The mid-point of JobKeeper: what we have seen and what we expect

The mid-point of JobKeeper what we have seen and what we expect

The Federal Government’s JobKeeper Payment Scheme is the most significant business stimulus package ever offered in Australia’s history. The scheme was unrolled in response to the devastating effects of the COVID-19 pandemic on local businesses. The ethos behind the scheme being that if Australians can stay employed and working for their pre-pandemic employer, we may be able to preserve some level of pre-pandemic business normalcy.

The details of the JobKeeper scheme are well known and can be summed up as a reimbursement payment of $1,500 (before tax) per fortnight for eligible employees where the business is able to demonstrate a decline of 30% in turnover.

The most recent reporting by the ATO states that over 872,000 businesses have been approved for JobKeeper and circa 3.3 million employees are now receiving the benefits of this stimulus. All in, the scheme is reported to be supported by a $70 billion carve out of Australia’s Federal Budget.

What we can expect in the coming months

With the scheme now reaching its projected mid-term, the ATO have begun to investigate fraudulent and ineligible claims. So far, a reported 6,500 businesses have already been removed from the program. The ATO’s compliance team are now reviewing applications for the following behaviours which may indicate a delinquency by an applicant:

– Payments to people who do not meet the eligibility requirements or are not employees;
– Falsifying records or revising activity statements to meet the fall in turnover test;
– Applying for JobKeeper where there is no evidence of carrying on a business or there is no assessable income from carrying on a business;
– Employers failing to pass on the full $1,500 payment to eligible employees;
– Multiple eligible business participant claims;
– Employees being incorrectly excluded under the one-in-all-in rule;
– There are penalties for making false claims and not complying with your obligations; and
– Instances where the actual and projected turnover have significantly diverged.

The ATO have urged all participants and applicants to perform a self-assessment of their applications. If there are any instances of an ‘honest mistake’, the ATO does have some limited discretion to work with the applicants on remedying the issue. If you are concerned that you or your employer may have done the wrong thing, the ATO have created a ‘tip-off’ line so the matter can be brought to their attention in priority.

The timeline for the scheme is also uncertain. At the date of publication, we are now in the 8th fortnight of JobKeeper. The scheme is slated to be in effect until 27 September 2020, meaning it will have been in effect for a total of 13 fortnights. Due to the uncertain nature of the pandemic, the administration of the scheme has not always been consistent and it is likely that we will see further updates to how and when it will be fully wound down.

For example, in the normal course, businesses were to lodge their monthly declarations between the 1st and 14th day of the month following the claim period (i.e. apply by 14 June for the May period). The declaration identifies the business’ participant and eligible employees for the claim period. However, in June we saw that deadline brought forward to 30 June, for the June 2020 period. If you have not already applied for JobKeeper by 30 June for the June period, the ATO has taken a strict stance of not accepting late applications.

Another example of the changes recently made to the scheme is for persons already receiving child care subsidies and sole traders operating child care services. As of 20 July, those persons will no longer be eligible for the JobKeeper payment.

It is unclear what changes will be to come. However, given the Government’s record of stripping away eligibility and now their undertaking a review for compliance, we consider it likely that these measures herald the early stages of the JobKeeper Scheme being systematically wound down.

Zombie companies

There has been a growing concern from within the local business community, financial advisors and body of insolvency practitioners that the JobKeeper package, along with the amendments to the Corporations Act to preserve businesses that we are now facing an economy of zombie businesses – i.e. businesses that would otherwise be dead if not for Government stimulus.

This is a very real concern for those businesses that operate on a trade credit basis or with delayed payment terms. The general advice we have been giving our clients in response has been to tighten the timeframes for payment provisions within their terms and conditions and to not let debts exceed $20,000. This has a twofold effect:

  1. Debts under $20,000 can be dealt with quickly and efficiently in the small claims court of most states. Once judgment is obtained, you can take steps to enforce the judgment debt, including placing the judgment debtor on creditor watch (thus stifling the debtor’s ability raise other debts before dealing with your judgment); and
  2. Debts over $20,000 can be dealt with by statutory demand, but the lapsing period for the payment under the demand has temporarily been extended from 21 days to 6 months.

