Garnishee Orders May Bring Home The Bacon

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Issuing a garnishee order is a cheap and easy way to claw back some of your debt, but there are a few matters to consider first.

Bypass your debtor and go straight to the source of their funds

Once the court has given you a judgment against your judgment debtor, and they have failed to satisfy the judgment, you can apply to the court for a garnishee order. This allows you to bypass the recalcitrant debtor and it sets up a relationship in the form of a triangle between you as creditor, the debtor and the third party.

This third-party garnishee acts as a kind of proxy for the debtor and the order will require them to pay the debt to you in a lump sum or in instalments.

A garnishee order can be directed straight to the debtor’s bank or their employer. In the latter case, you will be able to access the debtor’s pay packet before they do. You do not have to tell the debtor you have applied for a garnishee order and they may only find out when they see their bank statement or pay slip. However, the local and district courts instruct that the amounts claimed in total under the garnishee orders must not reduce the judgment debtor’s net weekly wage or salary received to less than $500.60.

This is known as the weekly compensation amount and is adjusted in April and October each year. When issuing a garnishee order, it must include an instruction to the garnishee about the amount that a judgment debtor is entitled to keep.

Garnishee orders can also be made against those who owe money to the debtor, for example a real estate agent who is collecting the rent from the debtor’s tenanted property.

Benefits galore of a garnishee order

One of the benefits of a garnishee order is that there is no filing fee, although a service fee may be payable. There is also no extensive research on the debtor required before the order is issued, the debtor’s name may be enough. And if the order fails to recover all or some of the money, the order can be reissued on the same garnishee several times.

There is also little the garnishee can do to stop the order unless they apply to the court or they repay the debt.

Guidance on garnishing

If you have received a judgment and have an outstanding debt you are trying to recover from your judgment debtor, we can help take the lead on it for you and take you straight to the debtor’s funds.

 

Age Pension Eligibility Rule

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The Government has announced that the Age Pension eligibility age will not go up to 70, as planned. But it is still going up, as is the superannuation preservation age.

The move to take the Age Pension eligibility age up to 67 was legislated by the last Labor Government. The process started in July last year, when Age Pension age went up from 65 to 65 and six months. It is scheduled to go up by six months every two years until 2023, when it will be 67.

The proposal to take Age Pension age up from 67 to 70 was announced in the 2014 Federal Budget. The plan was that from July 2025 the eligibility age would start increasing above 67 until it reached age 70 by July 2035.

The move up to age 70 was included in a bill that was never passed. This means that the decision announced by the Prime Minister last week does not require any legislative amendment.

The move up to age 67 will continue as planned.

The Government also introduced changes to the assets and income tests last year, which have a bearing on Age Pension recipients. Once you get to Age Pension age, the Department of Human Services, will apply a couple of tests to see whether you are entitled to a full or part pension.

Assets test. A single home owner can hold assets worth $258,500 before having the full age pension entitlement reduced. For a single non-home owner, the limit is $465,500.

A home owning couple can hold assets worth $387,500 before having their full age pension entitlement reduced. For a couple who do not own a home the limit is $594,500.

Assets included in the test include superannuation accounts, shares and other financial assets, investment property, business assets, motor vehicles, boats and caravans, collectibles. The family home is exempt.

The Department of Human Services updates these limits in January, March, July and September each year.

For each $1000 of assets over the threshold pension payments are reduced by $3.

Applying this taper rate, a single home-owner’s part pension runs out when asset value reaches $561,250. For a single non-home owner, the part pension runs out when assets reach $768,250.

A home owning couple’s part pension runs out when their asset value reaches $844,000. A non-homeowner couple’s part pension runs out when their assets reach $1.05 million.

Income test. A single person can earn up to $172 a fortnight ($4472 a year) without any reduction in their pension. The pension is reduced by 50 cents for each dollar of earnings over $172. When earnings reach $1987.20 a fortnight the pension cuts out altogether.

A couple can have combined income of up to $304 a fortnight ($7904 a year) without any reduction in pension entitlements. The pension is reduced by 50 cents for each dollar of earnings over $304. When earnings reach $3040.40 a fortnight the pension cuts out altogether.

Preservation age. While the eligibility age for the Age Pension will stop increasing at age 67, the age at which people can get access to their superannuation is still going up

The age at which people can get access to super, under normal circumstances, is called the preservation age. It used to be 55 for everyone but the rules have changed. Here is how it works now:

  • If before July 1, 1960 your preservation age is 55.
  • If date of birth is between July 1, 1960 and June 30, 1961, your preservation age is 56.
  • If date of birth is between July 1, 1961 and June 30, 1962, your preservation age is 57.
  • If date of birth is between July 1, 1962 and June 30, 1963, your preservation age is 58.
  • If date of birth is between July 1, 1963 and June 30, 1964, your preservation age is 59.
  • If date of birth is after July 1, 1964 your preservation age is 60.

There are some circumstances where you can get your super out early but they are very limited and relate mostly to serious medical conditions and severe financial hardship.

To get access to your super you must satisfy what is called a “condition of release”. In addition to reaching the preservation age you need to retire from full time work.

