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|  Rent Relief  

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<updated 13 April 2020>

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On 7 April 2020, the government announced a rent relief package for commercial tenants as a mandatory code of conduct . This is expected to be legislated by each state and territory governments (therefore, there may be some changes) but should come into effect from 3 April and should run for the period the JobKeeper program remains operational.

The code is set to cover commercial tenancies and will be eligible for,

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• SME tenants with an annual turnover of up to $50 million 　

• SME tenants must also qualify for the government’s JobKeeper program (turnover reduction of greater than 30%) 

 

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The principles of the code are as follows,

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• Where it can, rent should continue to be paid, and where there is reduction in business turnover, both tenants and landlords should negotiate a mutually agreed outcome

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• Landlords will be required to reduce rent proportionate to the sales reduction in the tenant’s business caused by the coronavirus pandemic through a combination of,

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• Rent Waivers  (must be more than 50 per cent) and,　

• Rental Deferral (for the balance which must be amortised over the balance of the lease term of no less than 24 months - as negotiated by both parties)　

 

<EXAMPLE>

Rent relief in proportion to the loss of turnover by say, if the tenant’s revenue has fallen by 50%,

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* At a minimum of 25% to be provided as "Rent free/waiver"

* The remainder is to be "Rent Deferral" (which is to be recouped over at least 24 months )

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• Rent increases will be frozen (except for turnover leases)

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• The following are prohibited on landlords,　

• termination of leases for non-payment of rent (lockouts and eviction)　

• penalties for tenants who stop trading or reduce opening hours

• passing land tax to tenants (if not already legislated)

• charging interest on unpaid rent　

• making a claim to a bank guarantee or security deposit for non-payment of rent　

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• Tenant and landlord could agree a rent waiver/rental deferral in return for a lease extension

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• Although some form of rent relief would be provided, tenants must still honour the lease

 

Alternativey, landlord and tenants are also free to make an alternative commercial arrangements to this formula if that is their wish.

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There is also further evidence that banks will negotiate with landlords with the Australian Banking Association (ABA) announcing that businesses with loan facilities up to $10 million will be able to defer loan repayments for six months. Landlords will also be asked to “provide an undertaking to the bank” that they will not terminate leases or evict current tenants for unpaid bills as a result of COVID-19. 

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|  Apprentice and trainee wage subsidy  

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<updated 28 March 2020>

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The government will offer employers a wage subsidy of 50 per cent of an apprentice’s or trainee’s wage from 1 January to 30 September 2020, capped at $7,000 each quarter per each eligible apprentice or trainee.

 

Businesses with less than 20 full-time staff will be eligible, however employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.

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The apprentice or trainee must have been in training with the small business as at 1 March 2020. Employers can register for the subsidy from early April 2020. Final claims for payment must be lodged by 31 December 2020.

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|  Government credit guarantee for unsecured Small and Medium Entities (SME) loan  

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<updated 28 March 2020>

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The Government has announced the Coronavirus SME Guarantee Scheme, whereby it will provide a guarantee to SME lenders of 50 per cent for new unsecured loans to be used for working capital. SMEs with a turnover of up to $50 million will be eligible to receive these loans.

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The Government will provide eligible lenders with a guarantee for loans with the following terms:

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• the maximum total size of loans of $250,000 per borrower

• the loans will be up to three years, with an initial six-month repayment holiday

• the loans will be in the form of unsecured finance.

 

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The Government hopes to expect lenders will look through the cycle to sensibly consider the uncertainty of the current economic conditions. Also, the Government will encourage lenders to provide facilities to SMEs that only have to be drawn if needed by the SME. If offered, this will mean that the SME will only incur interest on the amount they draw down.

 

The Scheme will commence by early April 2020 and be available for new loans made by participating lenders until 30 September 2020.

 

Furthermore, the Government will exempt lenders from the responsible lending obligations for a period of six months in relation to the credit they extend to their existing small business customers, provided there is an existing borrowing relationship and some proportion of that credit is used for business purposes The government anticipates that this reform should help small businesses get access to credit quickly and efficiently.

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|  Temporary relief for financially distressed businesses  

 

<updated 28 March 2020>

 

The Government is proposing several temporary measures to lessen the business risks of a surge in insolvencies and allow more businesses to trade through this difficult period, including

 

• temporary six-month increase to the threshold at which creditors can issue a statutory demand on a company under the Corporations Act 2001 from $2000 to $20,000

 

• a temporary extension to the statutory timeframe for a company to respond to a statutory demand from 21 days to six months. This extension will apply for six months.

 

• a temporary increase to the threshold at which creditors can initiate bankruptcy proceedings against a debtor who is not incorporated from $5,000 to $20,000. This will apply for six months

 

• a temporary extension to the period that a debtor must respond to a bankruptcy notice from 21 days to six months. This will apply for six months

 

• a temporary extension to the period under which an unsecured creditor cannot take further action to recover debts when a debtor declares an intention to enter voluntary bankruptcy from 21 days to six months. This will apply for six months

 

• giving directors temporary relief from personal liability for insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This relief will apply for six months but will not apply to egregious cases of dishonesty and fraud.

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Disclaimer: 

Information based on facts we have summarised to the above updated date. We have not considered your personal circumstances and should you wish to consider it, please seek professional advice.

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