If you are concerned that your business may in fact be a ‘zombie company’, you should seek advice from a suitably qualified insolvency practitioner. Directors of companies have duties to ensure they act in the best interest of the company, its members and its shareholders. Those duties have been preserved throughout the course of the pandemic, meaning it is as important as ever to ensure your business is sustainable not just while the stimulus is available but also when that stimulus is gone.

Directors of companies should turn a critical eye to their trade debtors, aged receivables, supply lines and customer books. If you identify that your business is reliant on certain companies or individuals paying large sums back or making major orders in the near future, you should also consider what those parties’ viability is likely to be once the stimulus is no longer available. The earlier you make this analysis, the better equipped you and your business will be at avoiding becoming a zombie company.

How to get help

The circumstances around the JobKeeper Payment Scheme are complex and highly unusual. Seeking the advice of a suitably qualified professional is key to making sure your business survives the pandemic. Rostron Carlyle Rojas Lawyers have serviced local communities in Brisbane, Sydney and Melbourne for nearly 20 years. We survived and advised our clients through the GFC and will continue to do the same through the COVID-19 pandemic.

Should you have any questions about the JobKeeper stimulus package or require help in securing your business as the package is wound down, Rostron Carlyle Rojas Lawyers is here to assist.

Hand sanitiser- not just protection from COVID-19

Hand-sanitiser-not-just-protection-from-COVID-19

As restrictions ease and businesses begin to re-open around Australia it is important for business owners to be aware of their obligations to eliminate or as far as possible minimise the risk of their employees, customers and other invitees (such as salespeople, suppliers or service providers) contracting COVID-19 while on their business premises.

As an employer a business owner must comply with their obligations under relevant Workplace Health & Safety legislation such as the model laws that have been implemented in most Australian jurisdictions. These laws impose duties on business owners to protect workers and invitees and if breached can lead to a fine of up to $600,000 and 5 years in jail for an individual or a fine of $3 million for a corporation, depending on the extent of the breach of duty. The severity of the offence increases if the breach of duty causes a person to be exposed to risk of death or serious injury or illness.

More generally a worker or invitee may have a claim for damages in negligence against a business owner who does not act reasonably. While initially a common law action negligence has more recently been enshrined in legislation such as the Queensland Civil Liability Act 2003. In both instances the elements that are required to succeed in a claim of negligence are:
• a person (the defendant) owed a duty of care to the injured party (the plaintiff)
• the defendant breached the duty of care
• the breach caused harm or injury to the plaintiff
In respect of the breach of duty the plaintiff must prove that:
• the risk was foreseeable, or ought reasonably to have been known by the defendant
• the risk was not insignificant
• a reasonable person in the position of the defendant would have taken precautions
In the context of COVID-19, given the widespread publicity about the risk of serious illness or death (particularly for vulnerable persons) and the ease of transmission of novel coronavirus, it would be extremely difficult if not impossible for a defendant to argue that the risk was either unforeseeable or insignificant.

In order to overcome the litigation risks brought about by COVID-19 business owners should ensure they adopt an industry approved COVID-safe plan and at the very least introduce policies and procedures that require all persons attending the business premises to practise physical distancing and good hygiene. Physical distancing should reflect government guidelines – 4 square metres per person and 1.5 metres between people – while good hygiene can be achieved by ensuring access to adequate and well-stocked hygiene facilities such as hand sanitisers. More than just a defence to contracting COVID-19 hand sanitiser may ultimately protect business owners from legal liability.

Casual Workers and Double Dipping

Casual Workers Double Dipping

Employers are rightly concerned about the possibility of having to pay their casual workers leave entitlements and exposure to very significant claims.

The recent decision of the Full Federal Court in Workpac Pty Ltd v Rosatto [2020] FCAFC 84 on 20 May 2020, has prompted calls for urgent legislative review.
The facts were unremarkable and are reflected in many workplaces around Australia.

Facts
Rossato was employed as a casual worker by labour hire company, Workpac under six consecutive contracts of employment for over 3 years.

