On 23 March 2020, the Australian Government successfully passed the Coronavirus Economic Response Package Omnibus Act 2020 (Act). The corresponding bill, having only been announced one day prior, was fast tracked through Parliament to help address the economic crisis caused by Novel Coronavirus (COVID-19). This Act forms part of the Government’s $189 billion response to the economic downturn caused by the virus. Some of the key impacts of the Act are as follows:
Improved Tax Benefits for Businesses
Instant Asset Write Offs
The Act has amended income tax laws to increase the cost threshold of depreciating assets and certain related expenses that small businesses can claim an immediate deduction for (Instant Asset Write Off). The threshold has temporarily increased from $30,000 to $150,000 until the end of this financial year. The Act has also increased the size of businesses that Instant Asset Write Offs are available to, allowing businesses with an aggregated turnover of between $10 million and $500 million (increased from between $10 million and $50 million) to make claims.
Accelerated Deduction Rates
In addition to more Instant Asset Write Offs, the Act also allows for accelerated rates of claiming deductions for other depreciating assets. Businesses with under $500 million in aggerated turnover can now claim these accelerated rates for new assets purchases. Businesses under $10 million in aggregated turnover can claim 57.5% (increased from 15%) in deductions per year. Note that for an asset to qualify for these deductions, the asset must be new, purchased between 12 March 2020 and 30 June 2021, and not previously been used or been claimed as a deduction by another entity. These changes are designed to encourage businesses to continue making investments, and support economic growth for the next year.
Boosting Cash Flow for Employers
The Government has also implemented a scheme that will provide between $20,000 and $100,000 to eligible small and medium sized businesses, as well as non-for-profit organisations, such as charities, that employ people. This will be done through two sets of cash flow boosts delivered from 28 April 2020, and aim to support employers to retain employees. You can read more about the eligibility requirements for this cash flow injection here:
Temporary Changes to the Insolvency and Bankruptcy Regime
Insolvent Trading
The Act operates to relax the application of some sections of the Corporations Act 2001 (Cth) (Corporations Act) to provide temporary relief for financially distressed businesses. It essentially provides a 6-month moratorium against directors incurring personal liability for trading a company whilst insolvent. Under usual circumstances, trading whilst insolvent is a breach of director’s duties under s 588G(2) of the Corporations Act, and will give rise to personal liability related to any debts incurred whilst insolvent. This 6-month period of relief will allow directors some flexibility in attempting to trade themselves out of insolvency during this economic slump.
It is well worth noting that this effect does not operate retrospectively, and the moratorium only applies to debt incurred in the 6 months following the commencement of the legislation (25 March 2020 to 25 September 2020). The legislation is not specific about protection granted to debts that are incurred outside the ordinary course of the company’s day to day business, so it is recommended that directors not be too liberal with this protection. The Act is also silent regarding other director’s duties, and directors should not assume they are immune from all personal liability under the Corporations Act.
Statutory Demands
The Act also operates to reduce pressure on financially distressed businesses by granting temporary relief from statutory demands. Statutory demands are a tool used to put a company on formal notice of a debt. If a company fails to respond to a statutory demand within the time limit, they are presumed to be insolvent and can have winding up proceedings brought against them. The Act makes the following notable changes:
1. The monetary threshold to issue a statutory demand has increased from $2,000 to $20,000;
2. The time limit to respond to a statutory demand before a company is presumed insolvent has been extended from 21 days to 6 months; and
3. These changes only apply to statutory demands issued during the 6 months after the commencement of the Act (25 March 2020 to 25 September 2020).
Bankruptcy
Similar to the above changes to statutory demands, amendments have also been made to personal bankruptcy laws to ease financial pressure on individuals who are bankrupt or are nearing bankruptcy. These changes are as follows:
1. The monetary threshold to issue a bankruptcy notice has increased from $5,000 to $20,000;
2. The time limit to respond to a bankruptcy notice before a debtor commits an act of bankruptcy has been extended from 21 days to 6 months; and
3. These changes only apply to bankruptcy notices issued during the 6 months after the commencement of the Act (25 March 2020 to 25 September 2020).
