#ASKDOM Q&A Session, Thursday 9th of April

Hi there and welcome to #ASKDOM, for our first, well, second session now in April. So as you remember, we’re doing these weekly now, and I’ve stockpiled all the questions from our daily 4:02 huddles and I’ll answer some of those today. But as we go along feel free to type your questions. This is very much a fireside chat. I want this to be, on the couch with Dom, where we just have a Q&A session. And a big day today because we had parliament sitting yesterday. They sat well into the night, and they passed a lot of legislation, that put all the rhetoric and all the promises around Coronavirus into acts of parliament. So the two big ones were, the Coronavirus Economic Response Package (Payments and Benefits) Bill, 2020. So that one was about the job keeper allowance. And they went into a lot of detail about that.

There was a lot of back and forth, and arguments about that, but ultimately it got passed with no amendment. I’ll talk more about the detail and the devil in the detail of these on our 4:02 daily huddle. The other thing that got passed was the Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020. They love their Latin lawyer, Omnibus means everything for everyone. So it’s a whole lot of legislation that got amended in one bill. Then there’s two appropriation bills, (No. 5) And (No. 6). So at the end of the day, high-level, what parliament does is, as you know, we have a Westminster system of parliament. We have two houses of parliament, and whenever they want to make a new law, they first of all, put up a bill, and they argue through the finer points of it. And then it gets passed through two houses, and then it goes to the governor general, who signs off and makes it law.

This time, because it was done on the fly, they had an emergency meeting, they weren’t due to sit til August, but they went through it all. There’s a site called Hansard, and Hansard is where they record all the debates, all the arguments, what everybody said, what all the ministers said when they weighed in on it. And that let us know that yes, there was a little bit of back and forth, but ultimately both houses agreed to everything. And instead of the governor general signing off, they’ve given the treasurer, Josh Frydenberg, power to sign the bills and make them law. So end of the day, everything that we’ve talked about in our previous sessions is now enacted as law. Those bills have now been passed through parliament. So let’s answer some of those questions.

We’ve got John. John said how do business owners who are unemployed get benefits? It’s so easy for employees to get help, but it’s always very hard and complex for unemployed business owners who are now suffering with loss of money. Couple of permutations and combinations depending on your situation. If you’ve literally shut your doors and your business has ceased to trade and you’re out of business, it’s like anything, you went for a venture, you were earning money from a cafe or whatever. Now it’s a failed business and you’re unemployed. So you need to skill up as a bricklayer or a bus driver or some other industry. And you’d go to Centerlink, and it’s a new start. You’re saying, “I’m looking for jobs in this area. I haven’t got one yet.” And you’re unemployed.

If you’re a business owner though, that’s just temporarily shut down because of Coronavirus. But as soon as restrictions are lifted, you’ll be back in business, then there’s lots of business benefits that you can get. And I’ll talk about those more in our 4:02, or if you can look at recordings of previous sessions, there’s lots of benefits for business owners. So depending on whether you have staff, you get the $1,500 a fortnight JobKeeper allowance, like a subsidy for employee wages. You get concessions in rent where the rent, your commercial rent under the mandatory code for commercial landlords and tenants, is reduced by the amount of your business. So if you’ve lost a hundred percent of your income, then a hundred percent of your rent is written off. Alternatively, if you’re looking for cash flow and you don’t have money coming in, then there’s business loans. The Reserve Bank has given money to banks to lend to businesses. There’s also other benefits that you can claim back.

So lodge your BAS. When you lodge your BAS on time at the end of the month, you’re going to get an automatic rebate for PAYG tax. There’s also a one-off payments, and you can get Centrelink benefits for one-off payments as well. So depending on which way you want to go to seize your assets, it’s going to be case by case. And it depends whether you’ve just got reduced income, no income, or you’ve just shut down altogether and you literally are unemployed, which Avenue you want to go for.

Lin’s asked, have the numbers of DAs dropped for domestic renovations. So maybe when we say renovations, not just painting the outside of a house, but something of a construction nature where you’re altering the actual property and you have to go to council and get a DA. To answer that question. Yes, but they had previously anyway.

