COVID-19 (Coronavirus) Financial Services Regulatory Response as at 9 April 2020

JobKeeper legislation passed 

The Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 and the Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020 were introduced into and passed by the House of Representatives and Senate on 8 April 2020. The Bills are awaiting Royal Assent.

UPDATE: Acts assented to on 9 April 2020.

The Bills deal with the JobKeeper wage subsidy as well as taxation and workplace aspects of the Commonwealth Jobkeeper package. Employers will have the power to reduce employees’ agreed hours or ask staff to take annual leave during the pandemic period.

A cross-party Senate Select Committee has been appointed to review and report on the Australian Government’s response to the COVID-19 pandemic.

Fair Work Commission award changes

The Fair Work Commission has announced its intention to vary 103 modern awards to provide an entitlement to 2 weeks’ unpaid “pandemic leave” and the flexibility to take annual leave at half pay.

APRA guidance on capital management

The Australian Prudential Regulation Authority (APRA) has written to all authorised deposit-taking institutions (ADIs) and insurers to provide guidance on capital management during the period of significant disruption caused by COVID-19.

In a letter to ADIs, general insurers, life companies, and private health insurers, APRA outlined its expectations that these institutions limit discretionary capital distributions in the months ahead, including deferrals or prudent reductions in dividends.

Mandatory code of conduct and SME commercial leasing principles

The National Cabinet has published a Mandatory code of conduct and SME commercial leasing principles.

The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies (including retail, office and industrial) between owners/operators/other landlords and tenants, where the tenant is an eligible business for the purpose of the Commonwealth Government’s JobKeeper program with an annual turnover of up to $50 million.

The leasing principles include:

1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period).
2. Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under the Code.
3. Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant’s trade during the COVID-19 pandemic period and a subsequent reasonable recovery period.
4. Rental waivers must constitute no less than 50% of the total reduction in rent payable under principle #3 above over the COVID-19 pandemic period and should constitute a greater proportion of the total reduction in rent payable in cases where failure to do so would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease agreement. Regard must also be had to the Landlord’s financial ability to provide such additional waivers. Tenants may waive the requirement for a 50% minimum waiver by agreement.
5. Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties.

The Code applies to all tenancies that are suffering financial stress or hardship as a result of the COVID-19 pandemic as defined by their eligibility for the Commonwealth Government’s JobKeeper program, with an annual turnover of up to $50 million. The JobKeeper program requires businesses to show their turnover has decreased by 30% against a comparable period of at least a month over the last year.

The $50 million annual turnover threshold will be applied in respect of franchises at the franchisee level, and in respect of retail corporate groups at the group level (rather than at the individual retail outlet level).

The Code comes into effect in all states and territories from a date following 3 April 2020 (being the date that National Cabinet agreed to a set of principles to guide the Code to govern commercial tenancies as affected by the COVID19 pandemic) to be defined by each jurisdiction, for the period during which the Commonwealth JobKeeper program remains operational.

The role of banks
National Cabinet noted that it expects Australian and foreign banks along with other financial institutions operating in Australia, to support landlords and tenants with appropriate flexibility as they work to implement the mandatory Code.

Residential tenancies
The states and territories will separately enact laws prohibiting the evictions of residential tenants for 6 months for rental arrears arising from COVID-19 financial hardship.

Temporary changes to the foreign investment framework

On 29 March 2020 the Treasurer announced temporary changes to Australia’s foreign investment framework. The changes mean that all proposed foreign investments into Australia subject to the Foreign Acquisitions and Takeovers Act 1975 will now require approval, regardless of the dollar value of the proposed deal or the nature of the foreign investor.

The changes will apply to all foreign persons subject to the Act, irrespective of the investor’s country of origin, and irrespective of whether they are a private foreign investor or a foreign government investor.

The changes will remain in place for the duration of the COVID-19 crisis.

The Foreign Investment Review Board (FIRB) has posted a Q&A about the changes here.

APRA temporarily suspends the issuing of new licences

The Australian Prudential Regulation Authority (APRA) has written to applicants for new banking or insurance and superannuation licences to advise that it is temporarily suspending issuing new licenses for at least six months in response to the economic uncertainty created by COVID-19.

Austrac invites SMRs about COVID-19 crime

Austrac has encouraged reporting entities to monitor for new and emerging threats during COVID-19 and submit suspicious matter reports (SMRs) to AUSTRAC.

AUSTRAC has identified areas of criminal exploitation where the financial system may be more vulnerable during the COVID-19 pandemic. These include:

  • Targeting of government assistance programs through fraudulent applications and phishing scams;
  • Movement of large amounts of cash following the purchase or sale of illegal or stockpiled goods;
  • Out of character purchases of precious metals and gold bullion;
  • Exploitation of workers or trafficking of vulnerable persons in the community;
  • An increase in the risk of online child exploitation following restrictions on travel;
  • A rise in extremist views either against members of the community or the government.

Changes to contactless PIN limit

The Australian Payments Network has announced that the payments industry will be temporarily increasing the contactless card PIN limit from $100 to $200 to help reduce the risk of COVID-19 transmission by reducing physical contact with the payment terminal.

The new $200 limit will be progressively introduced across certain cards and at certain retailers starting in April 2020.

The change is a temporary measure in response to COVID-19. It is expected to apply for a three-month period and will be extended if necessary, based on Government advice.

ATO shortcut for expenses of employees working from home

The ATO has announced guidance for deductions for expenses employees working from home can claim.

Assuming the claim does not relate to expenses for items provided by the employer or if the employee has been reimbursed for the expense, the ATO says employees can claim a deduction of 80 cents for each hour they work from home due to COVID-19 as long as they are:

  • working from home to fulfill their employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls,
  • incurring additional deductible running expenses as a result of working from home.

Employees do not have to have a separate or dedicated area of their home set aside for work, such as a private study.

The shortcut method rate covers all deductible running expenses.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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