Distress, anger in the business sector

THE first of a number of meetings to roll out the busi­ness compensation package was held on Tuesday night at Kandanga Hall.

Representatives from QRAA and QWI were pre­sent with QRAA being the lead presenter.

The distress and anger of affected business people who were present at the meeting was clear.

Whilst some obviously wanted to get things off their chest without analysing the package others who appeared to llsten and process the package appeared to be disappointed.

What is the package and how does it apply?

The first question to ask is — are you in the pro­posed ponded area?

If you are in the proposed ponded area and have land affected then QWI is the company to deal with your claim for business compensation.

If you are outside the proposed ponded area or your business is located within the proposed ponded area but you have no land affected then QRAA is the agency to deal with your claim.

Business Advice Assistance: assistance in the form of a grant of up to $2000 to cover the cost of obtaining relevant financial advice from appropriately quali­fied service providers such as a CPA, Chartered Ac­countant or financial services licensee is available to eligible business entities. The advice is intended to enable businesses to make an informed decision about the future of the business having regard to the effects of the proposed dam.

Business Restructure Assistance is intended by way of one off grant to assist in restructuring.

This could include:

• relocation expenses

• adopting new technologies/processes

• property improvements

• value adding improvements

• debt reduction

Support for short-term decline in profitability suf­fered as a result of the dam announcement is also available and assistance is limited to up to 100 percent of the estimated value of the business.

Business Exit Assistance: if exiting a business is the only realistic option then subject to an indepen­dent formal valuation of the business a one-off pay­ment based on the net exit value (valuation of the bu­siness) immediately prior to the announcement of the proposed dam can be made.

Forms are available and the assistance of your ap­propriately qualified adviser is recommended.
Although the forms have been developed by QRAA it is understood they are likely to be generally adopt­ed by QWI.

Whether the approach taken by QWI will in prac­tice over time differ from QRAA remains to be seen. QWI in dealing with business cases is also at the same time dealing with land cases and the two gener­ally interlinked.

Business issues, generating an appropriate set of options and selecting the best Option for you can be
complex.

It is essential that you seek tbe guidance and assis­tance of professional advisers.

Vital to keep all records

IT is important that if you are hold­ing negotiations or discussions with the government in relation to the proposed acquisition of your land that you keep records of your dis­cussions and negotiations.

For example, if you are ap­proached by a government official and told or asked something, you should immediately afterwards write a note noting the date and time of the discussion and a summary of the contents of the discussion.

If you have accurate records of your discussions and points are subsequently called into question then having an accurate written re­cord can tie an enormous advan­tage. Whilst keeping such notes may be something which is foreign or unfamiliar and may at the time seem unimportant it is never too late to start and it can be well worth the effort.

Whilst some people are natural negotiators most people do not have the training and do not have the de­veloped skills necessary to best re­present their own interests. If you are haggling at market over a $10 or $20 item then it doesn’t really mat­ter if you are not a good negotiator.

On the other hand if you are hag­gling over your most valuable pos­session (your home) then if you are not good negotiator you are doing yourself a disservice.

In such a situation you can do yourself a real favour and have a professional adviser assist you in negotiating on your behalf. Not only is this a much less stressful expe­rience as you have someone expe­rienced standing beside you and re­presenting your interests but you will generally achieve a much better outcome for yourself.

Professional advisers who regu­larly negotiate in this area have been down that path before, they know what other outcomes have been achieved, they know the pa­rameters and they have a better ov­erall picture to assist you.

Remember: You don’t get what you deserve — you get what you negotiate.

DNR hands over dam files to State firm

THE Department of Natural Re­sources is now writing to people who have been in negotiations with them advising that, as from the end of October, 2006, they are handing over their files to QWI.

DNR is completing some files where agreements have been reached, but otherwise QWI is tak­ing over including taking over ne­gotiations.

Will there be a difference for those people who are affected? In our view, the answer is “yes”.

DNR is a government depart­ment with the usual constraints and complexities of a government department.

On the other hand QWI is a priv­ate company although wholly owned by the government.

Our observation is that QWI be­ing a smaller outfit is “more nim­ble on its feet” and appears to be more flexible.

It has a job to do with clear pa­rameters and a timeframe within which to do it and appears willing

to negotiate and conclude a deal relatively quickly provided it is within the parameters set by the government as, after all, it is spending public money.

Since Anna Bligh made her pu­blic announcement in Gympie of the availability of assistance for business, QWI now has greater flexibility and scope for incorpo­rating business compensation into its compensation packages for those who are affected within the proposed “ponded area”.

Many people are not aware of how this works and to protect their interests need to obtain profes­sional assistance from their la­wyer or valuer who has experience in this area to ensure that they ob­tain the full compensation to which they are entitled.

To assist people within the pro­posed “ponded area” who have a business component, QWI has now appointed a well-regarded nation­al accounting firm BDO Kendalls to assess submissions made for business compensation.

This accounting firm will make an assessment and then a recom­mendation to QWL

This appointment is very wel­come and if the proposed turna­round times are delivered should result in a much quicker time­frame for settlement of claims which have a business component.

 Tax issues arise because of dam

WE understand that some people have not paid sufficient attention to the capital gains tax impllca­tions of selling their property to either the Government or QWI.

It pays to be aware of capital gains tax implications and we have noticed that QWI, in its most re­cent negotiations, has been specif­ically raising the issue.

In certain circumstances it is useful to be able to use the provi­sions of section 124 - 70 of the In­come Tax assessment Act 1997 to obtain rollover relief from CGT.