So we weren’t seeing the number of DAs coming through as of the last quarter of 2019 anyway. So we had an over supply. And what had happened was that people pulled back and developers sat on the fence because they weren’t getting the return. It’s a supply and demand thing, when there’s lots of buyers out there and there’s a shortage of stock, prices go up, developers do their feasibility, see that the numbers work and they come into the market. They then left them [inaudible] later last year. And we don’t have as much in the pipeline, but that’s not a Coronavirus thing. I think there will be fallout in construction. Coronavirus is affecting our whole market, our whole economy, even developers who are working on jobs now, and builders, don’t have access to materials and tiles and things that they are waiting for to come from China.

So there is a knock-on effect. And even on construction sites that are still open, where builders are working, that pipeline is going to dry out. But when people lose their jobs, they don’t renovate their properties. They don’t add the second storey and all of that. So they’re predicting a 10% rise or a 10% unemployment. They’re predicting that 2 million people will lose their jobs even after the JobKeeper allowance. So it is going to have an effect, an economic effect longer term. Some industries felt it instantly. Hospitality, travel, education. Others are going to feel it on a slower basis. As a result of restrictions, everyone hoarding money, no one out spending. And that’s going to flow through the system in coming days. They actually did an Australian Bureau of Statistics survey of all different areas of business. And whilst many businesses are feeling it. Now 50% of businesses reported an impact now from Coronavirus. But a further 46%. So 86% of businesses said we are going to get hit later on. So most businesses know that they will be affected whatever the industry.

Lan Chao 00:08:20 has asked us about quantitative easing and feared currency falling in value. Do I see a rise of cryptocurrency as the new norm in commercial operation? Oh, I don’t know. Cryptocurrency was a slippery slope. Wasn’t it? I see that the US dollar is the reserve currency of the world. And when there’s times of fear and doubt, the US dollar is seen as a safe haven. And similarly people like precious metals, silver and gold, but who knows how long is the piece of string where we’re going to end up. Everything is very speculative at the moment. And a lot of people are just hoarding cash rather than investing. They’re just keeping a tight hole. Cash is King.

Jim has asked, what about commission-based employees re JobKeeper. Yep. JobKeeper applies to everybody across the board. So whether or not you’re a PAYG, whether or not you’ve been stood down, if you were employed as at the 1st of March, and your employer registers for JobKeeper, then you are entitled to $1,500 per fortnight. They haven’t done it on basis of earnings or salary. It’s not as if you earn $250,000 a year, there’s some sort of scale where you earn more. People who earn less than $1,500 a fortnight are still getting the JobKeeper allowance. So it goes through the ATO and it is very dependent on your employer and whether or not they registered with the ATO for it. And then they’ll register you as an employee and they’ll claim the subsidy for you and they’ll pass it on to you.

So a concern that landlord here, the question is, the government has instructed that we can’t evict tenants in a residential tenancy agency agreement. Will the financial institution help the borrowers with their mortgage? Yes, absolutely. That was from Rebecca. So Rebecca, yes, definitely. So first of all, the bill that got passed through parliament just says that there is a moratorium or a freeze for six months on evictions. It doesn’t say that you can’t evict. It just says that it won’t take effect for six months. What the government also said though, was that banks, mortgage aid banks have to help their residential investment property owners. So there is available a package whereby you don’t have to pay your mortgage for six months.

Now, what the government said with tenants is not that you forgive their rent or not that you allow it to be deferred or not that you waive it in any way. It just said, talk about a commercial solution. So it maybe, okay, you don’t have to pay now while you don’t have a job, but you make it up later. In terms of you going with your bank, so there’s no law around that, negotiate case by case with your tenants for some commercial outcome. The end of the day, you can’t get blood out of a stone. If they don’t have a B it’s the law that you won’t be able to evict them.

So have they been good tenants? Can you come to some arrangement where you help them? They still like you, they’ll stay on afterwards and you can sort it out with your lender. What lenders will do, and the Reserve Bank has pumped liquidity into our banking system. They’re giving them cheap, basically free loans to banks to be able to accommodate you. So with your lender, you can be forgiven your mortgage repayments for six months. They will however capitalize that, they’ll add it to the loan over the term of the loan. So after the six months your loan repayments will be higher.

