What the COVID-19 Stimulus Packages means for your clients
Both the Federal and Victorian Governments have made further announcements of financial support over the weekend aimed at responding to the health and economic challenges posed by the spread of coronavirus / COVID-19 (CV).
The value of economic stimulus at both the Federal and Victorian level is now $191 billion (not including other States and Territories) and we recommend that you continue to monitor any further government announcements that come to hand over the next few days and identify which of your clients may be able to access economic stimulus.
These further measures of support are in addition to the previous support packages announced which took the form of a $17.6 billion economic stimulus package and a $2.4 billion health package (First Stimulus Package). Please see our Special Edition on Friday 13 March 2020 for more information. The Special Edition can be accessed here.
Set out below is a summary of the support offered at both the Federal Government and Victorian Government level in addition to some additional considerations for your clients to be aware of. We expect that in the coming weeks, further support will be announced.
The Second Stimulus Package – Federal Government
The Second Stimulus Package offered by the Federal Government has been referred to as the ‘safety net package”. This package aims to provide a further $66 billion in support of individuals and small business to ‘cushion the blow’ of the economic impact of CV.
We understand that in order to make these measures available as soon as possible, a fast track Parliamentary timetable has been set to enact the necessary legislation as soon as possible.
The key announcements made in relation to the measures offered by the Second Stimulus Package for Employers are:
All employers who are classified as a “small businesses” will receive at least $20,000 to continue wage payments to staff.
This amount will generally increase with the size of the business, up to $100,000. No application is required for this payment.
If your business is eligible, it will be paid via the ATO from 28 April 2020.
The Federal Government have announced that they will guarantee small businesses who take business loans of up to $250k for up to 3 years.
The guarantee is for 50% of the loan value.
No repayments will be due on these loans for the first 6 months.
The threshold debt amount to be declared bankrupt has moved from $2,500 to $20,000.00. The period to respond to a company statutory demand has increased from 21 days to 6 months. There is relief under the Corporations Act for matters such as insolvent trading, thereby providing protection for company directors.
Other requirements under that Act will also be relaxed, particularly around timing requirements.
The key announcements made in relation to the measures offered by the Second Stimulus Package for Employees are:
Newstart / job seeker payment
The rate of this payment has been doubled (approx. $1,100 per fortnight) and the application process has been made easier by removing the “asset test”. In addition, there is now no waiting period for the jobseeker payment, making this much easier to get.
Under the First Stimulus Package, recipients of government payments should qualify for an immediate $750 payment.
Now, a further payment of $750 will be made with effect from 13 July for eligible employees. These will be paid together with the government allowance.
Access to superannuation
Sole traders and employees whose income has reduced by 20% or more as a result of CV will be able to access a component of their superannuation funds, tax free.
The component of the superannuation fund that is available to be withdrawn is $10k this financial year and a further $10k next financial year.
Victorian Government Support Package
The Victorian Government has announced its support package for small business of $1.7 billion. This includes $500 million support for small businesses most impacted by CV which includes those operating in the hospitality, tourism, accommodation, arts and entertainment and retail industries. The specific form of this assistance for these sectors is not yet clear.
To the extent known, the support is as follows:
Payroll tax relief / refund
The Victorian Government has announced that any payroll tax paid this financial year to date will be refunded to businesses with payroll less than $3m. This will be automatic.
There will be a deferral of payroll tax obligations for the July to September 2020 period, through until 1 January 2021.
Commercial tenants in government buildings
Rent relief can be provided upon application by a tenant. Although this does not apply to private tenancy arrangements, private landlords are urged to also give relief where requested.
Liquor licence fees waived for the 2020 period
Where a liquor licence fee has been paid, the fee will be refunded.
Loan repayment relief 6 months
The Australian Banking Association, has announced that banks will defer loan repayments for mall businesses affected by CV for up to 6 months.
Commercial rent relief
The State governments are presently working on formalising a relief package directed to commercial tenancies. This form of relief has not yet been announced.
Reduced lending rates and relaxed criteria
The RBA has cut the official cash rate to 0.25 per cent and this has, or will, result in most banks cutting their lending rates.
Both the Federal Government and the RBA have injected $105 billion into banks and lenders, to try to assist with the provision of credit to struggling small businesses. $90 billion of this is intended to fund loans to small and medium businesses.
Credit institutions will be afforded temporary exemption from responsible lending obligations so that small business can access credit quickly and with less red tape.
Indoor gathering limits
The previous Federally imposed limit on non-essential indoor gatherings was 100 persons. This has now been reduced to 1 person per 4 square metres of indoor space. For settings where there is ongoing movement and an increased number of interactions between individuals, an individual’s attendance at the setting should be limited to less than two hours’ duration.