Rossato asserted that despite the description of his employment and the 25% loading paid to him, that his employment relationship was not in truth and law, that of a casual employee.

Workpac applied to the Federal Court seeking:
• declarations that Rossato was a casual employee and not entitled to leave entitlements provided for permanent employees under the National Employment Standards in the Fair Work Act 2009 (Cth) (FW Act); or
• that Rossato’s pay included a 25% casual loading which should be ‘set off’ against any amount owed to him.
The Rosatta case followed on from an earlier decision in WorkPac Pty Ltd v Skene [2018] FCAFC 131 in August 2018, where it was determined that work of a regular nature and on-going basis is not genuinely casual.

Decision
In Rosatta, the Court decided that Rosatta, a casual employee who worked regular and systematic hours with predictable rosters and was paid as a casual, was not a casual for the purpose of sections 86, 95 and 106 of the FW Act.
Consequently, such an employee was entitled to receive both a casual loading plus paid annual leave, personal leave, compassionate leave and public holiday payments (for public holidays during the annual shut down) since he was a permanent employee.
The decision affirmed that casual employment is characterised by an absence of a “firm advance commitment as to continuing and indefinite work according to an agreed pattern of work”.
In determining the nature of the employment relationship, the Court determined that the absence of a firm advance commitment may be assessed by considering the employment contract as a whole, including whether it:
• provided for employment to be intermittent or irregular;
• permitted the employer to elect to offer employment on a particular day;
• permitted the employee to elect whether to work;
• is unlikely to continue for any length of time; and
• terminable on short notice.
The fact that the parties might agree to call the relationship one of casual employment is relevant, but is not conclusive to the true nature of the relationship. The actual practice and factual matrix must be considered.
In Rosatto, the facts which lead to the finding that the employment was not “casual” were:
• the parties had agreed upon employment for an indefinite duration;
• there was an agreed pattern of full-time hours (seven days on/seven days off with some variability of hours allocated);
• there were long term rosters (shift rosters at the mines were set up to seven months in advance);
• free on-site accommodation during a roster cycle, implying he was expected to work all shifts; and
• dealings between the parties over six contracts and different locations suggested mutual assumptions of continuity of employment.
Rosatta may yet be appealed, but if it is not-there are at least 2 class actions ready and waiting to file claims on behalf of casual workers, which may run into many millions of dollars in compensation for the unfortunate employers.

Can Casual Loading be set-off if work found not to be casual?

A set off of the 25% loading against the monies owed was not accepted because the Court found that:
• the employment contracts themselves did not clearly allow contractual set off; and
• paying a casual loading is not a substitute for enjoying paid annual leave since the purpose of paid annual leave is to provide for rest and recreation without loss of income. Casual loading is paid because an employee is understood not to be entitled to such leave.

What should you do if you employ casual workers?

1. Review your employment contracts immediately, particularly for any longstanding “casual” employees and identify any risks.
2. Review actual work practices for those workers.
3. Consider revising or restructuring workplace arrangements.

How can we help?
We can help you in the following:
1. Review your workforce employment contracts and work practices, and assess your exposure and risks.
2. Preparation of carefully drafted employment contracts that:
• remove as much doubt or scope for mischaracterising the relationship
• permit a set-off of any paid loading
3. Assist with any restructuring of your workforce.
If you have concerns in relation to casual employees in your business, please contact Michael Sing to discuss how we can help on 07 3009 8444.

Queensland’s Way Out of COVID-19: The Three Step Process Back To “Normalcy”

Queensland’s Way Out of COVID-19 3 Steps To Normalcy

Recently, Premier, Anastacia Palaszcuck announced Queensland’s roadmap out of COVID-19. The roadmap consists of a three-pronged process on the way back to the new “normal”.