And if you’ve got 20 years left on your loan, they’ll just add that period to the 20. So it won’t be that much more, depending on how much longer on your loan. You may have to look at if you’re paying principal and interest, they may restructure the loan. They may let you refinance where you only pay interest only. So there are what they call hardship variations under the national Credit Code. So section 72 of the Credit Code says that, if you’re in hardship, which you are, if your tenant’s not paying you and the law’s being changed that you can’t evict them and you can’t do anything about it, then that is deemed hardship. So you can apply to your bank, they have to either forgive repayments, capitalize repayments, restructure your loan and arrangement and your repayment obligation. So they have to, under that code, under the banking code of practice, which is the private code that the banking industry subscribes to.

And you can apply for that without getting a black mark on your credit score. So on your credit score, there’s a section with comprehensive credit reporting. If you ever go for a loan in the future, they can pull your credit score. And if it’s up in the eight hundreds and above, it’s a score out of 1200, then you’re looking good, you can get a loan anywhere. But when you have defaults, non-payments of loans or late payments of loans, they can blacklist your credit score and it then lowers your ability to borrow. And you can borrow, but you may be charged a higher interest rate. So what the government have said is those credit reporting agencies under the Privacy Act are not allowed to blacklist you or put a mark or a late payment or a default on your credit score during the Coronavirus period. So asking for hardship won’t hurt you. It won’t hurt you anyway. They’re not allowed to on hardship applications.

Rebecca again, but will the financial institution help as I don’t trust the banks from previous experience with my clients? Can the banks decline in helping borrowers? Under the banking code of practice, they have to listen to your request. So they can’t fob you off. Under the national credit code, they have to consider fairness and equity with people in hardships. So under Coronavirus, there haven’t been any legal cases that have been heard by the courts yet. So I can’t say there’s a precedent set, but what I can say is that if ever, I’ve dealt thousands of hardship cases, if ever there has been an arguable case, it’s Coronavirus. And I have dealt with a lot of banks and they usually do come to the table with hardship, genuine or otherwise, their policies to arrive on the side of caution.

Now, I can say that every single case manager in every single bank is golden, but I can say that you can rattle their cage. If you don’t get the answer you want, you can go to managers, you can argue, and you can also then lodge an application with AFCA, the Australian Financial Complaints Authority. And the grounds of that application, you can do it in five minutes online, the grounds of the application are, failed to consider my hardship request. And I think it would be a very slippery slope for a bank to argue for a residential tenancy. When your tenants aren’t paying you and you haven’t defaulted on your loan to date, and you’ve got a very good reason and it’s out there, and most banks have published it.

I’m not sure Rebecca who your lender is, but the big four have come out and said, this is our policy. We will help you in hardship. We will help anyone with Coronavirus issues. We will help our residential landlords. And this is our way of doing it. You have to fill in this form or you have to give us a copy of this or that they’ve all put those policies on their website. So with our debt management team, we’re constantly in touch with the lender and we haven’t had one knocked back coronavirus claim on the basis of hardship. They’re very, very open to hardship, in my experience, having helped hundreds of clients.

Kent has asked, can the lender take the project back as the developer defaults on the loan? Yet contracts still apply Kent. So if you’ve got a lending contract and it says that, and it’s a commercial contract, and you’re unable to pay the bank for whatever reason, because you don’t have another source of income or whatever you planned. Maybe you were… Trying to think of a scenario. Maybe you had, for example, residential tenancies and you were collecting rent money and you were using the rent money to make progress payments or whatever, in relation to your commercial development and you’re unable to move forward. I would suggest that the bank wouldn’t do it because it’s a variation of the loan, but the government have not passed laws to stop commercial construction projects or for banks to not repossess those.

You’d have a very good argument though, to… And I would say that in the six month period, they won’t have the resources or the time or the bandwidth to actually get any legal traction to repossess a site. We’d have to take it offline Kent for me to understand more about that. But high level, from what you’re saying, there is no law passed by parliament yesterday that you can hang your hat on that says they can’t repossess a commercial construction site for non-payment, but commercial reality will apply. And even if they were going to go to court, the courts aren’t physically sitting at the moment, they’re hearing trials that have already been fixed. Everything else, it’s unprecedented. Judges are on telephone and Skype calls to litigants setting dates at some time in the future, because you’ve got to remember that a lot of our judges are old, over 65, and they’re not exposed. They’re all in social isolation.

