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JobKeeper and the ‘Code of Conduct for Commercial Rent Relief’ both ended in March 2021.  Now will be a crisis time for many businesses.

In October 2020, Federal Treasurer Josh Frydenberg stated:

“We can’t save every business and we can’t save every job”

This statement set the tone for the Federal Government’s approach to the JobKeeper wage subsidy and other business welfare measures.

JobKeeper finished in March 2021 and, despite calls for it to be continued, it appears that the Government shifted its plans to more targeted relief – such as tourist flight subsidies.

Allied with the JobKeeper scheme was the National Cabinet ‘Code of Conduct for Commercial Rent Relief’ which required commercial landlords, amongst other things, not to terminate leases due to non-payment of rent and to offer reductions of rent having regard to the business impact of the COVID-19 pandemic.

The Code of Conduct depended on the tenant qualifying for JobKeeper, which of course means that from April 2021 it no longer applies.

The scheme and associated measures have certainly had their desired effect.  The rate of insolvency appointments has declined in the last twelve months.  ABS data suggests that employment levels, in particular the number of employed people and the converse number of people not employed, returned to their pre-March 2020 levels in late January 2021.

Those survival stories and employment levels have been achieved thanks to the subsidies and associated measures such as the Code of Conduct.

Many businesses were only avoiding disaster in reliance on the subsidy and negotiated rent relief.  There are still many industries (notably tourism and hospitality) whose business models depend on the mass movement and gathering of people – still problematic, as there is statistical and anecdotal evidence of fewer people in the CBDs.

Add to this that private debt recovery activity is picking up with the removal of the six-month compliance period for Bankruptcy Notices and Statutory Demands.  This all points to significantly more business failures in the short to medium term.

The Government can’t save every business.  Some so-called ‘zombie businesses’ will fold now with removal of JobKeeper.  Some business will fold when the ATO comes calling. 

Others won’t be able to cover the rent without the right to seek relief.  This is likely to lead to higher rates of termination of leases – and distraints for rent in those jurisdictions which still permit it (eg, South Australia). 

A means of protecting a potentially viable, but distressed business is to appoint a Small Business Restructuring Practitioner, a Voluntary Administrator, or if the situation is beyond saving, a Liquidator.

Yulia Petrenko
Yulia Petrenko Partner
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