Phase One: Effective from 15 May 2020, Queenslanders will enjoy the ability to:

• gather in a public space of up to 10 people;
• dine in at restaurants, pubs, clubs, RSLs and cafes up to a maximum of 10 patrons at one time (no bars or gaming);
• undertake recreational travel of a radius of up to 150km from a person’s home for day trips;
• engage in some beauty therapies and nail salons up to 10 people at one time;
• attend libraries. playground equipment, skate parks and outdoor gyms up to a maximum of 10 people at one time;
• attend or have a wedding of up to 10 guests;
• attend a funeral of up to 20 guests (indoors) or 30 guests (outdoors);
• go to an open homes and/or auction with a maximum of 10 people at one time;
• go for a swim at a public pool and/or lagoon (eg South Bank, Cairns, Airlie Beach) with a maximum of 10 people at a time or greater numbers with an approved plan)

Whilst phase two of the Premier’s roadmap has been announced to take effect from 11:59pm on 12 June 2020, this will depend on Queenslander’s performance in maintaining social distancing and keeping the curve flattened. All going well, phase two will see Queenslanders be able to:

• gather in a public space of up to 20 people;
• dine in at restaurants, pubs, clubs, RSLs and cafes up to a maximum of 20 patrons at one time (or greater number with an approved plan);
• enjoy holiday travel within your region.

The anticipated date for phase three is 10 July 2020 and will see:

• a review of interstate travel;
• gatherings in venues of up to 100 people.

Again, the implementation of phase three will depend on the numbers associated with new cases of COVID-19, and how our health system is coping.

Whilst the Premier, and Prime Minister Scott Morrison continue to provide a strategy to Australians’ way out of this pandemic, it will be an interesting time to see whether and how much businesses will continue to be affected.

We are here to help

If you’re confused as to how this roadmap will affect you and/or your business, please speak with our team today. We can assist with interpreting what the Government guidelines means for you and your business.

For a detailed copy of the Premier’s roadmap, see: https://www.covid19.qld.gov.au/government-actions/roadmap-to-easing-queenslands-restrictions

JobKeeper – Qualifying Criteria and Updates

JobKeeper Qualifying Criteria and Updates

Commonwealth’s JobKeeper Scheme

By now most employers are aware of the Commonwealth’s Job Keeper scheme, a $130 billion social welfare program introduced by the Commonwealth Government to encourage employers to retain employees during the economic fallout of the COVID-19 (coronavirus) pandemic. Eligible employers are entitled to receive $1,500 per fortnight for each eligible employee for pay periods between 30 March 2020 and 27 September 2020. However, some employers remain uncertain about the criteria required for qualification under the scheme and how it will operate.

Eligibility for the JobKeeper scheme as an employer

To be eligible an employer must have carried on business in Australia on 1 March 2020 and suffered a reduction in turnover of at least:
• where the employer is an ACNC-registered charity (other than a university or school), 15%
• where the employer has a turnover of less than $1 billion, 30%
• where the employer has a turnover of $1 billion or more, 50%
in all instances compared to the same month or quarter in 2019.

Turnover in this instance is the definition for GST purposes, and can be current or projected in relation to any of the months March to September or the June or September quarters, 2020. So while, for example, this condition will be met if turnover for the month of March 2020 was 35% lower than the figure in March 2019, it will also be met if forward projections show a comparable reduction in turnover provided there is a reasonable expectation of the reduction based on factors such as numbers of quotes, inquiries, forward bookings, sales and customers. The ATO has said that there will be some tolerance where a ‘slightly smaller fall’ than predicted actually occurs but as yet there is no definitive explanation of what this phrase means. It is therefore important that employers retain evidence to be able to show the ATO how they calculated their predicted turnover for the relevant month or quarter so that they do not find themselves having to repay the Job Keeper payments together with penalties and interest or even (where fraudulent activity is involved) face criminal penalties.

Alternative tests in turnover reduction are available to employers where there is not an appropriate relevant comparison period, namely where:
• the business did not exist in the corresponding period in 2019
• the business is not the same business in that period as it is now because of an acquisition or disposal that occurred after the relevant comparison period
• the business is not the same business in that period as it is now because of a restructure that occurred after the relevant comparison period
• there was a substantial increase in turnover prior to the applicable turnover test period
• the entity was affected by drought or other declared natural disaster during the relevant comparison period
• there is a large irregular variance in turnover for the quarters ending in the 12 months before the applicable turnover test period
• the entity is a sole trader or small partnership where sickness, injury or leave have impacted an individual’s ability to work which has affected turnover
If an employer satisfies the turnover test for any one month or quarter it is eligible to receive the payment for the entire 6-month period of the scheme. In other words, there is no need to establish that the reduction in turnover has continued in each month or quarter (as applicable) of the scheme period.