If you wish to be able to use the provisions of this section then it makes a difference because in­stead of QWL purchasing the pro­perty the Government is the pur­chaser of the property named on the contract and there are certain additional steps which need to be taken. Generally speaking this takes longer than if QWI is named as the purchasing entity. We have seen cases recently where this has been particularly important to pe­ople because they have entered in­to purchases of replacement pro­perties.

A capital gain may be included in the taxable income of a lan­downer if they dispose of their pro­perty. This applies to property acquired on or after September 20,1985. If the property is your home you would generally be en­titled to an exemption from any capital gain on your house and ad­jacent two hectares.

If you have been advised your property will be compulsorily ac­quired and have acquired or will acquire a replacement asset you may be able to defer any taxable gain if you acquire a replacement asset. For rollover relief to be available under section 124 -70 the entity acquiring your property must be an Australian government agency - the disposal must take place after notice was served on you by or on behalf of the entity - the notice must invite you to nego­tiate with a view to the entity ac­quiring the asset by agreement - the notice must inform you that if negotiations were unsuccessful the asset would be compulsorily acquired by the entity; and the compulsory acquisition would have been under a power of compulsory acquisition conferred by law.

This is why the contract must be with the Government and the not­ice must come from the Govern­ment and not from QWI as QWI is not a government agency - it is a private company wholly owned by the government.

Rollover relief essentially means that the capital gain that would otherwise arise is effective­ly deferred and it can also pre­serve the pre-CGT status of the re­placement asset where relevant.

You are also entitled to a CGT discount if you own the asset for more than 12 months and you may be able to access CGT small-busi­ness concessions (this is a large topic and space does not permit discussion here although we may explore it at a later stage).

The best advice is to ‘seek ad­vice” from a professional adviser.

Settling of procedures and staff

THE last couple of weeks have seen the settling with-in QWI of some of its procedures and staff.

As previously reported, QWI have appointed BDO  Kendalls chartered accountants to assist in dealing with claims within the proposed ponded area which have a business aspect.

This week saw the partner from BDO Kendalls who is dealing with these claims and one of his staff in the Mary Valley visiting some of the businesses which have made claims. This is a welcome step and will hopefully lead to a greater understanding and quick­er processing and settling of claims.

This week and last week have seen the appoint­ment by QWI of new staff who to take over the major­ity of negotiations of claims with landowners. Pre­viously QWI’s Stakeholder and Interface manager had been personally involved in most negotiations.

Law firm Aliens Arthur Robinson in Brisbane pre­viously drafted the conditions of contract and lease-back documents to be offered in relation to settle claims.

Now law ffrm Quinn and Scattini also n Brisbane has been appointed by QWI to attend to preparation of contract and lease documents and acting on QWI’s behalf in settlement of purchase contracts and entry into leaseback’s.

Due to these changes and settling of procedures delays are being experienced which are very frustrat­ing to all concerned. Hopefully procedures can be ironed out in the very near future and the delays can be reduced.

There still in our view needs to be some adjustment of QWI’s documentatiqn. For example — although land owners have been told that they can terminate the lease back to them at any time the documentation submitted so far does not reflect this and it has been requested by us that the documentation be amended to allow for notice of termination at any time by the landholder.

We re-emphasise that people should seek profes­sional assistance to assist them in dealing with the difficult issues the proposed Dam has raised.

How to deal with QWI offers

WE have recently received reports from pe­ople that they are being contacted by per­sons from QWI seeking to discuss their case and in some case make offers.

In one case where there had been fairly extensive contact between the people’s pro­fessional advisers and QWI and DNR the people received a phone call from a person they had never heard of at an inappropriate time making an offer which they thought was a joke. In fact they thought the phone call was a hoax.

We have noticed that with QWI bringing on new staff to interface with people affect­ed by the proposed dam that there have been widely variable and in some cases in­appropriate standards used in interfacing with affected people.

Given the sensitivities and stress which a lot people are suffering as a result of the proposed dam we would think it appro­priate that QWI develop a protocol for deal­ing with affected people. This protocol could include that if people are represented by professional advisers then contact should be made with the professional advis­er and not directly with the person affected.

People have reported to us that they are confused by such direct contact particularly given previous representations made on their behalf by their professional advisers.

These people reported they were suspi­cious that QWI was deliberately trying to undermine their position or obtain an ad­vantage over them which would not be the case If the contact was direct with the pro­ffessional adviser. This suspicion is often un­nerving and does not assist people who al­ready have heightened stress levels.

If you are a person who is directly con­tacted and you have a professional adviser assisting you we would recommend that you politely direct QWI to that adviser and take no further part In the conversation. You may also wish to have your adviser con­firm to QWI that all contact is to be through the professional adviser. This way you can reduce stress levels and know that your claim is being dealt with appropriately.

Compensation payable unclear

THE compensation that QWI is prepared to pay to land owners for disturbance to business being ear­ned on on land appears yet to be settled.

After a broadening of their brief to include com­pensation for business disturbance when dealing with claims by landowners information provided by QWI raised the hopes of some who were in negotia­tion with QWI that there would be fair and reason­able compehsation for disturbance to business.

Essentially a land owner who is operating a busi­ness and will be disturbed by the announcement of proposed dam and acquisition of their property should be put back into the same position that they would have been had the announcement not been made and the property not acquired.

If for example a person has been conducting a busi­ness on land which will be affected by the proposed dam and has been earning a consistent maintainable profit and that consistent maintainable profit is going to be taken away from them then they should be com­pensated for it. They could otherwise have just conti­nued to operate the business and take that profit.