Okay, Rebecca again. If so, when the banks decline hardship, do the banks have to put it in writing when declining the hardship? Yes, they do. To answer that part of the question. So under the Consumer Credit Code, you can apply orally or you can apply in writing. And for those of you who’ve watched our special briefings recently on asset protection and how to protect your downside, I’ve given you a way, a letter, a precedent, or proforma for approaching your bank for hardship. You can do it in writing, you can do it orally from a borrower’s point of view, but that’s just putting them on notice. Once you put them on notice, they have 28 days under the code to give you a written response. So they have to respond in writing.

So Rebecca you’ve had your bank decline clients with hardship, but refuse to put it in writing. I’m not sure what you do, Rebecca, but I’d be quoting that section of the act and they’ve breached it. And there’s serious consequences for that for their credit license.

John, the Director’s GST Liability Law suggests that if we become a director, then we will be fully personally liable for any unpaid GST. That is the case anyway. The law is that directors of companies are vicariously liable for the debts of that company. And yes, you’re on the hook, they have directors penalties. So a director of a company that incurs an ATO debt, it’s from the Alan Bond, Christopher Skase days, they can’t just walk away and say, “Oh, well, it wasn’t me. It wasn’t my fault. It’s the company.” And you can just wind up the company. There’s nothing for anyone to get. And so everyone misses out. The ATO said, “No, we’re not missing out.” Because there were too many directors knowingly running up tax bills and then not paying them.

And so what happened was they said, “Okay, directors now are personally liable.” And then as with everything, there’s a balancing act. They had a lot of companies that were getting wound up that were pretty viable companies, but directors were really scared about personal liability. So they said, “Okay, we’re going to change the laws where directors are threatened and they’re allowed to trade through difficulties without being personally liable.” Because what was happening every time a company got into a bit of debt, and let’s face it most businesses at some time or another will face temporary cashflow problems.

Unfortunately with Coronavirus, everyone’s facing cashflow problems now on mass. But in good days, the government knew there are times where every business hits a bumpy road, and every time a business hits a roadblock, if the directors panic and go, “Oh my gosh, I’m personally liable for company debts. I have to wind up the company.” We had a lot of businesses in Australia getting wound up that were really viable businesses that could have traded through it. So they changed the laws in 2018 to introduce ‘safe harbor laws’. And ‘safe harbor laws’ said that if a business is in trouble and it’s got a lot of debt, then the director can wave a white flag basically, claim safe Harbor and be immune to personal liability for debts incurred while they try and figure out a way forward or turn around the company. They said, “We shouldn’t punish directors for having a go and for debt incurred one year, they are insolvent for that period of time, but they can get money in if they change strategy.”

So what the law says under safe harbor is, you can negotiate with all your creditors, you can keep the doors open, keep on trading, keeping incurring bills, but you have to look after, A, your employees, and B, you have to true acknowledged debts to the ATO. So they don’t just go out the window. Any debt to the ATO is still the director’s responsibility. They don’t have to pay it straight away in safe harbor, they can negotiate it, but they still have to lodge their BAS and keep up with all of the requirements under the tax act. That’s basically what it says. So none of that changes, and directors are still responsible for ATO debts.

That seems to be it. Have we’ve got any more questions coming up?

Yeah. There’s nothing really relevant. Yeah. A few people are asking about business debts. We’ve talked a lot about that in the past few sessions and especially our 4:02 huddles. There’s a lot available for business at the moment and a lot about available for personal. So on a personal level, there’s $550 supplement at Centerlink per… So in addition to your normal Centerlink benefits, an extra 550 a fortnight, there’s a $750 one-off grant for all Centerlink recipients, seniors, anybody in receipt of any Centrelink benefits. That’s coming in in July. There’s also the JobKeeper allowance, the $1,500 per fortnight, which will help employees, business owners and employees alike. There’s then special loans for businesses up to $250,000 government guaranteed with repayments deferred, no repayments for six months.

