March 23: Coronavirus Financial Relief Measures for Australia
Perhaps, like me, you were watching the press conference yesterday as the Prime Minister and Treasurer released details of a second round of economic measures, designed to cushion Australians from the economic impact of COVID-19.
To help answer some of the questions you may have about what these measures mean for your personal situation, I have made some notes below.
This latest stimulus package is focused on three main deliverables:
- Providing household support to ensure everyone has enough to pay for the daily necessities of life throughout this crisis
- Assisting businesses in retaining employees (keeping people in jobs)
- Assisting businesses in staying afloat
Here are the measures the Australian government is taking to do these three things.
FOCUS 1: PROVIDING HOUSEHOLD SUPPORT
Measure #1: “Coronavirus supplement” to increase payments by $550 a fortnight
Existing and new recipients of the:
- JobSeeker Payment (which recently replaced Newstart Allowance),
- Youth Allowance jobseeker,
- Parenting Payment,
- Farm Household Allowance and
- Special Benefit
will receive an additional $550 per fortnight (on top of their current regular fortnightly payment). This is a time-limited supplement and will be paid for the next six months.
This measure will benefit low-income earners, including sole traders and casual workers that are currently earning less than $1075 per fortnight.
Measure #2: $750 payment
As announced on 12 March, a one-off $750 stimulus payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders including Commonwealth senior cardholders. The payment will be tax-free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient. If a person qualifies for the one-off payment in multiple ways, they will only receive one payment. These payments will be made from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.
A second payment of $750 was announced yesterday and will be made to social security and veteran income support recipients and eligible concession card holders, except for those who are receiving an income support payment and are eligible to receive the Coronavirus supplement. This second payment will be made automatically from 13 July 2020.
Measure #3: Early release of superannuation
The Government will allow individuals in financial stress as a result of the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in the first three months of 2020-21.
Eligible individuals will be able to apply online through myGov for access of 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 within the first three months. They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
** HPH Solutions strongly urges individuals considering this option to seek financial advice before they do so. This should be an option of last resort.
Measure #4: Temporary reductions of superannuation minimum drawdown rates
If you are currently receiving an account-based pension, then you know you are required to draw a minimum amount out of that pension each year even if that minimum amount is surplus to your requirements. If you are currently in a situation where you’d prefer to preserve your pension by drawing less, you can now do so. 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.
|Age||Default minimum drawdown rates (%)||Reduced rates by 50% for the 2019-20 and 2020-21 income years (%)|
|95 or more||14||7|
This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.
Measure #5: Reducing social security deeming rates
The Government is also reducing the deeming rates by a further 0.25 percentage points to reflect the latest rate reductions by the RBA.
As of 1 May 2020, the lower deeming rate will be 0.25 per cent and the upper deeming rate will be 2.25 per cent.
This measure will benefit income support recipients that are currently income-tested, including Age Pensioners.
FOCUS 2: ASSISTING BUSINESSES IN RETAINING EMPLOYEES
Measure #1: Cash flow boost for employers
Eligible small and medium-sized businesses and not‑for-profits (including charities) that employ people will be able to access up to $100,000 in cash over two separate payments. These payments are linked to their staff wage tax withholdings (PAYG) in the March quarter.
The first payment will be made on 28th April and will be equal to 100 per cent of their staff wage tax withholdings, up to $50,000.
The second payment will be “equal to the total of all of the Boosting Cash Flow for Employers payments received” which suggests that the second payment will be exactly the same as the first payment, irrespective of the staff wage tax withholdings in the June quarter.
By linking the payments to business to staff wage tax withholdings, businesses will be incentivised to hold on to more of their workers.
The payments are tax-free and will flow automatically through the ATO (i.e. no special forms will need to be filled out).
FOCUS 3: ASSISTING BUSINESSES IN STAYING AFLOAT
Measure #1: Coronavirus SME Guarantee Scheme
For small and medium enterprises (SMEs) who need to access working capital to get through the impact of COVID-19, the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs.
This will enhance the willingness and ability of lenders to provide credit to SMEs.
The Government has also cut red-tape to allow SMEs to get access to credit faster.
Australian banks are also expected to make announcements in the coming week in support of small and medium-sized businesses.
Measure #2: Temporary relief for financially distressed businesses
The Government is temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive. The package also includes temporary relief for directors from any personal liability for trading while insolvent. The Corporations Act 2001 will be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus.
This measure supports businesses to remain operational, keep people in jobs and continue to trade in circumstances that would ordinarily trigger insolvency provisions.
We hope you have found the above helpful. Please feel free to forward it on to anyone you think might find it similarly useful. As you know, your HPH Adviser is only ever a phone call, email or virtual meeting away. If you’d like to discuss your personal situation with us, please do not hesitate to get in touch.