If they have to move to somewhere else and re-es­tablish the business and they will suffer loss because they will have moving and re-establishment costs and it will take some time before they can get up to the same level of profit then they should be compensated for this. They need to be put back in the same position which they would have been had the proposed dam not come along and their property be required for it.

Some of the offers which we have seen recently in respect of businesses operated on land required for the proposed dam are far less than could have rea­sonably been expected.

Whilst it is only early days in respect of resolving such claims and the offers made may well be in­creased we think that QWI should always keep in mind the fundamental principle that people need to be put back into the same position which they would have been had the proposed dam not been announced and properties required for acquisition.

Changes roll out as process drags on

The changes keep happening sometimes it seems the lon­ger the proposed dam process goes on the more the changes.

One of the changes which has recently been highlighted is how QWI is now going to deal with landowners who have a bu­siness aspect operating on their land.

Previously some people had been told by QWI that QWI would acquire their business and then lease the business back to them. To some people this was an attractive option (af­er they had thought the whole thing through).

Following this advice expectations were raised and a mindset put in place. QWI has now taken proffessional accounting advice and it is understood that its board has now resolved to follow the procedures under the Acqui­sition of Land Act in relation to land being acquired which has a business aspect.

This has meant that in one case where the land owner was told that the land and business would be acquired and they could lease the business back that now there will be no offer for the business as the business is in a different entity to the lan­downer.

It is quite common for people to arrange their affairs so that they have land in one entity such as their own name and bu­siness in another entity such as a company.

It often makes good sense to have a business operating through a company entity for purposes such as liability, taxa­tion, superannuation and flexi­bility.

In such an arrangement the land owner is usually the share­holder and director of the com­pany. For legal purposes whilst they are distinct legal entities in reality they are related entities and the people running them re­gard them as one asset.

The approach and view now being taken by QWI in this type of matter appears to be that un­der the Acquisition of Land Act procedures there must be a suf­ficient connection between the land owner and the business. They appear to take the view that in the example given above there was not a sufficient connection between the two and therefore compensation for the business is not payable.

The above example illustrates that things are now becoming much more technical and pro­fessional assistance is required. in resolving issues of this type.

Partial purchase — is it currently achievable?

As things move on it is now becoming more common for QWI to wish to purchase only part of people’s property and for people to only want to sell part of their property.

This week illustrated some of the difficulties which exist in this area. The people involved only wished to sell part of their property and that was all that QWI wished to really acquire (although they were willing to acquire the whole property). The problem was that because the acquisition is not under the Acquisition of Land Act — legislation for this type of scenario does not currently exist and the environmental impact statement (EIS) has not yet been completed and so for such a subdivision to occur it has to go through the normal processes of applying to the local government involved — in this case the Cooloola Shire Council .

Such a subdivision application has to be assessed against Council’s Planning Scheme. If for example the planning scheme does not allow subdivision of less than 100 ha in the area and given councils stated opposition to the dam then it is unlikely that the subdivision will be approved (as the area involved was much less than 100 ha). Without such a subdivision the land owner will find it difficult to sell and QWI difficult to purchase the portion of land they require.

Of course this could all change if the government amends its legislation, once the EIS has been passed or Council amends its Planning Scheme. Given the current situation is there a way around this?

One option being considered is the acquisition of the whole property by QWI and then either a sale back to the owner of the part the owner wishes to keep or alternatively the contract not be completed until the appropriate legislative framework or subdivision is able to be approved. The sale of the whole the property of course raises potential capital gains tax issues.

This situation is difficult for both the people who wish to sell part of their land and get the stress of uncertainty dealt with so that they can get on with their lives and also for QWI in attempting to deal with the timely acquisition of property. Will a solution be worked out with Council amending its town plan? Will the government amend legislation?

A solution enabling timely completion of matters for those involved needs to be found.

Should you opt for partial purchase - now, later or compulsory aquisition? 

LAST week we raised some of the difficulties which currently exist in relation to partial purchase.

At this stage legislation is not in place, nor in relation to cer­tain minimum area of subdivi­sion are Council planning scheme provisions in place, to allow ease of partial acquisition by QWI.

Some people face a dilemma where QWI really only wishes to purchase part of land as opposed to whole of land.

This problem can be greater where the land is only in stage two as opposed to stage one of the project.

Whilst QWI is prepared to pur­chase the whole of land it seems that where land is in stage two and they really only want part of the land that they may take a harder negotiating position than they would likely have if the land
was in stage one.

Various problems can exist with partial acquisitions partic­ularly for example if people are left with a new major road right next to their front door whereas previously they had peace and quiet which is the reason they lived in the property in the first place.

In this case it is reasonable that the people would want to sell the whole of the land because ultimately even though they would be left with their house if the partial acquisition proceed­ed, it would be very close to a new road with the possibility of loss of amenity through relatively high traffic volumes and noise.

With the perceived harder negotiation position by QWI in such circumstances a number of factors need to be considered. If people don’t conclude an agree­ment now then when QWI is able to easily purchase only part of the property when the legisla­tion and planning instruments are put in place the people will be left with a road right outside their front door and a loss of amenity.

When the legislation and plan­ning instruments are in place then it is likely that QWI will In respect of properties which they have fully purchased but which they only require part of will be subdivided and the parts of the property not required will be put back on the market.

This will possibly create a large number of properties com­ing onto the market.

With the laws of demand and supply applying it is worth con­sidering the effect on people who have not sold fully to QWI and only part of their property is required.