There’s, under PAYG tax requirements, when you lodge your BAS this month, as a business owner you’LL automatically get a rebate. Anywhere between $20,000 if you’ve got no employees at all up to a $100,000. So a special cash grant, if you want, based on lodging your BAS, what the PAYG withholding tax is. So big wide world out there for businesses and grants and stimulus packages, all of which has been passed through parliament yesterday in those two bills. So one is the JobKeeper bill and the other is what they called an Omnibus bill that covered all the laws. What they’re really trying to do is have an induced coma or hibernation for when we come out of this. Which the good news is, they’re saying maybe sooner rather than later, the rhetoric and the talk track around it has changed. And they seem to be saying it’ll be staggered and it’ll be in stages that we come out of hibernation.

Okay. So it doesn’t seem to be… Any more questions?

Another one from Rebecca about what section of the act to quote. It’s under section 72 of the National Credit Code, to quote to banks when claiming hardship, and there’s various subsections there.

Thank you so much for your time guys and for listening and for questions. So keep sending the questions in and I’ll answer them live. And on these live sessions, feel free to ask questions and pick my brain over them. We’re going to reconvene at 4:02 again today for our little daily huddle. And I’ll talk you through the bills, the road ahead and coming out the other side, which seems to be the new talk track, which is somewhat exciting, although we’re still in lockdown over Easter. So see you at 4:02 and have a wonderful Easter, have a restful time. Now is the time just to de-stress. Easter’s great, for that, you get four solid days just to let it rest.

If you’re looking for something to do, if you’re climbing the walls, it’s really, really good to have a focal point. Sometimes on when we have nothing to do, we go a bit stir crazy. And I’ve talked to a lot recently about survival. And one of the tips for survival is to have a focal point, have a GPS, have direction. Otherwise you’re just a rudderless ship and you can go into a tailspin where there’s no true North, where there’s no navigation or pole where you’re actually aiming for something. Took me a time to work that out. And even when I have thought that I’ve had goals and I’ve had a true North, life gets in the way. And it takes something like this, what’s happened and Coronavirus to really put our feet to the fire and set us straight.

So for me in business, I had business goals, but there’s nothing like that blow torch to your belly that requires instant action. That what hit us, not three weeks ago, with all these restrictions and lockdowns. So I liken it to, the other day. I was driving into work and my car just was like, I was like I was in Afghanistan or something driving over big rocks. And I was on a freeway going at like a hundred kilometers an hour, just lurching all over the place. So I had wide knuckles on the steering wheel. I was incredibly focused where I’d normally be on hands-free talking on the phone, listening to music or whatever. I was incredibly focused every turn of the wheel, every… Sweat driving down my face, just trying to control this car that had had some problems. Something had snapped currently with the air bags in the suspension, the pump had broken. But that incredible focus on that trip to work, something that’s normally something on autopilot, is a bit of a metaphor what’s happened to me and many of us in businesses at the moment.

We’ve had to get very real about it. Just have total focus and intention on one goal. My goal that day was getting to work in one piece without the car just lurching off the road. My goal in business now is staying on course, staying to the true North, corralling everything and intense focus on an outcome, which is to impact and assist as many people as possible. I’ve got a big, hairy, audacious goal, a hundred thousand lives impacted. So I’m very, very bullish about that. You need a goal to get intensely focused upon.

So to assist you with that, I’ve put a link up in the comment section for my goal setting course, I got very real about goal setting and staying on course. Most of us have our new year’s resolutions, we write down some goals and we forget about it by about now, about April. So this is a wake up call for you and you really, really want to put in some you time over Easter. You can sit my complimentary goal setting course, it’s all set out online, there’s a module that you can do. By the end of it you will be very, very clear. How often do we get four days to focus on us, our outcomes, our lives, and bettering ourselves and other people around us? So take advantage of that. Sit that online program. Love to catch up with you and hear your thoughts and your successes as a result of completing my goal setting program. And I’ll talk to you on our daily huddle at 4:02. Chat soon.

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