The National Cabinet in April 2020 introduced the Mandatory Code of Conduct for commercial tenancies (“the Code”) that provided a set of good faith leasing principles for landlords and their tenants to use for negotiations. The specifics of the Code was required to be legislated at a state level, where for example the Victorian Government introduced regulations of the scheme via the COVID-19 Omnibus (Emergency Measures) Act 2020.
You can refer to previous articles for more information on this topic:
- Rental relief provides a big relief
- Impact of the Mandatory Code of Conduct for commercial properties
- Documenting the temporary rental relief
With Victoria continuing to struggle under the pressure of a stage 4 lockdown in Melbourne and stage 3 across the remainder of the State, it has required the State Government to recently announce an extension and changes to the Scheme until 31 December 2020. This means negotiations for rent relief between a commercial tenant and their landlord must consider this timeframe. These regulations is Victoria were previously only available from 29 March to 29 September 2020 (6 months as the pandemic period).
Currently, no other states or territories have extended the application of their Regulations beyond the current date (end of September for most States except for NSW which lapses on 24 October 2020).
In addition to extending the period that rent relief will be available, the Regulations will be updated to include a specific requirement that rent relief be proportionate to the reduction in the tenant’s turnover, something that was notably different in the original regulations in Victoria to other states and the principles of the Code – i.e there was previously no explicit requirement for rent relief to be proportionate to the tenant’s reduction in turnover.
This change will align closer to the Code and will only be effective on a prospective basis, ensuring that any pre-existing arrangements between landlords and tenants which is not calculated with reference to the tenant’s turnover should not be subject to the new requirement.
Documentation is critical
The ATO has already placed significant importance on trustees as landlords to have in place adequate documentation to support any temporary rental relief, including but not limited to the revised terms of the rental agreement.
In particular, we have recently seen the ATO release draft legislative instrument, SPR 2020/D2 that provides an in-house asset exclusion for COVID-19 Rental income deferrals, in addition to previous changes announced for auditor contravention reporting (ACRs) to deal with various COVID-19 matters.
You can find more information about these extended measures, including a range of FAQs on the Victorian Small Business Commission website.
Smarter SMSF currently adding documentation to prepare extended rent relief for commercial tenancies to complement the already available documents provided COVID-19 rent relief, including through compliance in following the Mandatory Code of Conduct for commercial tenancies.
For more information, visit our dedicated COVID-19 page.
Smarter SMSF also offers a variety of smsf documents including pension documents, smsf investment strategies and more. Browse our selection today.