Eligibility for the JobKeeper scheme as an employee

For an employee to be eligible, all of the following must be applicable:
• they were employed on 1 March 2020 on a full-time or part-time basis, or as a casual but on a regular and systematic basis for longer than 12 months
• if they are a casual employee, they are not a permanent employee of any other employer
• they are currently employed (including those stood down or re-hired)
• they were aged 16 years or older at 1 March 2020, with the exception of full-time students who were 17 years old and younger at 1 March 2020 and who are not financially independent
• they were an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) visa holder at 1 March 2020
• they were a resident for Australian tax purposes on 1 March 2020
• they are not in receipt of a Job Keeper Payment from another employer

The Commonwealth Government has clarified that non-Australian citizen employees on temporary visas who are not Special Category (Subclass 444) visa holders are not entitled to receive the Job Keeper payment. The Prime Minister has made public announcements to the effect that if any such temporary visa holders are unable to support themselves in Australia they should return to their home countries.

The ATO will make the payments to employers monthly in arrears with the first payment to be made in the week commencing 4 May 2020. In order to be eligible to receive the payment the employer must have already paid each eligible employee at least $1,500 in respect of the relevant fortnight. In some instances – likely part-time and long-term casual employees – this will mean that wages need to be topped up to $1,500 (pre-PAYG withholding). Initially, employers were obliged to have enrolled for the scheme by 30 April 2020 and, if they wanted to claim the payment for the 2 fortnights in April, to have paid employees a minimum of $1,500 for those 2 fortnights by 30 April 2020. However, after receiving feedback on the cash flow problems that businesses are facing the Government amended the registration cut-off date to 31 May 2020 and the date by which payment of employees’ wages for April must be made to 8 May 2020.

It is inevitable that the legislation which was hurriedly introduced to create the largest social welfare program in Australian history will continue to be clarified and, where necessary, amended as its practical application unfolds. For example, the Treasurer recently announced that rules would be introduced to provide a turnover test for service entities that provide employees to related operating entities where the service entity’s fixed turnover has not reduced but the operating entity’s turnover has. Such rules will help service entities retain their employees in accordance with the stated aim of the JobKeeper scheme.

Rostron Carlyle Rojas is staying abreast of these changes as they occur and is available to discuss your obligations and entitlements under this unprecedented program.

Recent changes to the JobKeeper Payment Scheme

Recent Changes to Jobkeeper Payment scheme

The Federal Government’ JobKeeper Payment Scheme, which was announced in March 2020, is one of the most significant business stimulus packages offered by the Government in response to the COVID-19 pandemic. The scheme aims to keep Australians employed, in their pre-pandemic role with their employer.

Businesses seeking to rely on the JobKeeper stimulus package were to originally express their intention to access the scheme before the end of April 2020. This deadline has since been extended by the Federal Government. Enrolment for the initial two JobKeeper payments have been differed from 30 April 2020 to 31 May 2020.

To be eligible to claim the JobKeeper payments for the initial two fortnights (being 30 March to 12 April, and 13 April to 26 April), employers must have paid their nominated staff a minimum wage of $1,500 for each fortnight by 8 May 2020 during that period.

Other recent changes to the scheme include:

Jobkeeper Payment Scheme Table

Recent Changes to JobKeeper Payment Scheme Table

The amendments follow a number of stimulus measures being introduced by the Federal Government to address growing economic concerns during the COVID-19 pandemic. In a recent media release, the Federal Treasury revealed that since registration opened more than 900,000 businesses expressed interest in the scheme and over 400,000 businesses had successfully enrolled in the scheme. It is clear from these statistics that the demand for assistance is very high.