Accordingly, if premises remain open to the general public, the occupier needs to know the indoor floor area and impose relevant attendance limits.
For those clients with tenancy arrangements in place some of the measures above will have an impact on both the tenant and landlord’s obligations.
On the basis that at this point in time, none of the Government initiatives above directly address private tenancy arrangements, it will be of critical importance to determine whether the current lease on foot between landlord and tenant can accommodate things such as:
- Cessation of trade noting under the Retail Leases Act, tenants are obliged to keep their premises open for trade during the term of the lease;
- Whether a tenant opting to force a shut down to protect its employees under health and safety law is a contravention of the lease;
- The application of any rental abatement clauses in the event of a mandatory shutdown;
- The existence of a “force majeure” clause to end the contract; and
- Notification obligations in the event of an outbreak of the CV on the premises.
All employers and employees have statutory duties under the Occupational Health and Safety Act 2004 in Victoria.
Now is the time to remind those clients who employ staff that they must comply with the following obligations to maintain the safety of their workplace, to a standard that is “so far as is reasonably practicable”:
- Provide and maintain a working environment that is safe and without risks to the health of employees and independent contractors;
- Provide such information, instruction, training or supervision to employees and independent contractors as is necessary to enable those persons to perform their work in a way that is safe and without risks to health;
- Monitor the health of employees of the employer;
- Monitor conditions at any workplace under the employer’s management and control;
- Provide information concerning health and safety to employees, including (where appropriate) in languages other than English;
- Ensure that persons other than employees of the employer are not exposed to risks to their health or safety arising from the conduct of the undertaking of the employer; and
- Consult with employee, on matters related to health or safety that directly affect, or are likely to directly affect them.
From a practical perspective, in relation to the CV, this means that:
- If an employee is at risk of an infection from CV and / or is subject to quarantine orders, the employee should be requested to work from home;
- If an employer considers that it cannot reasonably ensure the workplace is a safe working environment, consideration should be given to closing the workplace and directing employees to work from home and preventing access by others (e.g. customers etc); and
- If employees are ready, willing and able to work, generally they are entitled to be paid. If the employee cannot work due to the CV or risk of it, the entitlement to payment may cease during the infection / risk period.
Employees also have duties under the Occupational Health and Safety Act 2004, which includes that they must:
- Take reasonable care for their own health and safety;
- Take reasonable care for the health and safety of persons who may be affected by the employee’s acts or omissions at a workplace; and
- Co-operate with their employer with respect to any action taken by the employer to comply with a requirement imposed by or under the legislation.
In responding to the challenges posed by CV, employers may be faced with a decision to stand down or terminate staff.
It is important to be aware that generally, the Fair Work Act 2009 contains laws dealing with stand down and termination actions and these can usually only be invoked where there is a statutory entitlement to do so.
In terms of “stand downs”, only events such as industrial action, a breakdown in machinery / equipment or there is a stoppage of work for any reason the employer cannot be reasonably be held responsible are justifiable for a “stand down” to be considered lawful. If a stand down is permitted as lawful, the employer is relieved of the obligation to pay wages.
It is important to also be aware that certain Awards, such as the Health Services Award, sets out the legal obligations of an employer during a “close down period” (which is effectively a “stand down”) and therefore must be looked at in addition to the statutory provisions.
Under the Health Services Award, where an employer temporarily closes a dental or medical practice, an employee may be directed to take paid annual leave during part or all of this period provided such direction is reasonable. Where an employee does not have sufficient accrued annual leave for this period, they may be required to take annual leave in advance where such requirement is reasonable.
Accordingly, for health professionals, a stand down period can result in an employer continuing their obligations to pay wages during the period of the stand down.
In terms of termination, there are a whole range of protections available at law to ensure that any termination of an employee is lawful. These are provided through the Fair Work Act 2009 and “general protections” which prohibit an employer from terminating an employee’s employment for a reason based on sex, age or sexual preference (for example) or because an employee exercised a workplace right.
If termination is genuinely attributable to a major disruption to business caused by the CV, such termination is unlikely to offend the unlawful termination provisions or any of these prohibited reasons. That said, termination of an employee can give rise to very adverse consequences for an employer. It is therefore essential that professional advice is obtained, prior to terminating any staff to at least ensure that the correct processes are applied.
This article is intended to provide you with an overview of the current initiatives being developed by the Federal and Victorian government in dealing with CV. We will provide further information and updates as that information comes to hand.
In the meantime, if you or your clients have any questions, please do not hesitate to contact us.
We’re here to help.
Ann-Maree Ventura Special Counsel