The latest round of COVID lockdowns has had a catastrophic impact on many Australian small businesses and retailers. With the country’s two largest states having been in prolonged lockdown, urgent assistance is required to prevent thousands of Australians joining the unemployment queue.
A coalition of Australia’s peak industry groups – the National Retail Association, Franchising Council of Australia, and the Australian Association of Convenience Stores – has today unveiled a five-point plan for business survival and seeking its endorsement from National Cabinet:
- JobKeeper 3.0: The first two JobKeeper programs met their objectives to support business and job survival, preserve employment relationships, and provide needed income support. An targeted JobKeeper 3.0 program would continue to provide assistance to the most affected businesses and support economic recovery.
- Emergency cash payments: debt-trapped small businesses need access to emergency cash payments to have funds available to pay immediate creditors, rent and remain solvent.
- ATO to defer lodgements and outstanding payments for debt-trapped businesses: There is record collectible debt owed to the Australian Taxation Office of $21 billion – well over half of this collectible debt is held by just 6.4% of SMEs. With these small businesses struggling to meet their tax obligations, now is not the time for the ATO to trigger any action which could take them under.
- Banking payment deferrals: Banks provided welcome relief and support during 2020 to Australian businesses experiencing hardship. With lockdowns and government restrictions in place across Australia, banks again need to provide support and payment deferrals to stranded businesses.
- National Leasing Code of Conduct mark 2: Constitutionally, commercial leasing arrangements sit within the remit of the states and territories. In March 2020, National Cabinet signed off on the National Leasing Code of Conduct. Currently, retail businesses in the same trading predicament as they were in March 2020, without the cash reserves they may have been able to call on last year. These businesses have the same or worse drop in turnover right now, and are being asked to pay 100% of their commercial rent with no support. We are calling for a short-term reinstatement of the National Leasing Code of Conduct, which concluded in March this year with JobKeeper.
In relation to point 5, details of proposed National Leasing Code as follows:
- Landlords and tenants share a common interest in working together, to ensure business continuity, and to facilitate the resumption of normal trading activities at the end of the COVID-19 pandemic during a reasonable recovery period.
- Landlords and tenants will be required to discuss relevant issues, to negotiate appropriate temporary leasing arrangements, and to work towards achieving mutually satisfactory outcomes.
- Landlords and tenants will negotiate in good faith.
- Landlords and tenants will act in an open, honest and transparent manner, and will each provide sufficient and accurate information within the context of negotiations to achieve outcomes consistent with this Code.
- Any agreed arrangements will take into account the impact of the COVID-19 pandemic on the tenant, with specific regard to its revenue, expenses, and profitability. Such arrangements will be proportionate and appropriate based on the impact of the COVID-19 pandemic plus a reasonable recovery period.
- The Parties will assist each other in their respective dealings with other stakeholders including governments, utility companies, and banks/other financial institutions in order to achieve outcomes consistent with the objectives of this Code.
- All premises are different, as are their commercial arrangements; it is therefore not possible to form a collective industry position. All parties recognise the intended application, legal constraints and spirit of the Competition and Consumer Act 2010.
- The Parties will take into account the fact that the risk of default on commercial leases is ultimately (and already) borne by the landlord. The landlord must not seek to permanently mitigate this risk in negotiating temporary arrangements envisaged under this Code.
- All leases must be dealt with on a case-by-case basis, considering factors such as whether the SME tenant has suffered financial hardship due to the COVID-19 pandemic; whether the tenant’s lease has expired or is soon to expire; and whether the tenant is in administration or receivership.
- Leases have different structures, different periods of tenure, and different mechanisms for determining rent. Leases may already be in arrears. Leases may already have expired and be in “hold-over.” These factors should also be taken into account in formulating any temporary arrangements in line with this Code.
- As the objective of this Code is to mitigate the impact of the COVID-19 pandemic on the tenant, due regard should be given to whether the tenant is in administration or receivership, and the application of the Code modified accordingly.
- The Qualifying applicant would be the franchisee in the case of a franchise arrangement
- A process for binding determination of situations where landlords and tenants have been unable to reach agreement.
- Ability for tenant to terminate a lease in severe hardship / unviable lease on reasonable terms as outlined above.