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COVID-19 Business Continuity – 16th April

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I’m here with the COVID-19 business continuity update for today, Thursday 16th April.

In today’s briefing:
1. JobKeeper – your employees’ questions answered
2. Support for commercial tenancies in Victoria
 
 
1. JobKeeper – your employees’ questions answered
Some of Tenfold’s clients’ employees have asked how JobKeeper affects their reduced hours or reduced days of work. In particular, they want to know if their normal work hours and salary will resume once the business receives the JobKeeper payment.
An article from SmartCompany may help answer that question – see this snippet:
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The full article can be viewed here on the SmartCompany news website.

Please ensure that any reduction to work hours and/or days have been done in line with the Fair Work Act provisions for JobKeeper enabling stand down directions. See here: FWA JobKeeper directions

Your Tenfold business coach has templates to support you to communicate changes to work – speak to your mentor to get access to the appropriate template for each situation.

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2. Support for commercial tenancies in Victoria
On 15th April, the Victorian government announced a land tax relief package to support commercial tenancies. Victoria will also be implementing the mandatory code of conduct for commercial tenancies that was agreed in the national cabinet in on 7th April (for more details on the mandatory code, see below)

For Tenfold Business Coaching clients who are landlords:
You will be eligible for a 25% discount on your land tax if you provide rent relief to tenants who are in the JobKeeper scheme. Any remaining land tax can be deferred until March 2021.

According to the mandatory code of conduct for commercial tenancies if your tenant is part of the JobKeeper scheme, you’ll be required to offer rent relief in line with the decrease in your tenant’s revenue. See my email on 7th April for more information, or visit: https://www.pm.gov.au/media/update-coronavirus-measures-070420

For Tenfold Business Coaching clients who are tenants:
You’ll only be entitled to rent relief and the support offered by the mandatory code if you’re eligible for the JobKeeper scheme. You’ll need to continue to pay rent and outgoings while you and your landlord work out your rent relief arrangements.

Generally, it is recommended that both landlords and tenants collaborate and act in good faith. Landlords should take a pragmatic approach giving consideration to the long-term benefits of reaching an agreement with their tenants, which will allow the tenants to re‑commence trading under the existing lease terms after the Covid‑19 pandemic and the reasonable recovery period. Ultimately, this would be preferable to vacant premises where a tenant’s business does not survive the pandemic.

The mandatory code of conduct for commercial rent relief to tenants that are:

  • a small to medium sized business with an annual turnover of up to $50 million, and
  • eligible for the JobKeeper scheme

The principles of the code are:

  • Commercial landlords are legally required to engage with tenants who meet the criteria about rental arrangements.
  • Landlords must reduce rent in proportion to the reduction in the tenant’s business. Landlords must also pass on outgoings relief – if landlords are granted any relief from their obligations to pay land tax, council rates or insurance premiums, these savings are required to be proportionately passed on to their tenants.
  • Rent reduction can be a waiver (i.e. rent will not payable by the tenant) or a deferral in rental payment. Waivers will have to account for at least 50 per cent of the reduction in rent. Deferrals (i.e. rent that is still payable but pushed out) must be spread over the remaining time on a lease and for no less than 12 months. Landlords will not be able to charge interest on unpaid rent.
  • Rent increases will be frozen.
  • Landlords must not terminate a lease for non-payment of rent during the Covid‑19 pandemic and the subsequent recovery period. Landlords are also prohibited from drawing on securities (e.g. bond or director’s guarantee). It is important to note that if a landlord has cash flow issues, it will not be able to call on any cash deposits, bonds or bank guarantees provided as security by the tenant under the lease.
  • Tenants must honour the lease.
  • There will be a binding mediation process.
  • Landlords will not be able to enforce penalties on tenants who stop trading or reduce opening hours – this mostly relates to businesses operating in shopping centres. Landlords should also note that they must not impose fees, interest or charges on rent waivers or fees, charges or punitive interest on rent deferrals.
  • Legislative and administrative process relating to lease extensions will be removed.
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Victoria recorded only two new cases of COVID-19 yesterday and based on consistently lower rates of infection Scott Morrison announced in a press conference today that some of the social distancing restrictions may be relaxed in the next four weeks.  This is good news for those Tenfold coaching clients who have been severely impacted by the restrictions, and also all of the other clients experiencing a general decline due to COVID-19.
Remain safe.
Ash

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