Consumer credit and margin lending reforms passed
On 26 October, the National Consumer Credit Protection Bill and associated legislation (Credit Reforms) and the Corporations Legislation Amendment (Financial Services Modernisation) Bill (Margin Lending Reforms) were passed by the Senate. The bills will commence once royal assent is received.
The timeline for implementation of the new regimes are set out in the tables below.
Australian Credit Licence
| Stimulus package | Eligibility | Details |
|---|---|---|
| Boosting cash flow for employers (Federal Government) | - Have employees. - Available to businesses with an aggregated annual turnover of less than $50 million (based on prior year turnover). - Only available to active eligible employers established prior to 12 March 2020. - Not-for-profit entities and charities are eligible. | - Businesses may receive a minimum payment of $20,000. - Businesses may apply for payments up to $100,000. - Payments are tax-free, automatically calculated, and delivered as a credit in the activity statement system by the Australian Tax Office (ATO). - Eligible businesses that withhold tax to the ATO on their employees’ salary and wages will receive a payment equal to 100% of the amount withheld, up to a maximum payment of $50,000 - Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax. - No application required, but business activity statements (BAS) must be lodged with the ATO before the specified deadlines, set out in the business.gov.au website. - Payments are currently available for the following periods: Phase One - Quarterly: Q3 (January, February, and March 2020) and Q4 (April, May and June 2020); and - Monthly: March 2020 to June 2020. Phase Two - Quarterly: Q1 (July, August, and September 2021); and - Monthly: June 2020 to October 2020. |
| Increased instant asset write-off (IAWO) (Federal Government) | - Available to businesses with an annual turnover of $500 million. | - The instant asset write-off threshold is $150,000. - The threshold applies on a per asset basis. - Applies from 12 March 2020 to 30 June 2020 for: - new or second-hand assets first used; or - installed ready for use in this timeframe. |
| Backing Business Investment (BBI) (Federal Government) | - Businesses with an aggregated turnover below $500 million, purchasing certain new depreciable assets. | - Businesses can deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the asset cost. - Applies to eligible assets acquired from 12 March 2020 and first used or installed by 30 June 2021. |
| Relief for financially distressed business | - Applicable to all businesses | - A temporary increase in the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. - The Government is temporarily increasing the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 (Cth) from $2,000 to $20,000. This will apply for 6 months. - The statutory time frame for a company to respond to a statutory demand will be extended temporarily from 21 days to 6 months. This will apply for 6 months. - A temporary increase in the threshold for a creditor to initiate bankruptcy proceedings, an increase in the time period for debtors to respond to a bankruptcy notice, and extending the period of protection a debtor receives after making a declaration of intention to present a debtor’s petition. - Temporary relief for directors from any personal liability for trading while insolvent. - Directors will be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business. This will relieve the director of personal liability that would otherwise be associated with the insolvent trading. It will apply for six months. - Providing temporary flexibility in the Corporations Act 2001 (Cth) to provide targeted relief for companies from provisions of the Corporations Act 2001 (Cth) to deal with unforeseen events that arise as a result of the coronavirus health crisis. |
| Jobkeeper wage subsidy (Federal Government) | - Businesses eligible to receive the $1,500 fortnightly payments include: - full-time workers - part-time workers - sole traders - casuals workers who have been with their employer for 12 months or more - New Zealanders on the 444 visas - not for profit entities | - Businesses will receive a fortnightly wage subsidy up to $1,500 per employee. - Payments will be backdated to 1 March 2020, and are expected to be made by May 2020. - Eligible business must apply for the wage subsidy with the ATO. - Businesses must have suffered a decline of 30% in revenue. |
| Coronavirus SME guarantee scheme | - SMEs with a turnover of up to $50 million will be eligible to receive these loans. - The Government will provide eligible lenders with a guarantee for loans with the following terms: - maximum total size of loans of $250,000 per borrower. - the loans will be up to 3 years, with an initial 6 month repayment holiday. - the loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan. | - The Government will provide a guarantee of 50% to small and medium enterprise (SME) lenders for new unsecured loans to be used for working capital. |
| Principles for commercial tenancies relief (Federal Government) | - Applicable to commercial property owners and tenants | - Further details to follow. - Commercial tenants to be allowed to terminate leases on financial hardship grounds. - A six-month moratorium on eviction for non-payment of rent to be applied to commercial tenancies in financial distress. |
| Payroll tax refunds (Victorian Government) | - Businesses must have payroll of less than $3 million. - Businesses that do not pay payroll tax may apply for grants. | - Payroll tax refunds up to $113,975 for the 2019/2020 financial year. - The Victorian State Revenue Office (SRO) will directly contact eligible businesses in relation to reimbursement for payroll tax already paid in the financial year. - Businesses can also defer paying payroll tax for Q1 2020 until January 2021. - The Victorian SRO begin processing reimbursements on 27 March 2020. - 30,000 grants of $10,000 each for employers who do not pay payroll tax (with a payroll of up to $650,000 in total). |
| Rent relief (Victorian government) | - Commercial tenants in Victorian government buildings | - Further details to follow. - Businesses should contact the relevant Victorian government building contact to discuss. |
| Payroll tax deferrals (New South Wales government) | - Businesses with payroll | - Further details to follow. - Payroll tax customers whose total grouped Australian wages for the 2019/20 financial year are over $10 million, will have the option of deferring the payment of payroll tax for up to six months. - Payroll tax customers whose total grouped Australian wages for the 2019/20 financial year are no more than $10 million will have their annual tax liability reduced by 25% when they lodge their annual reconciliation, which is due on 28 July 2020. - Businesses will not need to make their payment for the March period, normally due on 7 April 2020. |
Margin lending – Australian Financial Services Licence (AFSL)
| Code application | Consider whether the Code applies to your circumstances. |
| No enforcement | Defer tenancy enforcement (ie by way of terminations or calling on tenancy securities). It is in the landlord’s interests to have a rent-paying tenant on the other side of the ‘hibernation’ period. |
| Stress test the portfolio | Conduct a stress test of your tenancy portfolio to identify imminent expiry dates and which leases still have at least 12 months to run. This will help you decide on the relief packages that could be offered to your tenants. |
| Immediate measures | Identify costs and expenses which you can waive now to assist tenants. |
| Start a conversation | Approach your tenant and have full and frank discussions about your tenant’s financial situation, as well as discussions about the losses and overheads that you need to cover for your own business. Ask the tenant to produce information which demonstrates their eligibility for the JobKeeper programme as well as data showing the financial stress suffered by the tenant. In your discussions, have regard to the fact that your tenant also has fixed overheads to pay. |
* The legislation will not commence until the Bill receives Royal Assent and the commencement date maybe after 1 November 2009.
ASIC is expected to soon release a number of finalised Regulatory Guides for both the Credit Reforms and the Margin Lending Reforms. We will provide further updates once these documents have been released.
Assistance
Having assisted many financial services providers obtain their AFSL under a similar regime, the Hall & Wilcox Financial Services and Banking & Finance teams are able to:
- provide specific advice as to how the new regimes will apply to you
- assist in preparing ACL and AFSL applications including all necessary proof documents in accordance with ASIC requirements and
- assist in drafting template documents which comply with all of the disclosure requirements contained in the bills.
Contact
Harry New
Partner
Harry leads our financial services team and focuses extensively on financial services law and corporate advisory.
John Bassilios
Partner & Fintech and Blockchain Lead
John has broad experience in financial services, funds management, blockchain, crypto, web3 and corporate law.
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