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On 7 April 2020, the National Cabinet released a mandatory code of conduct – ‘SME Commercial Leasing Principles During COVID-19’ (the Code) which aims to share the financial risk and cashflow impact during the COVID-19 period whilst balancing the interests of both tenants and landlords. For the Code to be effective, each State and Territory needs to enact legislation or regulations implementing the provisions in the Code.

Importantly, each State and Territory is at a different stage in implementing the Code and so this may affect charities and not-for-profits differently.  Set out below is the current status on a state-by-state basis:

Current status - 20 May 2020

NSW

What has been announced?

The NSW government implemented the Code through the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) on 24 April 2020 (the Regulation). The Regulation contains a number of measures to protect lessees who have been impacted by COVID-19. The Regulation makes a number of provisions which apply to leases with ‘impacted lessees’, including a moratorium on eviction for the non-payment of rent and a freeze on rent increases.

The NSW Government has also introduced land tax relief which will be given to commercial and residential landowners who provide a reduction in rent to a tenant experiencing financial distress as a result of COVID-19. The land tax reduction will amount to up to 25% of tax payable, depending on the amount of rent reduction provided to the tenant.

Will charities or not for profits qualify for relief?

The Regulation applies to ‘impacted lessees’ who are eligible for the Commonwealth’s JobKeeper scheme which appears to include charities registered with the ACNC if they have suffered a 15% turnover decline as a result of the coronavirus. Additionally, ‘impacted lessees’ must have had a turnover of less than $50 million in the financial year 2017-2018. The relevant ‘turnover’ is that of the ‘business’ conducted by the lessee, which is defined in Regulation 3 as ‘an undertaking (whether or not carried on with a view to profit) involving the manufacture, sale or supply of goods or services’. Therefore, whether a charity or not-for-profit will qualify for relief will depend on the nature and size of their ‘business’, and whether they are eligible for JobKeeper assistance. 

VIC

What has been announced?

The COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) (the Omnibus Act) was introduced and passed by Parliament on 23 April 2020 to implement the Code in Victoria. The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (the Omnibus Regulations) were subsequently adopted on 1 May 2020. The Omnibus Regulations make a number of provisions for eligible leases, including a moratorium on eviction for the non-payment of rent and a freeze on rent increases. The Omnibus Regulations also establish a mediation service available to tenants and landlords for the purpose of resolving disputes relating to the negotiation or non-payment of rent and other related matters.

The Victorian Government has announced land tax relief measures for eligible landlords. Commercial and residential landlords who provide rent relief to tenants impacted by Covid-19 may be eligible for a 25% reduction on land tax payable for 2020.

Will charities or not for profits qualify for relief?

‘Eligible leases’, defined by Section 13 of the Omnibus Act, include commercial leases under which a tenant is a SME entity or an employer qualifying for the Commonwealth JobKeeper scheme. As noted above, charities and not-for-profits registered with the ACNC with a 15% turnover decline qualify for the JobKeeper program. However, the Omnibus Act specifies that ‘eligible leases’ do not include commercial leases where:

• The tenant under the lease is a member of a prescribed group of entities and the aggregate turnover of the group of entities exceeds $50 million;
• There is a relationship or connection between the tenant and another entity, and the aggregate turnover of both the tenant and the entity exceeds $50 million; or
• There is an entity that has a prescribed method of control or influence relating to the ownership, management or affairs of the tenant.

Unless charities and not-for-profits are tenants in leases excluded by the Omnibus Act, it would appear that they are eligible for the rental relief provided by regulations made under the Omnibus Act.

QLD 

What has been announced?

The Queensland Government introduced the COVID-19 Emergency Responses Act 2020 (Qld) (the Emergency Responses Act) on 23 April 2020 to facilitate the implementation of the Code and make emergency regulations. On 7 May 2020, the Land (COVID-19 Emergency Response – Waiver and Deferral of Rents and Instalments) Regulation 2020 (Qld) (the Emergency Response Regulation) was passed. This Emergency Response Regulation creates a scheme for the waiver or deferral of rent for ‘eligible tenures’. On Thursday 28 May 2020, the Queensland Parliament passed the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) (Retail Shop Leases Regulation).This Retail Shop Regulation adopts the principles set out in the Code and provides a mechanism for dispute resolution during the pandemic. The Retail Shop Regulation applies retrospectively from 29 March 2020 and adopts several provisions to protect retail shop or other commercial leases, including a moratorium on evictions and a freeze on rent increases.

The Queensland Government has also announced land tax relief measures for landowners. Landlords who lease all or part of their property may be eligible for a land tax rebate if certain conditions are met. These conditions include

• whether the ability of the tenant to pay their normal rent is affected by the COVID-19 pandemic;
• if the landlord will provide rent relief to the affected tenants; and
• whether they will comply with the leasing principles even if the relevant lease is not regulated.