In addition to the JobKeeper Payment Scheme, the Federal Government has also introduced and endorsed various other programs to support Australian businesses, including:

• the Coronavirus SME Guarantee Scheme which guarantees 50% of the value of eligible unsecured business loans to small and medium enterprises impacted by COVID-19;

• early superannuation access for eligible sole traders whose businesses were suspended or who have suffered at least a 20% decrease in their turnover; and

• electricity and gas tariff relief for eligible small businesses temporarily closed due to COVID-19 across New South Wales, Victoria and South Australia.

Rostron Carlyle Rojas is here to help

We are committed to keeping you up to date with the ever-evolving laws in Australia, especially during the course of the COVID-19 pandemic.

Should you require guidance or advice on the business stimulus packages available during the coronavirus pandemic, please do not hesitate to contact our team of qualified legal advisers today.

Contact us today at:

QLD: 07 3009 8444
[email protected]

NSW: 02 9307 8900
[email protected]

Also Read: The Job Keeper Allowance article

COVID-19 UPDATE: NSW Licence Fee Waivers and Deferrals

COVID-19 UPDATE NSW Licence Fee Waivers and Deferrals

16 April 2020

The NSW State Government has announced a $50 million relief package set to provide over 200,000 businesses across the state temporary relief from state government licensing fees. The license and permit fees will be waived for a 12-month relief period under the NSW Government’s first economic stimulus package.

The measures were implemented to help businesses during the current economic crisis focus on keeping in business and assist those businesses in retaining as many employees as possible by reducing overheads for State imposed licensing fees and permits.

Liquor and Gaming NSW

The annual liquor licence base fee and trading hours risk loading fee waivers will be applicable for most licensees for 12 months (2020-2021 fee period). Licensees will receive a $0 invoice to confirm the administration of the licence is complete. Compliance risk loadings will not be subject to waivers, but will be deferred and should be included as part of 2021-2022 annual liquor licence fees.

Licences that are eligible for the automatic fee waiver include:

  • small bar licence
  • microbreweries and small distilleries licence
  • on-premises licence
  • club licence
  • hotel licence
  • producer/wholesaler licence
  • limited licences
  • general bar licence

packaged liquor licence (if three or less outlets are owned by the same licensee or business)
Exception: Bottle shops and home delivery businesses (packaged liquor licences) with four or more outlets owned by the same licensee or business are currently not eligible for fee waiver assistance.

In addition, new liquor licence application fees and pro-rata liquor licence fees will be waived in full ($0) for 12 months between 1 April 2020 – 31 March 2021 for affected businesses.

NSW Fair Trading
The following new application and renewal fee waivers apply:

  • paintball venue permits (From 1 April 2020)
  • tattoo parlour operator licence (From 1 April 2020)
  • home building contractor licences (From 15 April 2020)
  • trade or specialist contractor licences (From 15 April 2020)
  • motor vehicle repairer licences (From 15 April 2020)
  • tattooist licence (From 20 April 2020)
  • home building: Qualified Supervisor Certificates (Building supervisor certificate) (From 20 April 2020)
  • home building: tradesperson certificates (From 20 April 2020)
  • motor vehicle tradesperson certificates (From 20 April 2020)

Note however, the waivers will apply for the minimum renewal term (some licences may be purchased for different lengths of time i.e. one or three years) and the fee waivers do not apply for change of class, changes to the licence or replacement of the licence.

SafeWork NSW
The following new application and renewal fee waivers apply:

  • pyrotechnician licences (e.g. fireworks) (From 1 April 2020)
  • registration permits for an amusement device (From 1 April 2020)
  • asbestos removal licences and asbestos assessor licences (From 15 April 2020)
  • demolition licences (From 15 April 2020)
  • high risk worker licences (From 15 April 2020)
  • High Risk Work Assessor Accreditation (From 20 April 2020)
  • SafeWork Registered Training Organisations (for asbestos, construction and high-risk work training) – new applications only (From 20 April 2020)

Note however, the waivers will apply for the minimum renewal term (some licences may be purchased for different lengths of time i.e. one or three years) and the fee waivers do not apply for change of class, changes to the licence or replacement of the licence.

Rostron Carlyle Rojas is here to help
We are committed to keeping you up to date with the ever-evolving laws in Australia, especially during the course of the COVI-19 pandemic. Our team of qualified legal advisors are ready to assist you with navigating the complexities of the ever-changing legal frameworks that underpin business in Australia.