Is it likely that with these new subdivided properties coming back onto the market that prices will drop thereby affecting com­pensation to be paid to people?

If people wait and their prop­erty is ultimately taken by com­pulsory acquisitien and sur­rounding prices have dropped would they be in a worse position than if they had sold now?

Should they word into their sale contract a right to buy back the part of the property not required by QWI?

Considerable thought needs to be given to partial acquisition situatIons to ensure your best long-term outcome.

QWI: no opposing valuation, no negotiation

NO opposing valuation, no negotia­tion. This seems to be the latest posi­tion from QWI.

It appears that they have recently taken a decision to adopt this ap­proach because of the way various valuers have couched the descrip­tion of their valuations.

If this position of “no opposing val­uation - no negotiation”, is correct then it raises some interesting ques­tions.

To date offers have been made by QWI which have not been condition­al upon the recipient of the offer ob­taining their own valuation. If peo­ple have informed themselves (by various means) of the value of their property then they have been able to accept the offer without having to go and get a formal independent valua­tion of their own. This is the normal position in any commercial negotia­tion. If you like an offer, you can ac­cept it.

There have been many people who have received an offer which they thought was fair and then have ac­cepted the offer. There should be no reason why this usual position could not continue. Having said that, in our view it is always prudent for a person who is negotiating to sell their property to QWI to obtain an independent valuation. That way you can have peace ot mind that you are not selling yourself short.

One of the real difficulties which people say they are encountering is the ability to buy replacement pro­perty of a similar type in the same district they are residing in for the money which they are being offered. This is a theme which repeats itself over and over again.

This brings us back to how va­luers prepare their valuations. If pe­ople whose land is required are not able to acquire a similar property in the same district for the same mo­ney they have been paid then some­thing unfair is occurring. Instead of just relying upon reference to pre­vious sales (which can be outdated and often difficult to match) and not accepting reference to prices QWI has paid, QWI should allow recogni­tion of the new market created by them which they have done by “standing in the market place” and acquiring properties at the prices they have negotiated.

The primary principle that affect­ed parties should be placed in as good a position as they currently en­joy in money terms after the acquisi­tion of the land should always be re­membered in every acquisition.

Capital Gains Tax (“CGT”) is currently a very topical issue.

QWI last week wrote to a number of land owners reaffirming that the land purchase process associated with the proposed Traveston Crossing Dam is voluntary and aimed at assisting affected landholders to obtain early resolution of their position should they wish to do so.

The letter confirms that the issue of CGT is complex and ultimately a matter for the Australian Tax Office to decide and advises that QWI is working with the Queensland and Federal governments to put in place a mechanism to provide for CGT rollover relief, where eligible.

It advises that there are a number of steps involved in establishing that mechanism and the process is well advanced and land owners will be advised immediately the process is in place.

It restates the importance of landholders obtaining their own professional advice on the CGT issues that will apply to their situation and QWI is prepared to meet the reasonable and related costs of obtaining this advice.

There may be situations where some landholders may not be eligible for CGT relief depending upon:
· the date on which landholders agreed to sell their land;
· whether intended leaseback of the purchase property by the vendor exceeds two years;
· whether only a small part of the property is actually affected by the project;
· the nature of the interest in the land acquired;
· the time when landholders acquire a replacement asset as a result of agreeing to sell their land;
· to what use landholders propose putting that replacement asset.

What is the letter really saying? We think it raises some very important points and issues:
· the CGT rollover relief mechanisms (from a compulsory acquisition point of view for this project) are not currently in place — although it is hoped that they soon will be
· land owners need to be very aware of and careful about CGT issues which may affect them if they choose to sell their land to QWI (or another government entity)
· it is imperative that land owners seek professional advice about CGT issues
· delays are currently and will continue to be encountered where landowners seek a notice under section 124 — 70(1) of the Income Tax Assessment Act 1997 so that they can obtain rollover relief under that section
· rollover relief under the small-business CGT concessions are currently available and eg a lot of farmers who have active assets may still be a better option than the compulsory acquisition relief

We have spoken to a number of prominent local accountants and one issue which QWI has raised which is causing concern is whether rollover relief applies where the leaseback exceeds two years (and the land owner has acquired a replacement property within the timeframe required by the Act). The view of the accountants is that relief would still appear to apply. In view of the fact that QWI has raised this issue (presumably upon advice received) this issue should be clarified as soon as possible.

The importance of obtaining your own professional advice as to CGT cannot be overstated.

“Call for State Government to speed up resolution of Capital Gains Tax “Rollover Relief” mechanism.”

Many people have agreed with QWI to sell their land and have requested a notice as required under section 124-70 of the Income Tax Assessment Act 1997 to enable them to seek rollover relief from capital gains tax. Generally these people are unable to take advantage of the rollover relief under the small business capital gains tax concessions.

Where a notice is to be given to provide relief under the section referred to above the Purchaser will not be QWI but will be the government.

People who have requested such a notice are still waiting for a contract even though they might have agreed to sell some time ago. This is causing hardship particularly where they have entered into a contract to purchase another property in replacement of the property they are selling.

People in this situation are becoming anxious as are the other people who have entered into contracts to sell to them. Nerves are becoming frayed.

Why does this situation exist?

The reason this situation exists is because the mechanism for such CGT relief in respect of this project is still not in place.

The State Government has yet to pass a regulation to provide for the compulsory acquisition of properties for the Traveston Crossing Dam project.

