Commercial leasing code of conduct.

Commercial leasing code of conduct.

On 7 April 2020, the National Cabinet announced a mandatory code of conduct the ‘Commercial Tenancies Code’, to be legislated and regulated by each of the State and Territory Governments. Please see link below for the release document.

Click here for the Commercial Tenancies Code

The Commercial Tenancies Code is intended to mandate a set of good faith principles to be applied to commercial, retail and industrial leases where the tenant is eligible for the Commonwealth Government’s JobKeeper assistance and is a small or medium sized enterprise (with an annual turnover of up to $50 million).

The objective of the Commercial Tenancies Code is for a landlord and tenant to share the risk and financial impact during the COVID-19 crisis, whilst seeking to balance the interests of the landlord and tenant. It is expected that a landlord and each eligible tenant will negotiate in good faith, on a case by case basis.

The following leasing principles should be applied in negotiating and enacting appropriate temporary arrangements between a landlord and tenant under Commercial Tenancies Code. These apply during the COVID-19 crisis and for a reasonable recovery period:

  1. A landlord must not terminate a lease for non-payment of rent;
  2. A landlord must not claim on upon a tenant’s security (bank guarantee, security deposit or personal guarantee) for non-payment of rent;
  3. A landlord must freeze rent increases. This includes fixed and market reviews;
  4. A landlord must not impose any penalties or prohibition against the tenant reducing its opening hours or ceasing to trade;
  5. A landlord must offer the tenant a rent reduction proportionate to the trading reduction in the tenant’s business over the course of the COVID-19 crisis, through a combination of waivers of rent and deferrals of rent (Rent Relief);
  6. Waivers of rent must account for at least 50% of the Rent Relief;
  7. Deferrals of rent must be covered over the balance of the lease term and in a period not less than 24 months following the COVID-29 crisis;
  8. A landlord must not charge any fees, interest or other charges to the tenant with respect to waivers and deferrals of rent;
  9. A landlord must pass on to the tenant (with appropriate proportionality as applicable under the terms of the lease) any reductions in statutory charges, such as land tax, council rates and insurance. This will be seen through a reduction in outgoings costs;
  10. A tenant must honour the terms of the lease, as amended in accordance with negotiations under the Commercial Tenancies Code. If the tenant breaches the substantive terms of the lease in a material way, the tenant will forfeit any protection provided to the tenant under the Commercial Tenancies Code;
  11. A tenant should be provided with an opportunity to extend its lease for the equivalent period of the waiver or deferral period. This is intended to provide the tenant with additional time to trade on the existing lease terms during the period after the COVID-19 crisis;
  12. If negotiated arrangements under the Commercial Tenancies Code involve repayment by the tenant, this should occur over an extended period to avoid placing an undue burden on the tenant;
  13. This Code is effective April 3rd, 2020 until such time as the Job Keeper Program is concluded.

If a landlord and tenant cannot reach an agreed position on alternative leasing arrangements as a direct result of COVID-19, the matter should be referred to a binding mediation process overseen by the relevant State or Territory Government.

As always, we are here to help so please reach out if you have any questions 02 9415 1511 or email reception@primeadvisory.com.au.

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A message from MBS insurance regarding the impact of COVID-19.

A message from MBS insurance regarding the impact of COVID-19.

“We have received some enquiries from our clients around the impact of Coronavirus. There are no exclusions to Life Insurance, TPD, Trauma or Income Protection that would prevent payment of a claim related to a Coronavirus for existing retail insurance policy holders.

We have seen and received announcements confirming this for policy holders of AMP, MLC, BT, AIA, CommInsure, OnePath, Zurich, Clearview, TAL and Asteron. Nick Kirwan, Senior Policy Manager at the Financial Services Council stated on the FSC website that no-one should be concerned about their existing life insurance policies.

We are aware of some Industry or Corporate Super Fund policies that do exclude pandemics and/or epidemics. If you or a family member have one of these policies, please reach out to your Adviser.

As is always the case, we are driven to provide protection at a time of need and deliver better outcomes for our clients. If you experience any downtime, it may be the ideal opportunity to have your insurance portfolio reviewed.  If you wish to speak with your Adviser, it will be more efficient to email them directly or at enquiries@mbsinsurance.com.au.

Our team has been set up to work from home, so the business will continue as usual however limited staff members will be answering phones.”

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COVID-19 Government Stimulus Packages & PrimeAdvisory Team Update.

COVID-19 Government Stimulus Packages & PrimeAdvisory Team Update.

Firstly, we want you to know we are here to support you every step of the way in what we are sure is an incredibly challenging time for you, your family, your income, your business interests and investments.

Below we detail the second stimulus package and will keep updating as more are released.  We have also made the decision for all team members to work from home and have outlined specific measures taken.

Stimulus Packages
On the 22nd March, the Federal Government announced a second stimulus package to address the economic fallout from the Coronavirus (COVID-19).

Seeking to provide timely support to those affected, the package targets three areas:
Individuals and Households, support for business and supporting the flow of credit.  This legislation is quite complicated and is moving very fast. Click here to view the latest blog for full details.

Our team is here to help you with this legislation, here to listen and here to see how it can benefit you and your business. If you would like to clarify anything with us, please call or email your advisor or the office.

Working remotely and efficiently
We would like to take this opportunity to share what we are doing to manage the impact of COVID-19 on our clients, our team and the community.  As of the 24th March we all left the office at Level 11 in Chatswood and are now fully functional and operating from home.

It is a different world working from home, however utilising technology our team is working remotely and efficiently and looking forward to upholding current service standards and delivering the same customer experience, hopefully even better!

