Leasing

Originally introduced in 2020 in response to the pain small businesses were suffering due to repeated covid lockdowns, the Scheme has been reintroduced in 2021 and took effect from 28 July 2021.

The Scheme is available to businesses with an annual turnover of less than $50,000,000 who have suffered a downturn of at least 30%. This is determined by comparing the business's final quarter 2018/19 turnover with their final quarter 2020/21 turnover. Businesses that weren't operating in 2019 will be assessed under special arrangements.

Landlords who have tenants that meet these criteria will need to defer / waive the amount of rent that correlates to the downturn suffered by the tenant's business. For example, if the tenant has only earned 50% of their pre-covid turnover, they're only required to pay 50% of their rent. Of the remaining 50%, half is deferred to January 2022 and the other half must be completely waived.

Tenants and landlords are encouraged to negotiate in good faith to implement the terms of the Scheme. However, if the parties can't reach agreement, the Victorian Small Business Commissioner can step in to mediate the dispute.

Whilst it is clear that this scheme is mostly for the benefit of small business owners / tenants, the landlords have not been completely forgotten. For those landlords paying land tax on their properties, a discount of up to 25% can be claimed. Unfortunately, for those landlords whose landholdings are not valuable enough to attract land tax, there is little on offer. There is a hardship fund available for landlords who can show they are suffering acute hardship by waiving rent, but with only $20,000,000 on offer in that fund, it's unlikely to go far.

Whilst the legislation to reintroduce the Scheme has been passed by Parliament, the accompanying regulations have not yet been released. It is the regulations that will set out the "nuts and bolts" of the Scheme, and until these are released there is a lot that is still unknown about the working of the Scheme and how it will compare to its previous version. Updates will be provided when more information is available.