asset protection and latest bankruptcy proposals

[NigelW]

see this paper summarising where the government thinking is at on this issue.

Anti_Avoidance_Paper.pdf

Who knows where it will end up, but IMHO legitimate asset protection arrangements which are not made in the shadow of impending bankruptcy (whether that's 2 or or 4 years or otherwise) will remain valid and effective.

Items of note are:

Proposal 1 - it's always been the case that you need to set things up asset protection structures long before you might ever need them... doubling to 4 years just reinforces that principle.

Proposal 2 - we all know you've got to keep good records - but this may add an additional imperative to do so

Proposal 4 may limit the old technique of moving assets such as the family home to the off-risk spouse...

I think it's also a shame that the idea of rebuttable presumption of insolvency on failure (within a certain grace period perhaps) to lodge tax returns didn't get much support...it seemed quick and easy to me...

Cheers
N.

 

[austini]

HI Nigel,

Thanks very much for the update.

Cheers - Gordon

 

[tubs]

This should be a concern to all of us, particularly those using structures for asset protection.

The law is currently that if you go bankrupt, anything that you have done 6 months prior to defeat creditors can be clawed back, and if there was "smoke on the horizon" (ie reason to believe you would become bankrupt) within the previous 2 years anything you did may be able to be clawed back. This will change 6 months to 12 and 2 years to 4.

What this may mean (and I'm not sure) is that if you have a few investment properties and you decide to transfer your PPOR it to your wife, a creditor may be able to get your PPOR if somebody has an accident in your IP within 4 years of the transfer. They may claim that you knew of a risk with that property when you purchased it and get your house as a result.

What it also means is that if you go into business, and want to set up a structure to protect yourself, you would want to wait a year before starting out, and up to 4 years if you were in a business that may invite litigation (and almost any business could face that).

It also means that you need to keep independant bookkeeping records (ie through a book keeper) otherwise all your excel spreadsheets could have been falsified by you. Its a bit scary that we have a presumption of guilt here and you have to prove yourself innocent of not being insolvent beyond reasonable doubt. But I agree that tax returns are probably not sufficient, as you can put anything you like on them to show that you are solvent.

Tubs

 

[Patosan]

This topic always reminds me of Alan Bond.
You got to admire him for his work in setting up protection structures, but oh how he used them to seemingly cheat the countless shareholders and creditors. We want the law to protect our hard earned wealth yet I think we can see that there should be some way to prevent abuse of the system.

 

[NigelW]

This topic always reminds me of Alan Bond.
You got to admire him for his work in setting up protection structures, but oh how he used them to seemingly cheat the countless shareholders and creditors. We want the law to protect our hard earned wealth yet I think we can see that there should be some way to prevent abuse of the system.

Yeah it's definitely difficult where to draw the line. The problem is that whilst technically all bets are off if there's fraud, it's really quite difficult to prove fraud.

N.