Once you reach age 65 you can take your super, even if you are still working.

Meaning Of Independent: Financial Advisers

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With all the media coverage around the negative behaviour of many large financial advisory firms and their affiliates, you may be forgiven for wanting to deal with a smaller, perhaps more independent financial adviser in the future, but what exactly does “independent” mean in in terms of financial services?

Under the Corporations Act, a person who carries on a financial services business or provides financial advice is prohibited from using the terms “independent”, “impartial”, or “unbiased” or any other term “of like import” in relation to the business or service, except where the person meets certain conditions. This condition is continually monitored by ASIC and it does take steps to intervene when it discovers false claims.

In one recent example, ASIC required four financial advice companies to cease and amend false claims of independence that could mislead consumers. The claims were made on websites and in some cases, in the marketing materials of the companies.

ASIC said it “will continue to publicly name advisers who do not comply with their obligations…and where appropriate, take action to enforce the obligations…and to ensure consumers are not mislead about the nature of the service they are receiving”.

So, what are the conditions that a financial services business have to satisfy to use terms such as “independent”? Basically, these restricted terms can only be used if the business does not:

  • receive commissions (other than commissions that are rebated in full);
  • volume-based payments (ie forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product); and
  • other gifts and benefits from product issuers which may reasonably be expected to have influence.

In addition, the business is expected to operate without any direct or indirect restrictions relating to the financial product and be free from conflicts of interest that may arise from relationships with product issuers (which might reasonably be expected to influence the person). It is ASIC’s view that words such as “independently owned”, “non-aligned”, “non-institutionally owned”, and other similar expressions must also satisfy those conditions.

If you go to a financial adviser that holds themselves out to the “independent” or the like, you can expect them to not receive commissions, volume-based payments or have conflicts of interest. However, “independent” financial advisers are still able to receive asset-based fees without affecting their ability to use restricted terms.

Independent financial advisers would also be more likely to have an open list of products in their approved product list (APL) and have an easy process to recommend a product that is not on the (APL) should you wish to invest in those particular products. Any restrictions whereby an off-APL process is not easy to access would be considered to be a restriction and therefore, the financial services business would not be permitted to use a restricted term such as independent.

Looking for a financial adviser?

The independence of financial advisers is an important issue and may sway decisions about investments as well as choice of advisers. If you’re looking for a financial adviser that’s independent, remember to look out for the use of restricted terms. If you’re after some simple financial advice around your super fund or just some general advice, an accountant with a limited AFSL licence may be able to help. Contact us today to find out more.

 

Reform Of The ABN System

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In Australia, there are currently around 7.7m ABNs with over 860,000 new ABNs issued in 2017-18. The ABN system was originally introduced in 2000 as a way to provide businesses with a unique identifier when dealing with the government and to support the introduction and administration of GST. Over the years, the ABN has become a de facto licence to do business and a key business credential used by other businesses and consumers in general.

Despite this expanded role, the ABN system has not changed substantially since 2000, ABNs can still be obtained easily and quickly using intentionally simple processes to facilitate small businesses. There is concern that this ease of application has led the ABN system to being used for nefarious purposes by operators in the black economy.

This view was affirmed by Black Economy Taskforce which found that ABNs were being used to provide a false sense of legitimacy to dodgy businesses with the potential to deceive consumers and other businesses. 

As a way to tackle this issue, the government has proposed changes to the ABN system to ensure that it remains fit to support the expanded range of purposes it is used for. It is currently consulting on changes including adjusting ABN entitlement rules, imposing conditions on ABN holders, and introducing a renewal process including a renewal fee.

The potential changes to ABN entitlement rules stem from the Taskforce finding that not everyone obtaining an ABN is entitled. This includes: inappropriate use of ABNs in phoenixing schemes; individuals working as employees but applying for ABNs as independent contractors; individuals incorrectly obtaining ABNs to avoid “no ABN withholding”, and individuals fraudulently claiming GST input tax credits.

In response, the taskforce recommended that certain groups (such as apprentices and individuals on tourist visas, as well as workers in certain industries) be excluded from obtaining an ABN. Another avenue to restricting ABNs that is currently being developed by the ABR and ATO include an application experience based on the applicant’s risk profile which may involve stronger entitlement checks before an ABN can be obtained.

In terms of potentially imposing conditions on ABN holders, the Taskforce had initially recommended that ABN holders should only be allowed to continue to hold their ABN if they comply with government obligations (ie tax obligations). Which would allow businesses and individuals to better identify compliant businesses and act as a deterrent to those wanting to engage in black economy behaviour. However, the government emphasised that the design of the ABN cancellation process would need to be fair and transparent and only occur where the business had not taken appropriate steps of rectify issues.

Finally, the government is also consulting on the proposal to make ABNs subject to periodic renewal for a fee as recommended by the Taskforce. While a renewal process would not directly address those who use the ABN system to engage in fraudulent behaviour, it would indirectly address fraudulent behaviour by prompting ABN holders to have a closer engagement with the ABN system. The fee would also assist the ABR to better support data needs and discourage people from holding an ABN when they do not need one or are not entitled to one.