getting results on small or degraded samples. Small sections are then examined for repeating sequences, and the number of repeats compared. In America, 13 points of comparison are used, plus a male/female check. The equipment used by Victoria Police’s Forensic Services Division tests nine, plus a male/female check.

Other more esoteric methods abound, including the controversial “low copy number” DNA testing process. This involves growing trace amounts of DNA into a usable sample by running it through multiple PCR cycles. Theoretically, low-copy could identify someone by just the DNA left by touching a surface, but every PCR cycle multiplies the chances of contamination.

Mitochondrial DNA matching, also controversial, can match a DNA sample to a suspect or any direct matrilineal relation (for example, mother or aunt’s son). Mitochondrial DNA is highly mutable, but there’s usually a lot more of it to test. SNP testing — single nucleotide polymorphism — is a DNA test that checks one single base pair in the DNA. Previously the domain of health testing for various genetic abnormalities and traits, it’s becoming more widely used in testing DNA in criminal cases.

What are the flaws?

Contamination is a huge issue with DNA. Strands of DNA get everywhere, with all the mobility of a dust mote. Just walking through a room will leave behind your DNA. Most lab DNA contamination is fairly obvious, as in the case of a rape victim whose DNA was detected on evidence in the Jaidyn Leskie case after evidence was processed in the same lab. Modern methods increase the likelihood of contamination, and while some states have taken precautions (Queensland Police requires all their forensics officers to volunteer a DNA sample for elimination), recent cases suggest that it’s a problem that will need to be addressed.

DNA is fragile. If any of the test points of the crime scene DNA are degraded to the point where they’re unreadable, the result is described as a “partial match”. Partial matches are dangerous; because of the way the statistics work, every lost information point pushes up the likelihood the match is a coincidence. Partial matches are common and continue to be used in Australian courtrooms.

It’s also impossible to absolutely rule out an accidental mismatch. Identical twins are plentiful; relatives are more likely to be a match. The “one in a million” figure means most of us will have around 20 forensic DNA matches around Australia. “The danger in the Forbes case is that there was someone else in the ACT that day has who the same DNA markers,” says Gans.

When a DNA sample is run through a database, “cold hits” may come up — people with matching DNA points who were previously not linked to the crime. Cold hit DNA is considered less significant as evidence, but occasionally police may build a case against a cold hit.

The last major problem with DNA evidence is the assumption that DNA found at the crime scene must relate to the crime. DNA evidence is, by definition, always circumstantial. To be really convincing, DNA evidence needs to be supported by other evidence.

What are the advantages?

Despite its flaws, DNA testing continues to be the most scientifically reliable evidence available to most courtrooms. Eyewitnesses forget, memories are altered, stories are incomplete. “Compared to the kind of evidence that gets thrown around in a courtroom, nuclear DNA is the gold standard,” says Gans. “It’s not infallible, but it’s just so good.”