We understand that the regulation to be made under the appropriate legislation ( likely to be the State Development and Public Works Organisation Act) is not expected until at least the second week of March 2007. This will provide a mechanism for the Co-Ordinator-General to acquire property similar to the Acquisition of Land Act. The Co-Ordinator-General will then have to put in place the necessary delegations for the relevant notices to be issued under the determined legislation and issue the notices that clients need for rollover relief for CGT under section 124-70 of the Income Tax Assessment Act.

We will keep you informed of further information as it becomes available.

This week sees the imminent release by Main Roads of the final corridor for the Bruce Highway upgrade.

Some people are affected by both the proposed Traveston dam project and the Bruce Highway upgrade.

We understand that as far as possible where the proposed new highway is to be built near the land required for the proposed dam project that the government has sought to put the highway corridor within the dam buffer area. The idea being to minimise impact to land holders who would otherwise be affected.

Some people are separately affected by both the proposed new highway and the proposed new dam (where the proposed highway corridor is not within the dam buffer area).

Who is handling compensation claims in these situations?

Generally, it is our experience that QWI is handling compensation claims where land is affected by both the proposed dam and the proposed highway. Main roads is handling land which is only affected by be proposed highway and QWI is handling claims where land is affected separately by the proposed dam and proposed highway.

Main Roads have been actively dealing with hardship claims in relation to the proposed new highway.

It is understood that once the final corridor for the highway upgrade is announced that Main Roads will become much more active in dealing with claims and the parameters for dealing with hardship claims will be widened.

Although there are differences in dealing with a dam compensation compared to a highway compensation case the procedures and principles are generally similar.

In either case you should seek the assistance of professional advisers to assist you in dealing with your claim. The reasonable cost of doing so is in almost all cases paid for by the authority wishing to acquire your land.

 
A point of difference between the current regime for dam compensation and the current regime for people directly affected by the proposed new Main Road highway corridor is that people directly affected by the proposed dam are compensated now whether or not they are suffering hardship.

By way of contrast, if your land is directly affected by the proposed new Main Road highway corridor and you are not able to demonstrate hardship then you (unless things change) will not be compensated until Federal money is available and designs are completed which may not be until many years in to the future.

Having seen the hardship stress and mental anguish which many people have suffered as a result of the proposed new Traveston Dam it would be hoped that people who now know that they will be directly affected by the proposed new Main Road highway corridor do not have to suffer in the same way.

For these people it would be hoped that if they are directly affected by the proposed new Main Road highway corridor them if they wanted to sell now then whether or not they are able to demonstrate hardship they could be compensated now.

If this is not achievable then the next best thing would be to widen and loosen the requirements for demonstrating hardship so that if people wish to get on with their lives then they can.

Another point of difference is that Main Roads representatives at their display in Gympie advised that they would not be doing partial acquisitions at this stage. If people wished to sell and could demonstrate hardship then they would have to sell the whole of their property and not just part. In respect of the proposed Traveston Dam QWI is prepared to purchase part of people’s property if that is all they wish to sell and that is all that is required by QWI (even though at this stage be necessary legislation to achieve this is not in place).

To some people the option to be able to sell part of their property as opposed to the whole is a very important thing.

Main Roads advice that they will not be compensating people who are not directly within the proposed new highway corridor must be very difficult for those people who are very close to be corridor but are not directly underneath its footprint and who believe that they will be adversely affected. Many people are now coming forward stating very legitimate cases as to how and why they will be affected even though they are not directly underneath the proposed new corridor’s footprint.

Because there is so much to know and so many nuances in the compensation area you should always seek the advice of a professional adviser

Highway Bypass

Similar frustration, disillusionment, anger and angst is now seen to be engulfing many people who are affected by the proposed new highway corridor as was seen to affect people affected by the proposed Traveston Dam.

In some ways, there is a greater feeling of injustice particularly by people who are affected by the proposed new highway corridor but whose property is not directly underneath the footprint of the proposed new highway corridor.

If a person’s property is directly underneath the footprint of the proposed highway corridor, the Government is prepared to pay compensation. In hardship cases – now – in other cases – when funding is available and design complete.

Many people have properties which are in close proximity to the proposed highway corridor but at this stage, according to the Government, they will receive no compensation.

Their property could be just a metre outside the corridor and yet they will receive no compensation, even though their property will be effectively de-valued by having a major highway located right next to it.

It will become harder for people to sell these properties and if they do manage to sell, then no doubt the price will be less than they would otherwise achieve if the property were not to be affected by such a corridor.

If they do not wish to sell, then the amenity of their property would be affected by virtue of noise, dislocation etc.

Whilst it is understandable that the Government must draw a line somewhere as to compensation, one cannot feel anything but sympathy for people who will be affected by the proposed new highway corridor but will receive no compensation.

Will the Government change its mind and provide compensation to those people who are not directly underneath the footprint of the proposed corridor? Or will these people continue to suffer and receive no compensation?

Lease-back of property from QWI

If you are considering a lease-back of property from QWI, then you should read the fine print of the lease and understand what you are agreeing to.

The lease-back terms being offered are generous particularly if you are in Stage 1 of the proposed dam. In this case, the rent is generally $1000.00 per annum.

The question is – what other things do you have to pay for? Many people who are entering into lease-backs generally expect that they would be treated as a normal tenant under a normal Residential Tenancies Act type situation.

This is not entirely the case.

Under a general residential tenancy, the tenant does not pay the rates. Under a QWI lease-back – they do.

Under a general residential tenancy, the tenant does not pay the insurance on the residential buildings. Under a QWI lease-back – tenants are generally requested to pay such insurance.