Accordingly, some of the specific measures that we are implementing during the period of disruption are:

  • Our firm will operate effectively even if our physical offices are closed with staff exercising social distancing and working from home
  • Meetings will be conducted electronically using Zoom/Teams and if outages occur as have happened due to the strain on networks, we will revert to phone calls.
  • Mail will be collected twice per week and where possible we ask if you could kindly scan and email documents to the respective team member or reception@primeadvisory.com.au
  • Phones have been diverted and will be answered by a team member who will take messages and have your call returned.

Want to Talk?
If you have any questions or wish to discuss what measures we are taking to support you and your business through this period, please feel free to reach out to your PrimeAdvisory team member, they are looking forward to helping.  To get in touch with the office please call 02 9415 1511 or email reception@primeadvisory.com.au

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Second $66.1 bn stimulus package

Second $66.1 bn stimulus package

On Sunday 22nd March, the Government released a second, far reaching $66.1 bn stimulus package that boosts income support payments, introduces targeted changes to the superannuation rules, provides cash flow support of up to $100,000 for small business employers, and relaxes corporate insolvency laws.

The Prime Minister has warned that there are no “quick solutions” and that business should prepare for 6 months of disruption. Bear in mind that as stimulus packages are released or new measures announced we will be updating you via our blogs, newsletter or email.

In Summary

Business

  • Tax-free payments up to $100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this, a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
  • Solvency safety net – temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000, and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
  • Access to working capital – Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
  • Sole traders and self-employed eligible for Jobseeker payment – the eligibility criteria to access income support relaxed for the self-employed and sole traders.
  • Temporary relief from some Corporations Act requirements

Individuals

  • Early release of superannuation – individuals in financial distress able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.
  • Temporary reduction in minimum superannuation draw down rates – superannuation minimum drawdown requirements for account based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
  • Deeming rates reduced – from 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
  • Supplements increased, access extended and eased – for 6 months from 27 April 2020:
    • A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
    • A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
    • Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
    • Waiting periods and assets tests temporarily waived.
  • Bankruptcy safety net – temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.

The Government has flagged that additional stimulus packages will be required.

In detail – Support for business

Tax-free payments up to $100,000 for employers

  • From: 28 April 2020
  • Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.

The Government has increased the previously announced measures to provide cash flow support to business.

Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support it must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.

  • The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
  • The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Business that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

More: Cash flow assistance for businesses

Solvency safety net

A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:

  • A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
  • The time a company has to respond to statutory demands will increase from 21 days to 6 months.
  • For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
  • See also bankruptcy safety net below

It will be more important than ever for business to stay on top of their debtors. Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

More: Temporary relief for financially distressed businesses

Access to working capital for SMEs – supporting lenders

The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.

SMEs with a turnover of up to $50 million will be eligible to receive these loans. The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • 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, meaning that borrowers will not have to provide an asset as security for the loan.

Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.

This latest measure builds on the previous initiatives to ensure small business can access capital, including:

Sole traders and self-employed eligible for Jobseeker payment

The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.

More: Income support for individuals,
More: Financial support for coronavirus affected job seekers

Temporary relief from Corporations Act requirements

The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

Individuals

Early release of superannuation

From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax free and will not affect Centrelink or Veterans’ Affairs payments.

To be eligible to access your superannuation you need to meet the following requirements:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20% or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

More: Early access to superannuation

Temporary reduction in minimum superannuation draw down rates

Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.

Age Default minimum drawdown rates (%) Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Under 65 4 2
65-74 5 2.5
75-79 6 3
80-84 7 3.5
85-89 9 4.5
90-94 11 5.5
95 or more 14 7

The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate 0.25%.

More: Providing support for retirees

Time limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

  • Jobseeker payment (and those transitioning to the jobseeker payment)
  • Youth allowance jobseeker
  • Parenting payment
  • Farm household allowance
  • Special benefits recipients

In addition, eligibility to income support payments will be expanded to:

  • Permanent employees who are stood down or lose their job
  • Casual workers
  • Sole traders
  • The self-employed
  • Contract workers who meet the income test

The Government notes that these criteria could include those required to care for someone affected by the Coronavirus. Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply. The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More: Income support for individuals

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.

  • Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
  • Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.

The payments will be made automatically to those that meet the criteria.

More: Payments to support households 

Bankruptcy safety net

A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More: Temporary relief for financially distressed businesses

More information:

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The effects of the Coronavirus

The effects of the Coronavirus

Since the outbreak of Coronavirus (COVID-19) on the 24th January 2020 there have been 4,027 deaths as of 10th March 2020 with 114,422 confirmed cases in 115 countries and territories. This has caused mixed results globally from a nationwide toilet paper shortage to extreme market volatility.

As the spread of the virus widens, we are seeing the effects globally, causing a lack of clarity and doubt for global investors. This is also impacting domestic businesses with supply deficiencies caused by China’s slowdown in production.  As the world’s manufacturing superpower accounting for 29% of production globally this was bound to have an impact.

We have seen the stock markets fall 14.98% year-to-date (at the market close on 9 March 2020) with GDP expected to slow by billions of dollars. This also encouraged the Reserve Bank of Australia (RBA) to announce its decision on the official cash rate for March slashing an already historically low interest rate by 25 basis points to 0.5%. AMP’s Capital chief economist Shane Oliver says, “Rate cuts won’t kill the virus or solve supply side constraints but they will help ease the pain for borrowers through this uncertain period and will help boost growth once the virus is under control.”

So, what should you do? Until more is known about the virus, we won’t fully understand the real economic and medical impacts of COVID-19 however we expect the volatility will continue. Please remember that our advice at times like these is to focus on the portfolio’s timeframe, generally years and decades, rather than weeks.

Should you have any concerns or questions you wish to discuss regarding COVID-19 and its impact on your finances please get in touch with your advisor on 02 9415 1511 or email reception@primeadvisory.com.au

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