Opinions on my situation

[jkat]

I don't know how much I can contribute because I am not an employer and don't have any legal knowledge/experience.

However, reading this to me it looks like the conflict/disagreement is not so much over the technicalities of whether or not China should consult his employees etc (because at the end of the day that has already been discussed in length with legislation links posted) but whether China should follow ONLY the letter of the law or 'go above and beyond' to make his employees feel valued/respected and this comes down to personal opinion/experience.

He has stated he has difficulty managing his employees and Geoff was giving him suggestions on how to do that so that 1) trust is rebuilt and the employees don't feel like they are being spied on 2) employee/employer relationships because they are key in staff retention, quality of work by staff.

Speaking as someone who has been employed in many different environments the ones where employers were considerate and treated me with respect by letting me know of changes made and genuinely listening to my opinion (whether or not they were going to take it on board) meant that as an employee I was happier and the quality of my work was better. It was in environments were I was treated as a second class citizen that I would work slowly and ineffectively etc.

 

[china]

Thank you for all the great input. Today was the last trading day for my office in 2013. We now go on a two week sojourn.

I will use this time to:

1. Sort out loan agreement between me and smsf
2. sort out tenancy agreement between me and smsf
3. figure out a way and means of having discussion with my employees with regards to security cameras


On a more positive note, I have secured a written expression of interest from a company wishing to be my co-tenant.

My smsf paid 245k plus 10k (stamp duty and conveyancer) : 255k
I paid about 140k for fitout, cabling, phones, IT fitout.

This means that my relocation cost me approx 400k. The latter 140k will be partly tax deductible and depreciable.

Currently the rental yield is :

28500 p.a. from me
18000 p.a. from new tenant

This means about 46000 p.a. in rental yield per year.
Strata and council rates come to 20000 p.a. per year.

At about 8% gross yield , this should mean a sale price of over 500k? I intend to pursue this with a commercial real estate agent in the new year.

Do you guys think this is feasible? If it is, then I would have made 100k in three months less agent commission, legal fees, etc.

 

[DaveM]

I dont think thats how it works china. You dont buy a cheap CIP, put in some fitout, get an inflated rent then sell it to some schmuck for $500k+. The property value is tied to comparables in the area, your fitout and subletting are increasing yield not value.

 

[geoffw]

Dave, quite often the value of a CIP is tied to yield- but also to quality of tenant and length of lease. But your point is valid- that the rent must be a fair market value rent.

China- you want to give up $26,000 pa, presumably increasing by inflation annually, for a profit of $100,000? Not even taking into account the possibility of another tenant. This would also potentially leave you in the situation were you could get evicted at the end of a lease, which I thought was your whole reason for buying in the first place.

You have an asset which is returning you a lot more than the same money parked in the bank, and now you want to sell it and park that money in the bank for half the return you're getting. I wouldn't.

 

[DaveM]

Dave, quite often the value of a CIP is tied to yield- but also to quality of tenant and length of lease. But your point is valid- that the rent must be a fair market value rent.

Geoff surely no CIP owner has ever used inflated rental figures on leaseback to drive up the price on a lame duck?

 

[china]

Dave, quite often the value of a CIP is tied to yield- but also to quality of tenant and length of lease. But your point is valid- that the rent must be a fair market value rent.

China- you want to give up $26,000 pa, presumably increasing by inflation annually, for a profit of $100,000? Not even taking into account the possibility of another tenant. This would also potentially leave you in the situation were you could get evicted at the end of a lease, which I thought was your whole reason for buying in the first place.

You have an asset which is returning you a lot more than the same money parked in the bank, and now you want to sell it and park that money in the bank for half the return you're getting. I wouldn't.

I think that the best time to sell my CIP is now for the following reasons.

1. It is brand new and looks great.
2. There are two AAA tenants in place, one of which is me.
3. If I decide to retire in five - six years time, the place will be older and there may be zilch rental yield. A lack of rental yield must turn off most investors.
4. The CIP has a 33 year history of capital depreciation. Previous owner paid 320k in 1980. I paid 245k in 2013.
5. Cash in hand with profit within the SMSF means I can do other investments.
6. Holding this CIP will only delay my retirement as I need about 2.5mil - 3 mil in net assets to retire.
7. Without me using the CIP, it would be hard to get tenants and again, if I retire, it would be zero yield but me continuing to bleed an inflation indexed 20k per year in council rates /strata.

So I am hoping to take profit now and maximise the sale price by maximising the rental yield. I don't wish to be evicted ever again but there is a good chance that five to six years may be enough time for me to retire anyway.

 

[china]

I dont think thats how it works china. You dont buy a cheap CIP, put in some fitout, get an inflated rent then sell it to some schmuck for $500k+. The property value is tied to comparables in the area, your fitout and subletting are increasing yield not value.