The land tax rebate will reduce land tax liabilities by 25% for the 2019-20 assessment year. Landlords may also be able to access a waiver of the 2% land tax foreign surcharge for foreign entities, and/or a 3-month deferral of land tax liabilities for the 2020-21 assessment year.

Will charities or not for profits qualify for relief?

Under the Emergency Response Regulation, an ‘eligible tenure’ is ‘a tenure, other than a tenure held by a government leasing entity’ of certain rental categories (s 5). These categories, defined in the Land Regulation 2009, include leases for ‘grazing or primary production’ (s 28), ‘business, commercial or industrial purposes’ (s 30), ‘sporting or recreational organisations’ (s 32), ‘telephonic, television, radio or other electronic communication services or a community service activity’ (s 33), or ‘DIP industrial estates’ (s 34). The eligibility of charities and not for profits will depend on whether they can fit into one of these categories.  The Retail Shop Leases Regulation applies to all SMEs that are eligible for the JobKeeper program. As mentioned previously, charities and not-for-profits registered with the ACNC with a 15% turnover decline qualify for the JobKeeper program.

If a charity or not-for-profit’s ability to pay their normal rent has been affected by the COVID-19 pandemic, and their landlord meets the other conditions for a land tax waiver, the landlord is expected to apply the rebate firstly to provide rent relief to the tenant. Therefore, an affected charity or not-for-profit should see relief under these measures.

WA

What has been announced?

The Commercial Tenancies (COVID-19 Response) Act 2020 (WA) (the COVID-19 Response Act) was introduced on 23 April 2020 to prevent evictions, rent increases and other ‘prohibited actions’. On 29 May 2020, a Code of Conduct was enacted under Schedule 1 of the Commercial Tenancies (COVID-19 Response) Regulations 2020 (WA) 2020 (Code of Conduct). The Code of Conduct implements the federal Code to regulate negotiations between landlords and tenants affected by COVID-19. Under the Code of Conduct, all parties to a lease must cooperate, act reasonably and in good faith, and provide each other reasonable information in an honest and transparent manner. The Commercial Tenancies (COVID-19 Response (Early Termination)) Bill 2020 (WA) is still awaiting assent and, if enacted, will allow for the early termination of commercial leases in certain circumstances if tenants are in severe financial distress.

The WA Government has announced that rental payments for small businesses and not-for-profits that lease from Government agencies and trading enterprises will be waived for six months. Commercial landlords in Western Australia may be eligible for land tax relief. To be eligible, landlords must have waived rent and outgoings for three months (or equivalent) for their tenant, who must have experienced a least a 30% decline in turnover.

Will charities or not for profits qualify for relief?

The COVID-19 Response Act applies to the following ‘small commercial leases’:

• A retail shop lease (as defined by section 3(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)); or
• A lease where the tenant owns or operates a small business (as defined by section 3(1) of the Small Business Development Corporation Act 1983 (WA)) and uses the land or premises that are the subject of the lease for the purpose of carrying on that business; or
• a lease where the tenant is an incorporated association; or
• any other lease that may be prescribed by subsequent regulations.

Therefore, all incorporated associations will qualify for relief under the COVID-19 Response Act. The eligibility of other charities and not-for-profits will depend on whether their lease fits into one of the listed categories. The Code of Conduct applies to all leases involving a tenant who is eligible for the JobKeeper program and has a turnover of less than $50 million.

As noted above, charities and not-for-profits leasing from Government agencies will be eligible for a six-month rental payment waiver.

SA

What has been announced?

Under the COVID-19 Emergency Responses Act 2020 (SA), the SA Government introduced the updated COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (SA) (the Commercial Leases Regulations) on 15 May 2020. The Commercial Leases Regulations provide several measures to protect commercial lessees who are experiencing financial hardship due to COVID-19. This includes a moratorium on evictions, a freeze on rent increases and the establishment of a dispute resolution mechanism.

Landlords who provide tenants impact by COVID-19 with rent relief may be eligible for a reduction in land tax payable for the 2019-20 land tax year. On 13 May 2020, the Local Government (Public Health Emergency) (Rate Relief) Amendment Bill 2020 was introduced into the House of Assembly in South Australia. If passed, these measures would provide 100% land tax rebates to business or not-for-profit organisations whose activities on the relevant land have ceased or have been restricted as a result of COVID-19. 

Will charities or not for profits qualify for relief?