Whilst the rates situation is generally explained during or at the conclusion of negotiations, the requirement to pay insurance has not been to date. We have raised this with QWI and understand that in future their negotiators will now specifically raise the question of the requirement that the tenant pay insurance on the residential improvements – e.g. the house.

Public risk insurance and workers’ compensation insurance (if applicable) are also required to be taken out by the tenant under QWI leases whereas they are not so required under general residential tenancies.

Make sure there is an early termination provision in the lease. If you wish to get out of the lease early (even though the rental terms may be generous), a clause should be inserted allowing such early termination. This has not been a standard feature of QWI leases so far and has had to be specifically requested.

There are also conditions relating to use of herbicides, pesticides and agricultural management practices.

You should seek professional advice on the meaning and interpretation of any lease-back offered to you.

Capital gains tax ruling welcomed 

FINALLY! At last! A capital gains tax rollover relief — ruling has been issued by the tax office in respect of acquisi­tion of land for the proposed Traveston Dam.

Class Ruling CR 2007/29 has just been issued. It is a public ruling expressing the commissioner’s opinion about the way section 124 -70(1)(a) of the Income Tax Assessment Act 1997 applies to owners of freehold land impacted by the proposed Traveston Dam who sell their interest in land to QWL following the receipt of a complying notice or have their interest in land compulsorily acquired.

The ruling covers a single topic being the satisfaction of the threshold condi­tions for the claim of compulsory acqui­sition rollover relief in section 124 -70(1) for the disposal of interest in land.

The ruling does not cover the income tax and capital gains tax consequences of the creation or taking by compulsory acquisition process of a water storage or access easement, or the consequenc­es of any additional payments received from QWI in relation to the sale under notice (such as allowances for distur­bance costs and stamp duties to be in­curred on the purchase of a replace­ment property).

The ruling applies from 1 July 2006 to 3 June 2008 — and continues to apply after this period in respect of persons who entered into arrangements during the term of the ruling.

The ruling clarifies that the thresh­old conditions for CGT rollover relief under the section referred to above are satisfied where an affected land owner disposes of their interest in land to QWI under an agreement entered into by the affected land owner after having re­ceived a land purchase notice in the ap­proved form.

Why is the ruling so important?

It is so important because it means that QWI can issue notices and acquire land anti capital gains tax rollover relief will apply rather then the convoluted pro­cess of having state government through one of its departments issue a notice and acquire the land. It means that the whole process can be speeded up and people wlll not have to incur the lengthy delays which would otherwise apply.

It also means that people who have requested the rollover relief notice and who have been patiently waiting (some for many months) will now be able to proceed forward and have their proper­ty purchased (after a complying notice
has been issued) by QWI and know that at least the threshold issue of capital gains tax rollover relief is secure.

Capital gains tax is a complex issue and people should always consult their professional adviser. QWI will pay your adviser’s reasonable fees.

Whose lifestyle block is it anyway?

CARE needs to be taken when in­terpreting a QWI valuation so that the basis of that valuation is un­derstood. The basis of the valua­tion should always be “highest and best use”.

Likewise, people need to take care so that they understand the independent valuation prepared for them.

“Lifestyle blocks” can see a dif­fering approach from different va­luers.

An example which one of us saw recently illustrates the different approaches.

A “lifestyle block” may appear to be similar to a farm in that It is usually a large block capable of, for example, running cattle and in many cases such blocks run cattle but not on a truly commercial ba­sis. People choose to live on these blocks for the “lifestyle”. They can often have attractive features such as trees, perhaps some rainforest, views, seclusion, etc. People select and buy these blocks because of the ambiance.

In the case in point QWI’s valuer had valued the property as if it were a farm. So many dollars per hectare were allocated to what he considered to be good quality agri­cultural land and a lesser number of dollars per hectare were allocat­ed to what he considered to be in­ferior or less valuable land. The block in question had good quality agricultural land at the front but rose to steep wooded country at the back.

By way of contrast, the person’s independent valuer viewed the block as a “lifestyle block” and adopted one figure across the en­tire property.

The result? Two very different valuations.

The independent valuer argued that the land in question was a “lif­estyle block” which people wish­ing to purchase would buy as a “whole package” having regard to the ambiance etc.

In such a situation the lawyers as negotiators have to “bridge the gap” and seek to achieve an outcome satisfactory to the land hol­der.

People need to be aware of the differing approaches which can be taken by valuers and the differing arguments which need to be put up to successfully and satisfactori­ly negotiate an outcome for the sale of their property that meets their expectations.

Fine tooth comb needed to check contract details

BEWARE the detail! As they say, “The devil is in the detail!”

Land owners who have negotiated deals with QWI and have received contracts, special conditions and leases from QWI need to go through those documents with a fine tooth comb to ensure that what they have negotiated is accurately reflected and to be aware of what it is exactly that they are signing up to.

Now that the Tax Office ruling in relation to capital gains tax has been released, there has recently been a surge in the number of contracts and leases which have been released in respect of those people who have been waiting for the CGT rollover re­lief ruling to come out.

QWI are using two Brisbane law firms to act (in their behalf in rela­tion to the preparation of the con­tracts and leases.

Whilst the confracts and leases are similar we are finding that there are some variations between the two firms and even within one of the firms.

People need to pay careful atten­tion to Important points including:

• Disturbance payment

• Buy-back provisions

• Term of lease

• Early termination provision for the benefit of the tenant 

• Payment of rates and outgoings

• Insurance on improvements

• Repairs and maintenance

• Continuation of llability in the event of early termination by default

• Permitted use

• Sub-letting

People should have their lawyer check over the contract, special con­ditions and leases’as they are impor­tant legal documents which can gov­ern your legal position to well into the future (in a lot of cases, until 2035).

