Commercial Tenancies Rent Relief

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Commercial Tenancies Rent Relief

Updated 25 August 2021

On 24 August 2021 the Commercial Tenancy Relief Scheme Regulations 2021 were updated offering a wider eligibility catchment.
In simple terms, if you have been previously ineligible for rent relief, you may now be in a position to receive financial reprieve.

For detailed information refer to the Victorian Small Business Commission website.

Check out our summary which aims to convey the effect of the Regulations.

ELIGIBILITY


DECLINE IN TURNOVER TEST

The Decline in Turnover Test will be satisfied if the tenant’s turnover in the Turnover Test Period was at least 30% lower than its Comparison Turnover. To determine this you will need to identify three terms:

  1. Turnover; 
  2. Turnover Test Period; and
  3. Comparison Turnover

Turnover is defined in the same way as GST turnover, varied to specifically include state government COVID grants and to exclude federal government grants.   
The Turnover Test Period and Comparison Turnover will depend on the day the tenant commenced trade and is best set out by reference to the following table:  

Date the tenant first commenced
business (whether from the
premises or otherwise)
Turnover Test Period Comparison Turnover
Prior to 1 April 2019 The tenant's choice of any three consecutive whole calendar months between 1 April 2021 and 30 September 2021 The three corresponding months in 2019
1 April 2019 – 31 March 2020 The tenant's choice of any three consecutive whole calendar months between 1 April 2021 and 30 September 2021 The sum of the tenant’s turnover for each whole month of trade to 31 March 2020, divided by the number of whole months, multiplied by 3 (so effectively 3-month average turnover to 31 March 2020)
1 April 2020 – 31 March 2021 The tenant's choice of any three consecutive whole calendar months between 1 April 2021 and 30 September 2021 The sum of the tenant’s turnover for each whole month of trade to 31 July 2021, divided by the number of whole months, multiplied by 3 (so effectively 3-month average turnover to 31 July 2021)
After 31 March 2021 A period agreed by landlord and tenant following good faith negotiations The tenant’s total turnover to 31 July 2021, divided by the number of days trade, multiplied by 92


There are various special rules, exclusions and also ‘alternative’ comparison tests (similar to jobkeeper approach), which may need to be considered depending on your situation. 

PROCESS FOR OBTAINING RELIEF

The details are contained in the legislation, and there is the focus on the tenants and landlords negotiating directly, but to summarise briefly:

  • Tenant makes a request in writing to the landlord (incorporating eligibility etc outlined above) 
  • Tenant needs to provide evidence to support the request (timing rules apply) 
  • Landlord is required to make an offer of rent relief (see below)


If any rent is deferred it is taken to be payable in equal instalments commencing not earlier than 15 January 2022 and running for two years or the balance of the length of the term (whichever is greater). Similarly to last year if any rent is deferred the landlord must offer the tenant an extension to the term of the lease equivalent to the period for which rent is deferred (there is no obligation on a tenant to accept the offer and the landlord’s rent relief offer can’t be contingent on the tenant agreeing to the longer term).  


Next Steps

Within 14 days of making its request, the tenant must provide information to the landlord "that evidences the turnover figures contained in" the request.
That information must include at least one of the following:

  1. extracts from the tenant's accounting records; 
  2. the tenant's business activity statements; 
  3. the tenant's bank statements; or 
  4. a statement prepared by a practising accountant

The tenant must also include a statutory declaration, made by the tenant (or an office of a corporate tenant) stating that the information and evidence provided is true (to the best of the tenant's knowledge and belief). 


If you, like many of us, do not feel comfortable with sharing your sensitive financial information with the landlord, please contact our office to request preparation of an Accountants Statement outlining the key information required by the landlord as evidence of Decline in Turnover.


Questions?

The Regulations are long, and complicated. We’ve done our best to keep it as straightforward as possible and to break it down into manageable chunks here.
We will provide more updates and information as it comes to hand. 

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