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COVID-19 & SME miners – managing unprecedented disruption

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This article was written by Robert Edel, Tim Edwards and Avi Shchigel.

COVID-19 is having an unprecedented effect on the economy and will continue to affect small and medium sized enterprises (SME), particularly in the mining sector.

Fortunately, State and Federal Governments have introduced a number of initiatives that will help SMEs in the mining sector survive the C-19 crisis.

This article collates and summarises the key financial support programs and temporary regulatory changes introduced by State and federal governments that may be of relevance to the SME mining sector during the crisis.

Regulatory Relief – Western Australia

Subject

Description

Further information

Relief from Minimum Expenditure Obligations and Rent Payments on tenements

  • An exemption from exploration expenditure is available (until 31 March 2021) unless rescinded earlier) if tenement holders are unable to meet the tenement's expenditure requirements as a direct result of COVID-19 or because of restrictions imposed by the State and Federal governments. Applications are made using the existing Form 5 process.
  • Tenement holders are able to apply for an extension of time to pay tenement rent using existing mechanisms.

 

Suspension of Wardens Court Proceedings

  • Warden's Court proceedings have been suspended until mid-April at which time the situation will be reviewed. This means there will be no mention hearings until further notice and all hearings currently listed to take place between now and mid-April are vacated. The suspension of proceedings will not prevent parties from having matters dealt with administratively or determined on the papers. Urgent matters may be dealt with by audio link or video link facilities.

 

Standing Down Employees

  • It is likely that SME miners will be permitted to stand down employees in the event of a shutdown of all n on-essential services. Before standing down an employee, consider alternative means of reducing labour costs, such as:
    • directed leave periods;
    • reduced hours working arrangements; and
    • salary reductions.
  • These arrangements can only be implemented with employee consent and the terms of any industrial instruments will need to be carefully navigated. 

For further detail see our KWM Insights here.

Exemptions from Travel Restrictions for Mining Companies

  • State and Federal Government advice with respect to travel restrictions is fluid and constantly changing.  Tighter travel restrictions will have a significant impact on miners who employ FIFO workers.  Where workers are permitted to travel, workers must be transported safely onto site and avoid contact with local populations.
  • The State Government is also working to launch an on-line system called 'G2G WA' this week, which will cover both inter-state and intra-state travel exemptions. SME miners will be able to bulk upload their employee travel exemptions and should ensure they have all the information needed to comply with the upload requirements.

 

Inter-State Travel

  • A hard border closure in Western Australia is currently in place. There is no information on when the border will be re-opened. FIFO workers will be permitted to enter Western Australia for work purposes but must undergo 14 days of self-isolation. SME miners should ensure that they comply with these restrictions and may wish to adapt the length of FIFO schedules to suit the new restrictions.

Further information is available here.

Intra-State Travel

  • The WA State Government has imposed restrictions on travel between the following regions.
    • Perth and Peel;
    • South West;
    • Great Southern;
    • Goldfields-Esperance;
    • Mid-West;
    • Wheatbelt;
    • Gascoyne;
    • Pilbara; and
    • Kimberley.
  • Exemptions apply for employment purposes, which includes mining and resources work.

Further information is available here.

Intra-State Travel

  • Travel by employees of mining companies to and from these regions is permitted (except in relation to the Kimberley and parts of the Pilbara) where necessary to maintain operations in the company's activities but specific permission will be required in advance to cross regional boundaries.
  • Travel to the following areas is also restricted in order to protect vulnerable communities:
    • Kimberley (comprising all four local government areas);
    • Shire of Ngaanyatjarraku;
    • Parts of the Shire of East Pilbara that encompass the communities of Jigalong, Martu homeland communities and Kiwirrkurra.
  • Miners are not exempt from these restrictions.

Further Information is available here.

Regulatory Relief - Federal 

Subject

Description

Further information

Relief from Application of Insolvency Laws

  • The following new temporary bankruptcy laws have been introduced to relieve pressure on companies struggling from the effects of COVID-19:
    • Directors are relieved from personal liability for trading while insolvent for a 6 month period.
    • 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.
    • An extension of the protection period a debtor receives after making a declaration of intention to present a debtor's petition.
    • A temporary increase in the threshold for creditors to issue a statutory demand against a company and an extension of the time the company has to respond to the demand.

For further detail see our KWM Insights here and here.