Do you need guidance or advice on applicable deferrals, waivers, other business stimulus packages and/or support available during the coronavirus pandemic?

Contact us today at (02) 9307 8900 or send us your questions by email at [email protected]

Sydney, NSW Lawyers Offices

National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During The Coronavirus Pandemic

SME Commercial Leasing Principles During The Coronavirus Pandemic

Prime Minister Scott Morrison released a statement on 7 April 2020 regarding the decision reached by the Cabinet, in cooperation with States, Territories and various industries, with respect to the new mandatory Commercial Tenancies Code.

The Code aims to preserve the lease and relationship between tenants and landlords whilst also preserving the value of the properties underpinning the lease through this proactive, constructive and cooperative mechanism.

The National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 is accessible here.

The Code imposes a set of good faith leasing principles on landlords that apply to all commercial tenancies where the tenant is suffering financial stress or hardship as a result of the COVID 19 pandemic. Eligibility is assessed by the tenant’s eligibility for the Commonwealth Government’s JobKeeper programme, with an annual turnover of up to $50 million.

Notably, the annual turnover criteria will be applied in respect of franchises at the franchisee level, and in respect of retail corporate groups at the group level (rather than at the individual retail outlet level).
The Code will be given effect through relevant state and territory legislation or regulation as appropriate. While the Code is not intended to supersede such state and territory legislation, it aims to complement it during period of the COVID-19 crisis. We anticipate the Code will be included in each jurisdiction’s relevant legislation as a Schedule that informs the operation of the provisions of that legislation. This will be confirmed as we see the Code rolled out across the various states and territories.

The code has been formulated in accordance with the Hibernation Strategy approach to dealing with the effects of COVID-19 on business activity. This is to preserve the foundations and pillars of the economy in a bid to rebuild and grow the economy through the pandemic and the period following the pandemic. The code combines a set of good-faith leasing principles which should be applied. We extract those principles below:

1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period).

2. Tenants must remain committed to the terms of their lease (subject to amendments negotiated under this Code). Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code.

3. Landlords must offer waivers and deferrals of rent up to 100% of the amount ordinarily payable, on a case-by-case basis, proportionate to reductions in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.

4. Rental waivers must constitute no less than 50% of the total reduction in rent payable over the COVID-19 pandemic period. Waivers should constitute a greater proportion of the total reduction in rent where failure to do so would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease. Regard must also be given to the Landlord’s financial ability to provide such additional waivers. Tenants may waive the requirement for a 50% minimum waiver by agreement.

5. Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties.

6. Any reduction in statutory charges (e.g. land tax, council rates) or insurance will be passed on to the tenant in the appropriate proportion applicable under the terms of the lease.

7. A landlord should seek to share any benefit received by way of deferral of loan repayments with the tenant in a proportionate manner.

8. Landlords should seek to waive recovery of any other expenses or outgoing payable under the lease during the period the tenant is not able to trade (if appropriate to do so). Landlords reserve the right to reduce services as required in such circumstances.

9. If negotiated arrangements under this Code necessitate repayment, repayment should be made over an extended period to avoid placing an undue financial burden on the tenant. No repayment should commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government) or the existing lease expiring, and taking into account a reasonable subsequent recovery period.

10. No fees, interest or other charges should be applied with respect to rent waived under the Code and no fees, charges nor punitive interest may be charged on deferrals under the Code.

11. Landlords must not draw on a tenant’s security for the non-payment of rent (i.e. cash bond, bank guarantee or personal guarantee) during the period of the COVID-19 pandemic and/or a reasonable subsequent recovery period.

12. The tenant should be provided with an opportunity to extend its lease for an equivalent period of the rent waiver and/or deferral period. This is intended to provide the tenant additional time to trade, on existing lease terms, during the recovery period following the COVID-19 pandemic.

13. Landlords agree to a freeze on rent increases (except for retail leases based on turnover rent) for the duration of the COVID-19 pandemic and a reasonable subsequent recovery period, notwithstanding any arrangements between the landlord and the tenant.

