Retail struggle in January 2020

As the Coronavirus lockdown continues, last week provided further developments regarding the retail sector. Following extensive collaboration with numerous industry groups, including the NRA, the Prime Minister announced the national tenancy framework.

Overall, we believe it strikes a sensible balance between the interests of tenants and landlords and would maximise the chances of small business survival. Under the framework, businesses suffering a major downturn will be eligible to have their rents reduced by the same proportion as their revenue has fallen.  This rental reduction will be a combination of at least 50 per cent rent waiver and a rent deferral.

Businesses will have a minimum of 12 months after the downturn to pay the deferred rent. The Prime Minister also urged financiers to support property owners who would be affected by the new rules.

What the code will do is provide maximum opportunity for businesses that suffer during the current downturn, to also have the greatest chance of surviving. It is a proportionate response that will be beneficial to both retailers and landlords. Just as we want to see businesses survive to keep employing their staff, property owners will also want to see the retail sector survive.

The New South Wales and Queensland Governments have both also made announcements in relation to land tax. Yesterday, New South Wales Treasurer Dominic Perrottet announced a $440 million land tax relief package. Commercial leases where the tenant has experienced financial distress will be eligible under the scheme.

Eligible landlords can apply for a land tax concession of up to 25 per cent of their 2020 calendar year land tax liability on relevant properties. A land tax deferral will also be offered for any outstanding amounts for a three-month period to landlords who claim the concession.

The Queensland Government has announced a $400 million land tax relief to property owners, provided they pass on the concession to tenants. The package includes a three-month rebate of land tax for 2019-20, followed by a three-month deferral of land tax for 2020-21. The following criteria must be met for a property owner to be eligible under the Queensland scheme:

  • The landowner rents all or part of a property to a tenant/s OR all or part of a property is currently available for lease; and
  • At least one tenant’s ability to pay their normal rent OR the landowner’s ability to secure a tenant is affected by the COVID-19 pandemic; and
  • the landowner provides rent relief to an affected tenant/s commensurate with the amount of the land tax rebate OR if the property is unable to be leased, the landowner requires land tax relief to meet their financial obligations (such as debt repayments); and
  • the landowner complies with new leasing requirements, even if the relevant lease is not regulated.

Meanwhile, the Treasury has also released the rules for the JobKeeper package following the passage of the relevant legislation last Wednesday. Eligible employers include those who meet the following:

  • their business has a aggregated turnover of less than $1 billion (for income tax purposes) and they estimate their turnover has fallen by more than 30 per cent or more; or
  • their business has an annual turnover of $1 billion or more (for income tax purposes) and they estimate their turnover has fallen or will likely fall by more than 50 per cent; and
  • the business is not subject to the Major Bank Levy.

While eligible employees are those who satisfy the following:

  • are currently employed by the eligible employer (including those stood down or re-hired)
  • were employed by the employer at 1 March 2020
  • are full-time, part-time, or long-term casuals (a casual employed on a regular and systemic basis for longer than 12 months as at 1 March 2020)
  • are a permanent employee of the employer, or if a long-term casual employee, not a permanent employee of any other employer
  • are at least 16 years of age at 1 March 2020
  • are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020
  • were a resident for Australian tax purposes on 1 March 2020
  • are not in receipt of a JobKeeper Payment from another employer

Businesses can register their interest at the ATO website.

Lastly, to round out our comprehensive services to assist National Retail Association members through this pandemic, we have now partnered with Vincents Chartered Accountants.  Vincents has volunteered to man a financial assistance hotline, offering members 15 minutes of complimentary advice from their financial directors. Vincents has also provided a series of webinars and budgeting templates you can access here. Please make use of the hotline by phoning 1300 846 236 7am – 9pm, Monday to Friday, and 10am – 4pm on weekends.