Changes to AGM Requirements

  • For public companies (both listed and unlisted) with a financial year end of 31 December 2019 that are required to hold an AGM by 31 May 2020, ASIC has formally announced:
    • a two-month extension by 'no action' position; and
    • a 'no action' position on virtual AGMs.
  • SME miners should also look at their Company Constitution to assess whether they are able to conduct virtual AGM's.  ASIC does not have the power to modify the Corporations Act to facilitate virtual AGMs, but has opted to take a 'no action' position on non-compliance with provisions of the Corporations Act that may restrict virtual AGMs.  It is worth noting that ASIC's 'no action' position does not necessarily remove the risk of legal action from third parties.  SME miners should continue to monitor legislative changes in relation to AGMs. 

Further information is available here.

Changes to Capital Raising Requirements – Back to Back Trading Halts

  • ASX now permits an entity to request two consecutive trading halts (total of 4 days) to allow for more time to plan and execute a proposed capital raising.
  • In order for the request to be granted, entities must make it clear that they are seeking back-to-back halts for the purpose of considering a capital raising.

For further detail on changes to capital raising requirements, see our article in the AFR here.

Changes to Capital Raising Requirements – Temporary extra placement capacity

  • ASX will lift the limit on placements in ASX listing rule 7.1 to 25% (from 15%) on the condition that the entity follows with an accelerated pro-rata entitlement offer or a Share Purchase Placement (SPP).
  • This measure may only be exercised once. Entities seeking more than one placement must seek an individual waiver from the ASX.
  • Entities that already have the extra 10% placement capacity under rule 7.1A can elect to use their existing rule 7.1A capacity or the extra 10% placement capacity available under the Temporary Extra Placement Capacity, but not both.
  • Entities that have already used part of their 15% placement capacity in the last 12 months must deduct what has already been used when calculating their remaining placement capacity.

For further detail on changes to capital raising requirements, see our article in the AFR here.

Changes to Capital Raising Requirements – Waiver of 1:1 Cap on Non-renounceable Entitlement Offers

  • The ratio of a 1:1 cap on non-renounceable offers has been removed. There is currently no limit in place.

For further detail on changes to capital raising requirements, see our article in the AFR here.

Changes to Capital Raising Requirements – Applicability

  • This relief applies to entities who have not been suspended for 10 days or more in the last 12 months as of the date they apply for relief (up from 5 days).
  • Entities who have been suspended for more than 5 days in the 12 months up to 19 March 2020 are not entitled to the relief. This is in order to avoid giving relief to entities that were significantly suspended prior to COVID-19.

 

For further detail on changes to capital raising requirements, see our article in the AFR here.

 Financial Assistance – State Programs

Subject

Description

Further information

WA State Government Assistance – Payroll Tax

  • The WA State Government has announced:
    • $17,500 grants for small businesses with a payroll between $1 million and $4 million.
    • The reduction in the payroll tax threshold to $1 million (announced in October 2019) will be brought forward by six months to 1 July 2020.
    • Businesses impacted by COVID-19 can apply now to defer payment of their 2019-20 payroll tax until 21 July 2020.                                                   

Further 
information is available
here.

NSW State Government Assistance – Payroll Tax

  • The NSW State Government has announced:
    • Waiver of payroll tax for businesses with payrolls of less than $10 million for 6 months.
    • Deferral of payroll tax for businesses with payrolls of over $10 million for 6 months.
    • Bringing forward payroll tax cuts by raising the threshold limit to $1 million in FY 2020-21.
    • The tax-free threshold will increase from $900,000 to $1 million for the financial year commencing on 1 July 2020.

Further information is available here.

 

Victoria State Government Assistance – Payroll Tax

The Victorian State Government has announced:

  • Full payroll tax refunds for the FY 2019-20 for businesses with a payroll of less than $3 million.
  • Deferral of payroll tax for businesses with a payroll of less than $3 million for the first three months of FY 2020-21 (until 1 January 2021).
  • The State will pay all outstanding supplier invoices within 5 business days.

Further information is available here.

 

QLD State Government Assistance – Payroll Tax

  • All small and medium businesses (payroll up to $6.5 million) in Queensland will be eligible for:
    • A two-month refund of payroll tax.
    • A three-month payroll tax holiday.
    • Deferral of all payroll tax payments for the rest of 2020.
  • Larger businesses (payroll over $6.5 million) in Queensland affected by COVID-19 will be eligible for a two-month payroll tax refund and to have their deferral extended for all of 2020.

Further information is available here.

