Motions

Probate Fees

The Hon. M.C. PARNELL (16:42): I move:

That regulations under the Supreme Court Act 1935 in relation to probate fees, made on 4 February 2016 and laid on the table of this council on 9 February 2016, be disallowed.

I have brought this motion to the council at the request of the Law Society of South Australia. I understand that the Law Society wrote to many, if not all, members of the Legislative Council on 16 February urging us to take this action. I will put on the record the brief letter provided by the Law Society, which I think sums up succinctly why these regulations ought to be disallowed. The letter commences:

The Law Society requests that the Honourable Members of the Legislative Council vote to disallow the Supreme Court (Probate Fees) Variation Regulations 2016 pursuant to section 105a of the Subordinate Legislation Act 1978.

The Society respectfully submits that the operation of the regulations is unreasonable and unjust.

The tiered system proposed to be introduced is based on the gross value of the deceased's estate rather than the net value.

The fee increase for estates valued between $500,000 and $1 million is almost double the existing fee. For estates worth more than $1 million the fee is almost tripled.

Valuing the fee based on the gross value of a deceased estate is unfair to surviving family members because such a valuation misrepresents the economic basis on which the estate is held.

A majority of the population have a large mortgage.

Take, for example, a couple who live in a house valued at $600,000 which is registered in one of their names and is 90 per cent mortgaged. The mortgage liability will not be taken into account when assessing the probate filing fee. There may not even be ready cash available for a $2,000 filing fee, especially in the case of a young couple. If the net value of the estate was used in calculating the fee, the fee would be only $750.

Further concerns are raised having regard to the large number of farmers who personally own their properties. Frequently these holdings are in the name of one family member, who has inherited the family farm from a parent. The gross value will often exceed $1 million but there will likely be many liabilities attached to the property. If the farmer dies, his or her family will be faced with a $3,000 probate filing fee, which may cause considerable hardship to the surviving family.

In many cases, the proposed executor of the deceased's estate is required to fund the cost of the application before they have access to estate funds to seek reimbursement from the estate.

The letter is signed by David Caruso, President of the Law Society of South Australia. I think that sums up why the Law Society believes that the regulations are unjust and unfair, but I would like to put a bit more detail on the record. The existing fees for attaining a grant of probate are set out in the Supreme Court regulations, and in terms of the lodgement fee it is a flat fee. It is $1,114. There is also a range of fees that apply to other services that might be required of the court, but it is the lodgement fee we are talking about here; $1,114.

The first thing the new regulations do is introduce this concept of gross value, which is defined as the value of an estate without deduction for debts, encumbrances or funeral expenses. The regulations then go on to establish a tiered structure for the payment of lodgement fees. I will say that I do not necessarily have a problem with a tiered structure—I actually think it is quite reasonable that valuable estates might be subject to a higher lodgement fee—but when that fee is based on the gross value of the estate then I think gross injustice can result.

The new scale of fees provides that for small estates, under $200,000, the fee will be $750. That is cheaper than the current fee and that is to be welcomed; for very small estates the lodgement fee will go down. For estates worth between $200,000 and $500,000 the fee is $1,500. That is an increase. For estates worth between $500,000 and $1 million the lodgement fee will be $2,000 and for estates over $1 million it will be $3,000.

I guess we can discuss the relative merits of a tiered structure—like I said, the Greens are not necessarily opposed to that—but what we are strongly opposed to is it being based on the gross value of assets because, as the Law Society pointed out in its letter, many of these estates are heavily encumbered with mortgages or other debts. If we were to apply the watercooler test to this issue, I think most people would agree that when working out what you are worth at your death the calculation would be what you own less what you owe. That is the net value of your assets, and most people would accept that. Otherwise, I think the outcome is unjust.

Putting this on the table now basically gives the Legislative Council the option of telling the government to go back to the drawing board with these regulations. As I said, the primary concern I have is in relation to the gross value of estates being used rather than the net value. I know that the Law Society, in its earlier communication with the Attorney-General, was worried about what might happen if people underestimated or overestimated the value of the estate, but I think that has been dealt with in the regulations. There is the provision that if the Registrar of Probates determines that you have not valued it properly they can either ask you for more or they can give you a discount if you have overdone it, and I think that is a sensible provision.

Also, I understand that the Legislative Review Committee will be having a look at these regulations as well, but what I would stress for the council is the importance of dealing with this quickly. So, in the absence of any pressing reason to the contrary, I will be asking for this to come to a vote on the next Wednesday of sitting. The reason for that is that these regulations come into operation at the end of the month on 28 February, so they come into operation next week.

Whilst it is not possible to urge people to defer their death until this matter is resolved, as nice as it would be to do that, I think there will be a period of uncertainty where solicitors, for example, or executors who are lodging applications for the grant of probate, will have this uncertainty about whether it is the old fees or the new fees.

Certainly we know that from Sunday these new fees will apply but, given the indications that I have had so far from members, I think there is a good chance these regulations will be disallowed, in which case there may well be cause for lawyers to advise their clients that maybe holding off lodging an application for a grant of probate might be in order because, if these regulations are disallowed, the fee drops back to $1,114 the moment that the Legislative Council makes that resolution.

My plea to the government is to take the opportunity now to pull these regulations immediately, to revert to the status quo while they go back to the drawing board and come up with a system of fees and charges that is fair. By 'fair' I mean fees that properly reflect the estates of people who have died and do not artificially inflate the value of an estate by pretending that the 90 per cent of your house that might be owned by your bank is in fact yours. We know that is not true. It does not pass the water cooler test.

With those words, I urge all honourable members to support this motion. I will take some advice on whether there is any reason not to bring it to a vote on the next Wednesday of sitting, but in the absence of any such advice I will be sending a note out to members urging that course of action. I urge all honourable members to support the motion and disallow these regulations.

Debate adjourned on motion of Hon. A.L. McLachlan.