As the impacts and consequences of the coronavirus are escalating, we want to assure you that we remain vigilant in our support for all our clients. Everyone’s health and safety are of paramount importance and we will continue our workplace measures of working remotely and engaging with you over the phone or video conference. We continue to follow the advice of our Government and closely monitor the advice being shared by the Department of Health. This is a period of time when financial advice and support become more critical than ever and we are well positioned to continue to offer that support and guidance to you.
Sunday evening 22 March, the Government announced additional measures to provide financial support to individuals, households and business during this very difficult time. In addition, late last week the major lenders in Australia announced some mortgage relief for up to 6 months. Many incredibly good business operators and hardworking individuals will find their incomes impacted through no fault of their own. We want to ensure our clients are able to access the support you are entitled to and that your choices around superannuation and lending flexibility are informed.
Relief measures for individuals and households include:
- Additional income support payments for the unemployed (or those in quarantine with coronavirus, or their carers)
- Additional $750 lump sum for pensioners and concession cardholders
- Temporary early release of superannuation for those in need (up to $20,000 over two years)
- A reduction in the minimum drawdown rates for superannuation income streams for the next two years
- Reducing the deeming rates by a further 0.25%
1. JobKeeper Payment Update
The JobKeeper payment will provide eligible businesses impacted by the Coronavirus a subsidy payment from the Government to help cover the wages of their employees. The payment will ensure eligible employees are paid at least $1500 per fortnight with the aim of allowing more people to remain employed during this period.
On the 21st of July, the Prime Minister announced the JobKeeper payment will continue to be available until the 28th of March 2021. Originally the scheme was due to end on the 27th of September, however, payment rates will be reduced effective from the 27th of September.
Business eligibility will need to be assessed on each key date and obtain a business loss of:
- 50% for organisations with a turnover of more than $1b
- 30% for organisations with a turnover of $1b or less
- 15% for Australian charities and non for profits
Payment rates from the 27th of September to the 3rd of Jan
$1200 per fortnight for employees working more than 20 hours per week.
$750 per fortnight for employees’ workings less than 20 hours per week.
Payments rates from 4th of Jan to the 28th of March
$1000 per fortnight for eligible employees working more than 20 hours per week.
$650 per fortnight for employees working less than 20 hours per week.
You can find the full JobKeeper extension fact sheet here.
2. Additional Income Support
If you find yourself unemployed due to the economic downturn or social distancing rules, you’ll be able to access a ‘coronavirus supplement’ of $550 a fortnight on top of other benefits you may have through Jobseeker.
3. Lumpsum for Pensioners and Concession cardholders
If you are not eligible for the income support payment and are a pensioner or concession cardholder, an additional $750 stimulus payment will be made. That means two payments of $750.
The first payment will be made to those receiving eligible income support or other benefits as at 12 March 2020, or those who have applied for a benefit as at that date (or up to 13 April 2020) and are subsequently approved.
The second payment will be available to those who are eligible income support recipients or concession cardholders as at 10 July 2020 and will be paid automatically from 13 July 2020.
However, those who are receiving a payment that is eligible to receive the Coronavirus supplement (see below) will not receive this second $750 payment. The payments will be exempt from tax and not included in the income test for social security, veteran or Farm Household Allowance payments.
Those whose only qualifying benefit is a concession card will be contacted to confirm bank account details. In addition, eligibility criteria for benefits such as Sickness Allowance and Youth Allowance or other study-related payments will be relaxed where the recipient can demonstrate an inability to work or lack of compliance is due to Coronavirus related causes. More information can is available from Treasury.
4. Early release of superannuation
Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months.
The exact eligibility requirements will be formed in the coming days but broadly to apply for early release you must satisfy any one or more of the following requirements:
- you are unemployed; or
- you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020:
- you were made redundant; or
- your working hours were reduced by 20 per cent or more; or
- if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGov website: https://my.gov.au/.
Separate arrangements will apply if you are a member of an SMSF.
You will be able to apply for early release of your superannuation from mid-April 2020. More information is available through this Treasury fact sheet.
5. Temporarily reduce superannuation minimum drawdown rates
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.
Individuals who have already taken their minimum pension amount for the 2019/20 financial year will not able to put that money back into his superannuation account under these changes. More information can be found through the Treasury web site.
6. Reducing social security deeming rates
As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings.
The change will benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.
The changes will be effective from 1 May 2020.
For those who find themselves in financial hardship due to the economic consequences of coronavirus, there are options to consider when it comes to your mortgage. In addition to hardship exemption applications, you may be able to consider:
- Reviewing your loan repayment options
- Leveraging the equity in your home
- Options available to reduce interest rates
- Utilising offset accounts or redraw facilities
We have a dedicated lending specialist team who, alongside our advisers, can help you navigate through the options available and suitable for you.
Relief measures for small and medium-sized businesses include:
- Tax-free cash payments
- Supporting Apprentices and Trainees
- Government-backed loan guarantees
1. Tax-free cash payments
The Government is providing up to $100,000 to eligible small and medium-sized businesses, and not-for profits (including charities) that employ people, with a minimum payment of $20,000. These payments will help businesses’ and not-for-profits’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff. Details can be found in this Treasury fact sheet.
2. Supporting Apprentices and Trainees
The Government is supporting small business to retain their apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage paid during the 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer. Employers will be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). Support will also be provided to the National Apprentice Employment Network, the peak national body representing Group Training Organisations, to co-ordinate the re-employment of displaced apprentices and trainees throughout their network of host employers across Australia.
Further information is available at:
3. Government-backed loan guarantees & Loan deferrals
The federal government has committed to provide guarantees of up to $20billion, thereby creating up to $40 billion in new loans for small businesses to support ongoing operation during this period of disruption. The federal government would guarantee a portion of new, unsecured loans. For details review the Treasury’s fact sheet.
This comes on the back of the big four banks pledging to offer six month deferrals on loan repayments for small businesses who have been impacted by the economic crisis.
Full details of the government packages on offer can be found at the Treasury website.
What does this mean for you?
Each of these initiatives are important and should be considered for individuals and businesses. Some measures, however, have longer term consequences which should also be considered.
There are a lot of options on the table, and there will be more to come.
Every person has their own set of circumstances, values and goals that need to be considered in the context of the unprecedented time we are going through.
It is a stressful and emotional time for Australians. Now more than ever, it makes sense to work with an adviser who understands the options available and who can help you understand what they mean for you.
Reach out for help.