 

QLD State Government Assistance – Job Support Loans

  • The State will provide:
    • A loan facility of at least $500 million (interest free for the first 12 months) for QLD businesses. The concessional loan facility comprises fixed interest loans (2.5% p.a) of 50% of the operations annual wage expense up to $250,000 with an initial 12-month interest free period for businesses to retain staff
    • up to $100,000 do not require security.

 

Further information is available here.

 

 Financial Assistance – Federal Programs

Subject

Description

Further Information

Federal Government Cash Flow Boost

  • The Federal Government has pledged a cash flow boost to SME's who have an aggregated annual turnover less than $50 million.
    • An initial cash flow boost of 100% of tax withheld on employee's salary and wages, up to $50,000.
    • An additional cash flow boost when a business activity statement is lodged of 25% (if lodged monthly) or 50% (if lodged quarterly).
  • Payments will range from a minimum of $20,000 to $100,000. SME's do not need to apply for these cash flow boosts.  They will be automatically credited if an entity is eligible.

Further information is available here.

 

Federal Government JobKeeper Payments

  • Businesses with an aggregated annual turnover of less than $1 billion impacted by COVID-19 will be able to access a $1500 fortnightly subsidy for a maximum of 6 months from 30 March 2020 to continue paying their employees.

 

Instant Asset Write-off

  • The ATO has increased the instant asset write off threshold to $150,000 (up from $30,000) from 12 March 2020 until 30 June 2020.  Eligible businesses are those with an aggregated turnover of less than $500 million (up from $50 million).

Further information is available here.

 

Accelerated Depreciation

  • Businesses with a turnover of less than $500 million are able to deduct the cost of depreciating assets at an accelerated rate.  These assets must:
    • be new and not previously held by another entity (other than as trading stock);
    • not be an asset to which an entity has applied depreciation deductions or the instant asset write-off rules;
    • be first held on or after 12 March 2020; and
    • first used or first installed ready for use for a taxable purpose on or after 12 March 2020 until 30 June 2021.
  • Small businesses with an aggregated turnover of less than $10 million using the simplified depreciation rules can now deduct an amount equal to 57.5% of a new depreciating asset (up from 15%).

 

Further information is available here.

 

Deferral of PAYG Instalments

  • SME miners with PAYG instalments are able to:
    • change their PAYG instalments to zero from the quarter beginning March 2020; and
    • Claim a refund for any instalments made for the September 2019 and December 2019 quarters.

 

Pausing Business Activity – ABN/GST Registration

  • The ATO has stated that if a person has temporarily ceased some trading activities in their business but they intend to restart when they can, they are not required to cancel their ABN or GST registration. 
  • This is the case even where the business is paused for a lengthy or uncertain time period. 

 

Small business Bank Loan Repayments

  • On 30 March, the ABA announced that businesses with total business loan facilities of up to $10 million (up from the $3 million small business threshold) will now be able to defer repayments for loans attached to their business for six months.  During this period banks have also agreed to not enforce business loans for non-financial breaches of the loan contract (such as changes in valuations).

 

Apprentice and Trainee Wage Subsidy

  • Small businesses will also receive support for paying the salaries of apprentices and trainees. Eligible employers (those with fewer than 20 full-time employees) can apply for a wage subsidy of 50% of the apprentice's or trainee's wage for up to 9 months from 1 January 2020 to 30 September 2020.
  • Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice ($7,000 per quarter).  Employers can register for the subsidy from early April 2020, with the deadline for claims ending on 31 December 2020.  Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that apprentice.

 

Payment Plans

  • The ATO may allow COVID-19 affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities.

 

Interest and penalties on tax liabilities

  • For businesses affected by COVID-19, the ATO will consider remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities.

 

GST

  • Businesses that are currently on a quarterly reporting cycle can opt into monthly GST reporting in order to obtain faster access to any GST refunds.  The reporting change also applies to fuel tax credits.
  • On 13 March, the ATO clarified that a business can only make this change from the start of a quarter.

 

Deferral of tax

  • Businesses can defer by up to 6 months the payment of tax amounts due up to 12 September 2020 through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise.

 


The COVID-19 crisis has clearly created a number of very serious issues that mining companies in Australia must overcome. Many of these issues will continue to evolve over time. However, State and Commonwealth governments have responded quickly to the COVID-19 crisis and have moved to introduce regulatory changes and financial packages that will benefit mining companies, particularly those junior and mid-cap sector, significantly. It is likely that there will be further regulatory change and we may also see the introduction of additional financial assistance packages from State and Commonwealth governments. SMEs in the mining sector should continue to monitor these reforms carefully.  

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