Conclusion
These changes are just a portion of the full suite of economic relief measures introduced by the Act to combat the impacts of COVID-19. Other measures include the early release of superannuation funds, stimulus payments to households, and additional support for workers with children, just to name a few. Hopefully these measures will be enough to help local Australia businesses survive the mandatory shutdown periods and continue trading well into the future.
In the wake of the COVID 19 pandemic, the NSW Treasurer Dominic Perottet MP has confirmed that the NSW Government’s infrastructure program will continue.
On 23 March 2020, Mr Perrottet MP issued a letter outlining the NSW Government’s position, a copy of the letter can be found here.
Mr Perrottet MP explains that the NSW Government will remain to act in accordance with the ‘advice of NSW health officials’ for communities to remain safe, as well as maintaining the continuation of the vital building work in a practical and strategic manner. This will allow the industry to remain afloat and functional during this period. In doing this, Mr Perrottet MP expands on the finances that will be expended to provide for the 6-month program. He explains;
“The NSW Government announced a major $2.3 billion Health Boost and Economic Stimulus package to protect the community and help protect jobs in the face of the COVID-19 outbreak over the next six months. This package has two key components: $700 million in extra health funding and $1.6 billion in tax cuts to support jobs.”
Flexibility with contractors
In order to keep projects on schedule, collaboration between contactors and agencies is being urged by NSW Government. Mr Perrottet MP explains;
“Our 10-Point Commitment to the Construction Industry sets out the collaborative approach we expect from all parties. The Government’s Construction Leadership Group will monitor developments over the coming months, and Infrastructure NSW will facilitate industry-wide discussions over this period.”
The NSW Government is strongly encouraging contractors to communicate with their client agencies immediately in the event of any potential issue. This will likely be critical in the NSW Government allowing the infrastructure program to move ahead and in keeping the industry operational at a time when non-essential services are being shut down.
Operational Challenges
As the measures implemented by NSW Government to reduce the spread of COVID-19 have yet to reach the desired outcome of slowing the pandemic, the question becomes; how long until the NSW Government shuts down the construction industry?.
The press release by Mr Perrottet MP should provide some comfort for those working in, or supplying to, the construction industry, but as the situation remains fluid all businesses should be implementing a backup plan.
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Over the weekend the Prime Minister Scott Morrison announced an agreed set of principles that deals with commercial tenancies, which will be later legislated by the states and territories.
What are the agreed set of principles?
The agreed set of principles are:
What practical steps can landlords and tenants take?
It is recommended that landlords and tenants immediately discuss ways forward, keeping in mind the above agreed set of principles, to come together to form workable solutions. It is also advised that all correspondence is kept in writing in case either party decides to make a claim.
What we can do?
At Chamberlains, our experienced Property Team can help both landlords and tenants in understanding their leasing obligations, and how to move forward in this ever-changing environment.
COVID-19 and Utilising Safe Harbour Provisions:
Safe harbour provisions provide an exception to business directors from liability when trading as insolvent when the company is establishing a course of actions, such as a restructuring plan, that would result in an outcome better than entering liquidation or administration.
Considering the current uncertain climate that many business owners face due to the COVID-19 outbreak, there are substantial disruptions and event breakdowns in business operations. Failures in key supply chains, staff shortages and general economic uncertainty pose serious issues to business owners which cannot be satiated long-term by government stimulus.
Whilst a ‘business as usual’, ‘wait it out’ approach may work for some businesses, the reality for many businesses is that this will not be the case.
It is important to note however, that Safe Harbour provisions have complex criteria and qualifications that need to be met.
Using Safe Harbour when affected by COVID-19 and similar situations:
Why should you be proactive?
Safe Harbour provisions enable directors to be protected from liability outlined under s 588G of the Corporations Act, during their attempts to restructure the business. Generally, these provisions when combined with restructuring processes assist in critically governing of financially distressed companies.
Undertaking Safe Harbour provisions and restructuring efforts also enable directors to consider alternative, potentially more effective, business strategies to implement in order to build, maintain and protect long term viability.