If I can find such a schmuck / investor, I would gladly sell.

The buyer has the potential to increase the yield even further, (the property could easily accommodate another tenant) thereby making the investment to be one with exceptionally high yield.

 

[Ace in the Hole]

No. But any small business owner who is not at least aware of the law can leave themselves open to problems later.

When we took over our business I was not aware of the plethora of laws which cover the workplace and employment. There's laws on workplace health and safety, employee pay and conditions, privacy, surveillance, superannuation, immigration to name a few. Being in the food industry, we were very much under scrutiny as the industry has a bad name- so it was even more important to ensure that we did everything by the book as much as we knew how- and even that wasn't enough. We have had the workplace ombudsman do random checks, as well as the workplace health and safety people, and of course the food safety people. (The ombudsman found problems in our paperwork which cost us a lot to fix, but we were allowed to go back and fix. The WPHS people found problems which needed to be fixed, but told us that our standard was the best of any food place in the shopping mall. The food safety people didn't find problems. Unless the breeches are serious, they are very helpful in allowing things to be fixed).

If you have missed any super payment, an employee has the right to complain to the authorities, which could open yourself to an audit.

You have obligations to providing full information to employees about their pay, which includes the prompt issuing of payslips, and the keeping of records for a period of time, securely and privately. Privacy covers the secure recording of employment information as well as video surveillance. To have private employee information available over a network may be a problem for instance, as may be unsealed payslips. There are many areas where a workplace has the potential to be deemed unsafe. There are fire regulations. You may even leave yourself open to risk if an employee leaves milk in the fridge for too long. Perhaps you need to have a trained first aid person or to have a fully stocked first aid kit- which may not be applicable for a medical type practice. But perhaps your kind of practice requires more stringent than normal standards.

With today's emphasis on workplace bullying and discrimination you may be required to show that you have educated employees in these matters- and that you are aware how to handle any such problems legally.

I guess any employer has a number of actions.
1. Ignore potential problems. Obviously I wouldn't advocate this in a public forum, even if I did think it was a good idea! But There's probably a lot of employers who get away with a lot of things just because nobody has ever checked them. A small workplace may have a low risk of being assessed by any authority, or to have a disgruntled employee complain about problems.
2. Read up on the laws and try to comply. China, in your case, it would seem that this is not a strength- and to keep up with all laws may be a big job.
3. Get a third party. This doesn't have to be a lawyer. There are firms which can do workplace audits, which can cover as many or as few areas as you wish to have checked. It may be a good insurance policy, cutting down your chances of being audited or even sued at a later date.

All this stuff is a massive wate of time, ie. the research part.
Of course you have to apply this, but the quickest way is to get the up to date facts given to you to simply pass on.
No small business owner has time to keep up with ever changing rules and regulations.
Look into - Employsure
We got onto them last year and are completely protected now, and it's cheap.
We had the camera thing too, just got to issue notice.
Far as I know employees can not disupte at all if they are there to protect your business.
Employsure will draft all your custom docs for you included in the flat rate subsctiption fee.

 

[geoffw]

All this stuff is a massive wate of time, ie. the research part.
Of course you have to apply this, but the quickest way is to get the up to date facts given to you to simply pass on.
No small business owner has time to keep up with ever changing rules and regulations.
Look into - Employsure
We got onto them last year and are completely protected now, and it's cheap.
We had the camera thing too, just got to issue notice.
Far as I know employees can not disupte at all if they are there to protect your business.
Employsure will draft all your custom docs for you included in the flat rate subsctiption fee.

Thanks ATIH. It's good to know of a company that does this, especially a company which does it properly.

I got screwed over by a company which told me it was acting in my best interest. Then I went with a company which gave me an excellent workplace agreement- and then went bust.

 

[BayView]

Far as I know employees can not dispute at all if they are there to protect your business.

When it gets to the stage when the Unions work it so that the Employees can tell the Boss what to do...it's over for employees in this Country.

Why would anyone run a business if they can't take all the risk, and make all the decisions that will benefit them?

Unions are a clever lot...fight hard for what will eventually put everyone out of work.

It'll be an interesting next 20 or so years.

 

[china]

I got quotes from local solicitors for:

1. Commercial lease between myself and SMSF for my comm property

2. Loan agreement between myself and SMSF

This comes to about 2400 for these two documents. Is this about the right ballpark for this?

 

[Terry_w]

I got quotes from local solicitors for:

1. Commercial lease between myself and SMSF for my comm property

2. Loan agreement between myself and SMSF

This comes to about 2400 for these two documents. Is this about the right ballpark for this?

Very cheap. What about some advice as well? both legal and tax.