People should not be out of pocket for such advice as QWI pays all rea­sonable legal fees.

Timing is everything!

This is particularly the case in relation to the issues of capital gains tax and superannuation.  These issues are very much alive for people at the moment with the impending approach of the end of the financial year.

In one case, the land owner had one block of land which was pre-CGT (i.e. purchased before 20 September 1985) and one block of land which was post-CGT. 

In many cases, people can achieve better CGT outcomes using the small business CGT rules as opposed to using compulsory acquisition CGT rollover relief. 

The CGT small business rules do not apply to businesses over $5 million. 

In the case referred to above, the business (which included the land) was over $5 million.  In the case under discussion, the land owner was able to sell to QWI the pre-CGT land and settle it before 30 June 2007 and then in the new financial year will be able to take advantage of the more favourable CGT small business rules by effecting the sale of the post-CGT assets in the new financial year. 

Timing is also important for people who are wishing to take advantage of the ability to put in up to $1 million worth of superannuation by 30 June 2007.  New rules apply from 1 July 2007. 

If people are wishing to take advantage of timing in respect of either CGT or super and need to have some things completed by 30 June 2007 and have not yet either started their negotiations with QWI or completed them, then they need to act as soon as possible to have some chance of being able to meet the deadline. 

CGT and super can be complex areas and people should seek competent accounting and financial planning advice to ensure that their best interests are met. 

Backlog as June 30 nears

WITH June 30 and the end of the financial year now two weeks away some people who have negotiated settlement are now feeling under extreme stress in terms of trying to get their settlements through before the end of the financial year.

Some people have deadlines to meet by having money contributed to superannua­tion before the rules change on July 1.

There is a backlog of cases where people have reached an agreement but are waiting for QWI’s lawyers to produce the paperwork and where the paperwork has been pro­duced but settlement has not yet occurred and may not occur by the required date.

When the paperwork is received from QWI’s lawyers it can be literally inches thick as it includes the Contract, Special Condi­tions and often multiple Leases.

People who are in the situation described can assist themselves by paying attention to their side of the equation in terms of what they need to do to enable settlement to pro­ceed, including:

~ water licences;

~ interim water allocation;

~ mortgagees releases;

~ mortgagee’s consent to the registration of plan;

~ execution of survey plan;

~ having available original certificate of title;

~ easement agreements;

~ agistment agreements;

~ tenancy agreements;

~ unregistered encumbrances;

~ special leases; and

~ leases.

Whilst QWI is responsible for the primary preparation of the documentation and ensur­ing that the documentation accurately re­flects what has been negotiated the land holder can also assist to conclude the tran­saction by having available those items which need to be produced to enable settle­ment to occur within the expected time-frames.

To sell or not to sell - balancing the options 

IT’S a balancing act!

In deciding whether to sell at all, sell now or wait and sell at a later time involves balancing va­rious factors.

We are aware that there are some in the community who are advocating that people who want to sell should not sell now but should wait until much later and they will achieve a better sale price.

Is this a sound viewpoint? We do not think that this is ne­cessarily a sound viewpoint.

With the ability now to ac­quire only those parts of proper­ties that it needs QWI is no longer in the position of having to buy whole properties.

In cases coming through now we have seen it is very easy for them to bypass the whole Coun­cil and IPA process in subdivid­ing properties.

PERHAPS if the land involved is es­sential for Stage One of the proposed dam then QWI may be more keen to purchase it. People should not ho­wever be lulled in to a false sense of security that the longer they wait the more they’ll get.

Ultimately the compulsory acqui­sition of land process can be used and people may well get less under that process. In deciding whether pe­ople should sell now, at a future time or at all they could consider balanc­ing some of the following items:

• Age and Health;
• Social Security Status;
• Ability to cope with uncertainty;
• Ability to borrow;
• CGT;
• Cost of replacement property;
• Future plans;
• Family;
• Future business aspirations;.
• Financial circumstances;
• Whether they think the pro­posed dam will gain approval and will actually proceed.

People should be wary of relying only on “bush telegraph” or “bush la­wyer” advice and are well advised to discuss their individual circumstanc­es views and fears with their profes­sional advisor.

QWI in compo contradiction 

THE difference in the way that QWI treats land compensation claims and business compensa­tion claims is certainly a contrast.

Over time, the contrast has become more marked. The way that land compensation claims are dealt with has now become fairly settled and practitioners who are heavily involved in this area can usually predict with a fair degree of accuracy the likely outcome or range of outcomes which can be achieved in a land compensation case.

As a very large number of cases have now been agreed and in many cases settled and completed the “ground rules” and “precedents” have been set. Of course each case is unique and has a diffe­rent set of facts and circumstances. Negotiations must always take into consideration the unique features of each case.

There are always new and novel questions and aspects which can arise but generally speaking the procedures, mechanisms and parameters for land compensation claims are now well known and generally predictable.

Can the same be said of business compensa­tion claims within the proposed “ponded area”?

The answer is generally “no”. Why is this?

Partly because business claims by their very nature can be far more unique and variable than land claims. Each business can he radically diffe­rent. There is far less uniformity Things are more difficult to measure and predict. Another part of the reason is the way that QWI deals with busi­ness compensation claims. In some business conppensation claims it appeal’s to be QWI’s prefe­rence to relocate the business rather than merely pay out the owner by way of compensation.