How would implementing Safe Harbour provisions work?
Considering the complex requirements for these provisions to be used, directors should carefully consider whether they should implement them. If they believe exploring this avenue is the best option, seeking assistance from an advisor in insolvency is important to ensure your business meets the entry requirements under Corporations legislation. If your advisor has indicated the business is capable of meeting these entry requirements, then establishing a course of action which would lead to a better outcome than administration/liquidation is required (e.g. restructuring).
Benefits to Using Safe Harbour Provisions:
Establishing a restructuring plan:
Establishing a restructuring plan with your business’ advisor is important to ensure the Safe Harbour provisions apply. These plans can include:
Safe Harbour going forward:
If Safe Harbour has been granted and your company is afforded the relevant protections from the legislation, what then?
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A trade mark communicates your brand and businesses identity to the public, and acts as a strong marketing tool that shows clients and consumers who you are.
You can help the public identify your trade mark by using the ™ and ® symbol after your trade mark:
However, it is important to note the difference between the ™ and ® symbol.
What is the TM symbol?
Generally, to advertise what your trade mark is, you can use the ™ symbol after your trade mark at any point in time in any country. Using the ™ symbol helps the public recognise and remember your business.
What is the ® symbol?
You can only use the ® symbol once your trade mark is registered and in the country that your trade mark is registered.
You can use the symbol if your trade mark is registered overseas and not in Australia, however you are required to show the country of registration close to it.
Although it is legal to use the TM symbol without registration, it is an offense if the ® symbol is used without a registered trade mark. The Australian Federal Police, Customs Border Patrol or Intellectual Property Specialists deal with infringements of this nature and can be utilised if you require legal aid in such circumstances.
What does a Registered Trade Mark Give Me?
Once your trade mark is registered you are legally able to enforce your trade mark rights and actively stop others from using your trade mark and trade marks that are deceptively similar to your registered trade mark.
Without trade mark registration, you are vulnerable to other businesses using your trade mark to see their goods and services.
Seeking legal advice through an Intellectual Property Specialist is a highly effective way of understanding your trade mark and remaining in the know about the status of your intellectual property.
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Media release.
Chamberlains Law Firm announces the launch of a new Intellectual Property (IP) practice. The new practice continues the expansion of Chamberlains’ full-service offer to provide creative and specialised advice for clients. The firm now offers its expertise on Patents, Trademarks, Designs and IP protection in Australia and New Zealand.
The practice will be headed by Linda Katnic, a registered Patent and Trademark attorney who has experience across a variety of intellectual property sectors. Linda has worked with large multi-national organisations, as well as small to medium sized businesses and individuals. Linda will be supported by Mark North, who has worked closely with Australia’s leading video game development academy and has acted for many Canberran technology start-ups, assisting them in commercialising and protecting their intellectual property.
Chamberlains’ Managing Director, Stipe Vuleta’s comments on the launch “Chamberlains has long been a leader in the property and corporate sectors and the launch of our new intellectual property offering enables us to look after our clients whole development lifecycle, from creation of an idea, through growth of their venture and to the maturity of their business.”
The new practice aims to provide flexible and creative legal advice to meet the individual style and needs of different clients and was launched as of Wednesday 25 March. Chamberlains’ IP practice includes the following areas:
Following the recent outbreak of the Coronavirus (COVID-19) pandemic, many nations have reacted with drastic measures in a bid to limit the contagion. In Australia, the most recent measures include the indefinite closure of ‘non-essential’ businesses. As a result of these measures, many businesses are now assessing their contractual rights and the legal implications under their contracts, including commercial leases and service contracts.
Infectious Disease Provisions
Most leases include an infectious disease provision. These clauses generally require the tenant to provide the landlord and relevant Authorities with notice of any infectious disease. Where the infection is confined to the premises, the tenant must, at its own cost, take necessary action to prevent the spread of the disease – including fumigating the premises.
A failure to comply with these provisions is a breach of a lease covenant. The landlord may seek to terminate for breach and sue for damages.