14. Landlords may not apply any prohibition on levy any penalties if tenants reduce opening hours or cease to trade due to the COVID-19 pandemic.

In cases where landlords and tenants are unable to reach an amicable agreement on leasing arrangements, the issue should be referred to applicable state or territory retail and commercial leasing dispute resolution processes for binding mediation, including Small Business Commissioners, Champions or Ombudsmen as applicable.

This Code comes into effect in all states and territories from a date following 3 April 2020 to be defined by each respective state and territory jurisdiction, for the period during which the Commonwealth JobKeeper program remains operational.

For more information on the JobKeeper program, please see our recent article on the topic here.

Rostron Carlyle Rojas Lawyers is here to help

These are uncertain days for SME business and the laws around eligibility for stimulus packages are evolving on a daily basis.

Rostron Carlyle Rojas Lawyers remains committed to keeping you up to date with how the various COVID-19 response measures may impact on your business. As the needs and circumstances of each business are individual to them, it is important to that directors of companies seek qualified advice with how to navigate the rapidly evolving state of corporate law in Australia.

Speak with our team at Rostron Carlyle Rojas Lawyers for qualified advice that is tailored to your business’ specific issues.

QLD: 07 3009 8444
[email protected]

NSW: 02 9307 8900
[email protected]

NSW Update: Introduction of the Planning System Acceleration Program

Introduction of the Planning System Acceleration Program Coronavirus

Introduction of the Planning System Acceleration Program

The NSW Government has announced a new program aimed at fast-tracking planning processes and boosting jobs in the construction and development sectors in response to the economic stresses as a result of the current COVID-19 pandemic.

On 3 April 2020, the Minister for Planning and Public Spaces, Mr Rob Stokes, introduced the Planning System Acceleration Program, which will:

• generate new construction jobs over the next six months;
• fast-track the assessment of State Significant Developments, re-zonings and development applications;
• support councils and planning panels to fast-track local and regionally significant development approvals;
• allocate additional Acting Commissioners to help clear the backlog of cases in the Land & Environment Court; and
• invest $70 million to fund vital community infrastructure in North West Sydney.

Further details of the Program are expected to be released in the coming weeks.

The Program was announced a mere day after the State relaxed restrictions on construction sites by extending work hours to 7 days a week including public holidays (for all works except ground works). These recent measures show that the NSW Government is actively taking steps to boost the construction industry amidst the COVID-19 crisis. These measures are likely to create new jobs and ensure projects across the State can proceed, even where other businesses may not be able to.

The Minister’s full media release can be read here.

Coronavirus – Cabinet update regarding Commercial Leases

COVID-19 – Cabinet update regarding Commercial Leases

Australian Cabinet update regarding commercial leases

On 3 April 2020, the Federal Cabinet met to discuss the imposition of a mandatory coronavirus industry code of practice for commercial and retail leases. The code is likely to be released once the Cabinet has settled the balance between tenant and landlord rights and obligations. To that end, PM Scott Morrison stated that the current drafting of the code is “not where it needs to be” to provide enough security for landlords.

It is anticipated that the industry code will:

  • be a mandatory code incorporated into state and territory legislation where appropriate;
  • be mandatory for tenants with a turnover of less than $50 million and are participants in the JobKeeper scheme;
  • incorporate a proportionality principle whereby the turnover reduction of the tenant ought to be reflected in the rental waiver provided by the landlord;
  • include protections for tenants against claims on penalties, acting on guarantees and interest protection on rent;
  • include protections from evictions while landlords will also be protected from the tenant terminating the lease on those grounds;
  • include a requirement that both tenants and landlords enter mediation where no suitable agreement is in place;
  • include provision that rent relief only be available for coronavirus-affected businesses;confirm that leasing arrangements will continue to stand for all ot
  • her businesses who are not coronavirus-affected (i.e. do not have a reduction in their turnover); and
  • allow States and territories to provide further exemptions, waivers and reduction to their fees and rates.

National Cabinet is scheduled to convene on in the morning of 7 April 2020 and will re consider the terms of the industry code at that time.