Whilst it is no doubt QWI’s view that such relo­cation will assist in maintaining the “social fa­bric” of the affected communities and will help to minimise disruption to the economy of the Mary Valley, this is often not the preferred option for the affected business owner. Such an owner may prefer to just sell up and get out. This is often just a personal choice and preference even though if the business were relocated and continued it may enjoy some economic benefit from the proposed economic activities which will result if the proposed Dam proceeds.

What should take precedence? The right of the business owner to be compensated and to choose how they get on with their life or QWI’s preferred vision?

 25 May 2007

On the 14th March 2007 Minister Anna Bligh introduced into the Parliament the Community Ambulance Cover and other Acts Amendment Bill 2007 which was assented to on 23 April 2007 and has now become law.

The Act’s main provisions commence on 1 July 2007 and in Part 8 amendments are made to the Integrated Planning Act 1997 (“IPA”).

Under IPA if people wish to reconfigure or subdivide land a plan is required which requires the approval of Council before it can be registered in the Titles Office.

IPA has been amended so that in relation to plans of subdivision it no longer applies to the acquisition of land for a water infrastructure facility. 

IPA has also been amended so that acquisition of land for a water infrastructure facility is no longer assessable development and is exempt from assessment against a Planning Scheme.

“Water infrastructure facility” is defined to mean a measure, outcome, works or anything else that Queensland Water Infrastructure Pty Ltd is directed to carry out or achieve under –

(a)     the State Development and Public Works Organisation Act 1971; or
(b)     the Water Act 2000.

What does this mean for people who are affected by the proposed Traveston Dam?

Effectively it means that QWI can bypass Cooloola Shire Council or the other Councils involved and register subdivision plans which accord with whatever they need to do to build the proposed dam and associated road and other infrastructure.

Will this change the way that QWI negotiates purchase of land?   We think so.

Why would they spend a great deal of money buying the whole of a property when they could spend a great deal less and only purchase part of it if that is all they require?

Professional advice is essential to help guide people through the process.

9 JUN 2007 

With QWI now having, on our understanding, agreed to acquire more than 54% of properties they require for the proposed Traveston Crossing Dam, has their attitude to negotiation changed? 

Are QWI becoming harder in the way they approach and conduct negotiations?

We are not sure whether QWI has acquired most of the key properties which they require for Stage 1 of the proposed dam, but they have certainly agreed to acquire a substantial number of key properties. 

With the number of properties acquired and the new legislation coming into effect on 1 July allowing easy acquisition of part of people’s property (notwithstanding the provisions of the relevant Local Council’s Town Planning Scheme), it may be that there has been a change in attitude towards negotiation and payment of compensation. 

We think it is a little too early to tell, however, there are now increasing references being made to “compulsory acquisition” in negotiation discussions.

With the new power of being able to take part only of property the bargaining power of property owners has decreased. 

In our view (based on our previous experience with compulsory acquisition), authorities or companies which are able to use compulsory acquisition powers, generally speaking, prefer to acquire by agreement rather than the process set out in the Acquisition of Land Act 1967 and the State Development and Public Works Organisation Act 1971.

The reason generally is because it is quicker, mostly less expensive (because it avoids the potential cost of litigation in the Land Court) and because it causes less disenfranchisement and dissatisfaction.  People who are dissatisfied will generally complain about it loud and long and, of course, Governments at all levels prefer to avoid bad publicity and criticism. 

 It may be that QWI is taking a harder attitude to Stage 2 land because, of course, it is not as important (at this stage given the length of time before Stage 2 land is likely to be required) as the acquisition of proposed Stage 1 land which has a much closer time frame for requirement.  Again, it is a little too early to tell.

Despite the number of properties acquired and the new powers which it has we believe that QWI should continue to abide by commitment as stated in correspondence by it to various landholders that it “is committed to engaging with landholders in an open and honest fashion and seeks to minimise the impact on those affected”. It’s policy states that it wishes to undertake the purchase negotiations fairly and openly.  Nothing less should be expected.

Affected landholders should always engage professional assistance to assist them through what can be a very difficult period in their life.

Pre-Contract inspections and record taking – a new development.

QWI is now arranging for one of its property representatives and its managing agent representative to visit landowners’ property after negotiations have successfully concluded to gather information about the property.

Previously, things went straight to contract after conclusion of successful negotiations and presumably QWI gathered the information it required from the information on the contract as well as information it already had.

We understand the information now being gathered includes, depending on the circumstances:-

•     photographs
•     pumps
•     state of repair
•   building features
•     other improvements

The onsite meeting no doubt also allows the representatives to get to know the people if they are going to rent back.

Leases prepared by QWI’s legal representatives have provided that the tenant is required in the event of a lease-back to hand the property back in the same condition it was at the commencement of the lease.  Fast forward to 2035 (if your lease is for that long) and imagine how likely it will be that the property improvements, e.g. house and shed, will be in the same condition they are in in 2007 (some 28 years earlier) – how did your house look 28 years ago in 1979?).

Perhaps this is where QWI’s photographs and record-taking will be of assistance to them in dealing with issues which might arise during or at the end of the lease-back.

In our view, landowners should:-

•     request an amendment to QWI’s standard lease to allow for “fair wear and tear” as an exception to the requirement that the property be in the same condition as it was at the commencement of the lease;
•     request copies of photographs taken by QWI;
•    request a copy of QWI’s/Agent’s condition report;
•     take their own photographs – comprehensive;
•    prepare their own condition notes.

People are well advised to seek professional advice to assist them through this difficult period.