Force Majeure
Due to the rapidly evolving circumstances of the Coronavirus outbreak, it is not inconceivable that many commercial and/or retail buildings may be forced to shut down as the Government continues to introduce further measures to limit the contagion.
Generally, a force majeure clause excuses parties from their contractual obligations and liabilities in circumstances beyond their reasonable control. These clauses expressly stipulate specific events and may include an ‘Act of God’ or events such as epidemics, pandemics and Government acts.
As there is no common law doctrine of force majeure, the ability to rely on force majeure is subject to the commercial agreement between contracting parties and is generally determined on a case-by-case basis. Subsequently, parties should review their contracts to confirm that a force majeure clause applies and the application of such clause.
In order to rely on force majeure provisions, a party will need to provide written notice of the force majeure event to the other party. In conjunction with issuing a notice, the party should engage with the other party to assess the implications of the force majeure event on the contract and agree to viable commercial solutions.
Although force majeure clauses are often found in commercial contracts including building contracts, they are rarely included in standard leases. As a result of this pandemic, it may be prudent to consider including force majeure clauses in leases moving forward.
Frustration
The doctrine of frustration is recognised at common law and (in many Australian states) by statute. This doctrine operates to end a contract in circumstances where the obligations under the contract become impossible to be performed or have been radically transformed. These circumstances can be an intervening, post-contractual event or an event that has arisen outside of the parties’ control (or not through their fault). However, it may be difficult for an aggrieved party to establish frustration of a contract due to its narrow application.
For instance, frustration cannot be established where the contract has an operative force majeure clause; the intervening event is the fault of either of the parties; performance has merely become more onerous or expensive; or the change is only temporary. Where frustration is successfully established, the contract will generally be at an end.
At common law, the House of Lords decision in Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4 provided the presiding ruling on losses from a frustrating event ruling that “the loss lies where it falls.” However, legislation in states such as New South Wales, South Australia and Victoria provides alternative or ‘fairer’ results to parties in light of frustrating events on a case-by-case basis.
Rental Reductions or Abatement
Most leases include provisions that allow for a rental reduction or abatement in certain circumstances. These common clauses usually relate to damage and destruction of the premises. As a consequence, for most leases rent is unlikely to be reduced or abate as a result of a pandemic. However, this will depend on the drafting of the specific clause in the lease and will need to be determined on a case-by-case basis.
The circumstances of the shut down and the interpretation of each lease will be different in every case.
The COVID-19 outbreak has posed many challenges for business owners. However, simply responding to this is shortsighted and a long-term management strategy in light of crisis is integral. Besides this outbreak, Australia alone has suffered from severe bushfires and droughts in the past. Therefore, establishing clear and effective crisis management processes and strategies are essential to ensure stability in these trying times.
1. Evaluate and focus on your organization. How does the crisis effect your business?
2. Formulate a business plan
Once the risks and issues posed to the business are identified, they need to be addressed to mitigate and prevent loss:
3. Initiate and deploy strategies
Implement the procedures and start rolling out new policy and procedure immediately. It is important to expedite the process to minimise risks posed by a crisis.
4. Delegate (and Assess)
Assign responsibilities to leaders to ensure these practices are being followed at every level. It is important in times of difficulty that all employees are involved in this process. By doing this you will ensure that your staff can monitor and assess the plans adapted. Then, if these plans are not giving your business a feasible outcome, you can adjust the strategies to best fit the business’ needs.
Summary of the policy updates that has been made due to Covid-19 in the Local Court of New South Wales.
2. Unrepresented defendants
Trying to reduce the need to come to the court unless the offence is so serious that their attendance is absolutely necessary
3. No attendance required
4. Note
5. Details
Summary of the policy updates that has been made due to Covid-19 in the Supreme Court of New South Wales.
Effective from Monday, 23 March 2020
Effective from Monday 16 March
2. Virtual courtroom environment
3. List of hearings to be conducted by video-link or by telephone
4. Registrars’ Lists
Effective from Monday, 23 March 2020
5. Arrangements to appear by video-link or telephone:
5.1 Registrars’ Lists
5.2 Judges’ Lists
5.3 Appeals or first instance matters
6. Note
7. Details
8. Other