To be eligible for relief as 'affected lessee' charities a not-for-profits must be eligible for the JobKeeper Program and have an annual turnover of less than $50 million. As noted above, generally charities and not-for-profits registered with the ACNC with a 15% turnover decline qualify for the JobKeeper program.

Landlords will be eligible for the land tax reduction if their tenant is eligible for the JobKeeper program, which includes registered charities and not-for-profits.

TAS

What has been announced?

The Tasmanian legislation to implement the Code, COVID-19 Disease Emergency (Commercial Leases) Act 2020 (Tas) (the Disease Emergency Act), commenced on 13 May 2020. The Disease Emergency Act contains a number of measures including preventing evictions or rent increases for eligible lessees. The legislation is designed to enable an apportioning of the financial burden between parties to affected leases. The financial hardship period under the Disease Emergency Act will extend from 1 April 2020 until 12 months after the commencement on 13 May 2020, unless the Treasurer decides otherwise.

The Commissioner for State Revenue has administered measures to waive land tax for commercial property in Tasmania. The State Revenue Office has stated that land tax will be waived for commercial property for the 2020-2021 financial year where the business owner is both liable for the land tax and can demonstrate that their business operations have been affected by COVID-19. The State Revenue Office will publish more information once the future administrative details for taxpayers are prepared.

Will charities or not for profits qualify for relief?

To be eligible for relief under the Disease Emergency Act, a charity or not for profit must be eligible for the JobKeeper program and be classified as an SME entity, as defined by the Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Act 2020 (Cth). A non-profit can qualify as an SME entity providing its expected turnover for the current year, or its annual turnover for the previous year, was less than $50 million.

If a charity or not-for-profit is liable to pay land tax on a commercial property, it will be waived if they can demonstrate that their business operations have been affected by COVID-19. There has not yet been any advice from the Commissioner for State Revenue as to what extent business operations must have been affected to qualify for relief. The State Revenue Office is due to provide further details in the near future.

ACT

What has been announced?

The COVID-19 Emergency Response Act 2020 (ACT) (the ACT Act) empowered the Minister to make a declaration prohibiting the termination of commercial and retail leases and repossession of the premises. Pursuant to this power, the Leases (Commercial and Retails) COVID-19 Emergency Response Declaration 2020 (ACT) (the Declaration) came into effect on 12 May 2020. The Declaration applies to prescribed leases, defined as residential or commercial leases in the ACT entered into prior to 7 April 2020, with ‘impacted tenants’. Under the Declaration, if an impacted tenant commits a ‘prescribed breach’ of its lease (failure to pay rent or other amounts due; failure to operate its business during the hours required), the landlord cannot take any ‘prescribed action’ (eviction, draw down on security etc) until they have engaged in ‘good faith negotiations’ with the impacted tenant.

As part of the ACT Government COVID-19 Economic Survival Package, the government will provide a land tax credit to landlords of residential properties who reduce rents by at least 25% for tenants impacted by COVID-19. The credit will be equal to 50% of the rent reduction, with a cap of $1,300 per quarter (about $100 per week), for up to six months. This should be applied to tenants and will provide rental relief of up to $200 per week. To access the rebate, landlords need to complete a short online form.

Will charities or not for profits qualify for relief?

The Declaration applies to ‘impacted tenants’ who qualify for the JobKeeper program and had a turnover of less than $50 million in the 2018-19 financial year. Provided they fulfil those criteria, it would appear that they are ‘impacted lessees’ to which the Declaration applies.

If a charity or not-for-profit has agreed with their landlord on a rent reduction of at least 25%, their landlord will be able to access a land tax credit of up to approximately $100 per week, or half the amount of the rent reduction. This will provide eligible charities and not-for-profits with relief of up to $200 per week.

NT

What has been announced?

The Tenancies Legislation Amendment Act 2020 (NT) commenced on 25 April 2020. Part 2 implements amendments to the Business Tenancies (Fair Dealings) Act 2003 (NT). Under those amendments, the Minister has the power to regulate business premises or business leases by publishing a modification note in the Gazette. The amendments also facilitate later amendments to be made to tenancy laws, but do not give effect to any substantive changes. On 28 April 2020, the Attorney-General and Minister for Justice published the Business Tenancies COVID-19 Modification Notice 2020 (NT) ('Modification Notice') under section 11B(2)(a) of the Business Tenancies (Fair Dealings) Act 2003 (NT). The Modification Notice makes it mandatory for all landlords to engage in negotiations with their tenant for 30 days before giving 'notice to quit' the lease.

Will charities or not for profits qualify for relief?

The Modification Notice appears to apply across all leases regulated by the Business Tenancies (Fair Dealings) Act 2003 (NT). It remains unclear whether further relief will become available to charities and not-for-profits.

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