 

[china]

Very cheap. What about some advice as well? both legal and tax.

With my whole smsf situation, it is the accountant who has been directing the overall game play. So he has sent me out to organise the lease document and the loan document. Therefore, I went to get quotes from solicitor. Why does it cost 1200 to generate a pro-forma document wherein I sign and he signs?

And I suspect, come smsf audit time, I will probably pay the accountant again.

I guess it is good for me to get a solicitor to draw up these documents as he is a separate party to my accountant and hopefully will pick up anything glaringly erroneous in the whole process.

 

[Terry_w]

Why does it cost 1200 to generate a pro-forma document wherein I sign and he signs?

.

Accountants can't give legal advice so can only advise on limited aspects of SMSFs - tax.

Who is 'he'?
Why do you think it is a proforma document?
What about associated legal advice?
Why should a patient pay a doctor a high fee for 'proforma' advice?

You have already made some major mistakes and have probably breached the SIS Act a few times. You are on the verge of a non complying fund - in fact it probably is non-complying. You could have the whole fund taxed at 45% yet you still do not take things seriously.

Wonder what Mary thinks!

 

[china]

Accountants can't give legal advice so can only advise on limited aspects of SMSFs - tax.

Who is 'he'?
Why do you think it is a proforma document?
What about associated legal advice?
Why should a patient pay a doctor a high fee for 'proforma' advice?

You have already made some major mistakes and have probably breached the SIS Act a few times. You are on the verge of a non complying fund - in fact it probably is non-complying. You could have the whole fund taxed at 45% yet you still do not take things seriously.

Wonder what Mary thinks!

"He" refers to the solicitor.
It is a proforma document because he emailed me a sample but asked me to meet him so that he can fill in the specifics e.g. my name and address of property. The same happened with my accountant. When he set up the various trusts and bare companies and my smsf, he too ordered some proforma documents from online and got my signatures on them.
The quote of 1200 per document does not include any advice.
Doctors are not giving proforma advice.

 

[DaveM]

"He" refers to the solicitor.
It is a proforma document because he emailed me a sample but asked me to meet him so that he can fill in the specifics e.g. my name and address of property. The same happened with my accountant. When he set up the various trusts and bare companies and my smsf, he too ordered some proforma documents from online and got my signatures on them.
The quote of 1200 per document does not include any advice.

So you are willing to spend hundreds of thousands on fitout and premises and cameras, but cheap out on really important stuff like correct SMSF structure, loan and lease agreements.

You get free advise from a very knowledgable forum member, and still you wont take it.

Stop procrastinating and watching every cent in your pile of money. $2400 now is much cheaper than dealing with the mess a non compliant fund will leave you with come audit time.

 

[Terry_w]

"He" refers to the solicitor.
It is a proforma document because he emailed me a sample but asked me to meet him so that he can fill in the specifics e.g. my name and address of property. The same happened with my accountant. When he set up the various trusts and bare companies and my smsf, he too ordered some proforma documents from online and got my signatures on them.
The quote of 1200 per document does not include any advice.
Doctors are not giving proforma advice.

Sounds like you need a new solicitor.

He won't be entering into any leases so won't be signing anything. It will be the lessor and the lessee entering into a contract - whether lease or borrowing.

You should get legal advice about the the non-conforming issues and about the SIS act in general.

And, yes you will be paying for your accountant to do the tax returns for the SMSF and also paying for an auditor to audit the fund each year - and this is where they will pick up the fact that there was no written loan agreement or written lease before you entered the contracts. Also did you get advice on avoiding double stamp duty when the loan is paid out?

 

[geoffw]

You get free advise from a very knowledgable forum member, and still you wont take it.

In all sorts of matters, not just SMSF.

Starting from "buy an investment property".

 

[china]

Sounds like you need a new solicitor.

He won't be entering into any leases so won't be signing anything. It will be the lessor and the lessee entering into a contract - whether lease or borrowing.

You should get legal advice about the the non-conforming issues and about the SIS act in general.

And, yes you will be paying for your accountant to do the tax returns for the SMSF and also paying for an auditor to audit the fund each year - and this is where they will pick up the fact that there was no written loan agreement or written lease before you entered the contracts. Also did you get advice on avoiding double stamp duty when the loan is paid out?

Interesting thank you. I must ask this solicitor about this. I guess I really need to retain a solicitor who knows about property/ SMSF loans etc / SIS.

I guess any solicitor can draw up a loan and lease but know nothing about smsf or SIS. The law firms I emailed are general firms - they deal with everything from crimininal law, family law, conveyancing etc.

 

[china]

In all sorts of matters, not just SMSF.

Starting from "buy an investment property".

I thought my comm property should count as an IP ?

In 2014, my project will be sell the comm investment property if I can get an appropriate price.