The Australian Government’s Response to the Coronavirus Pandemic has intended to protect the country from an economic depression that’s effects could be felt for years to come.
The rapid spread of the Coronavirus (Covid-19) pandemic around the world has devastated global markets and sent the global economy heading towards a recession.
To help alleviate some of the economic strain, on the 22nd March 2020, the Australian Government announced a variety of measures aimed to stimulate the Australian economy whilst also extending a helping hand towards those directly impacted by the ongoing effects of this economic downturn.
But its not just the Government taking responsibility, private industry such as the Australian banking sector have also stepped in to assist their customers. This includes relief such as the deferral of scheduled loan repayments, the waiving of fees & charges, interest free or not interest rate increases and debt consolidation to help make repayments more management.
At Yield our clients reflect a cross section of individuals and business owners, growing wealth or that are retired, and we are actively reviewing the government initiatives and how they could potentially benefit our clients. In this article we have broken down several of the measures for ‘Individuals and households’ and ‘Business owners.
It’s important to note that the exact timing of these measures will be dependent on the passage of the relevant legislation and is therefore subject to change.
The Australian Government’s Response to the Coronavirus Pandemic: Supporting Individuals & Households
Through their actions, the Government is hoping to provide financial assistance to individuals and households, through the bolstering of income support payments. Some of this assistance include the following:
1. The Coronavirus Supplement for Job seekers
If you or any of your family members are looking for work, there will be an expansion of the current eligibility criteria for income support payments and establishing a time-limited “Coronavirus Supplement” to be paid at a rate of $550 per fortnight. This amount will be paid to both existing and new recipients of Job Seeker Payments, Youth allowance Job Seeker, parenting payments, farm household allowance and special benefits.
2. An additional $750 payment to those receiving Social Security Benefits
As part of their response to Covid-19, the Government had already previously announced anyone on social security, veteran or any other income support recipients including eligible concession card holders would receive a once off $750 payment, with this payment being made from 31st March 2020.
On top of this payment, the Government has also announced that they will be providing a further $750 to eligible individuals which is expected to be made available from 13th July 2020.
It’s important to distinguish that half of the recipients of this payment are pensioners and this will therefore be particularly valuable to our clients currently receiving Age Pension entitlements. It aims to support confidence and domestic demand within the economy, if you are eligible for the before mentioned Coronavirus Supplement, you will not be eligible for this payment.
3. Reducing Minimum Pension drawdown rates
For the the remained of this financial year and the following financial year ending 2021, the Australian Government will be temporarily reducing the minimum pension drawdown rate requirements for account-based pensions and other similar products by 50%.
This is the response to significant drops in global share markets and aims to minimise the needs of those holding Account Based Pensions to sell investment assets to meet minimum drawdown requirements.
We will be in contact with all our clients that we think this can benefit shortly.
Since this article was published, this initiative has been legislated.
4. Reduction in Deeming Rates
To reflect the low interest rate environment in Australia, the Government has announced a 0.75% reduction in both the upper and lower social security deeming rates.
The changes will be effective from 1st May 2020.
This reduction will help assist those whose social security payments are calculated from means testing and benefit many pensioners in Australia.
5. Early access to Superannuation
Subject to legalisation, those who have been impacted by the Coronavirus may be able to gain access up to $10,000 of their Superannuation during the financial year ending 2020. In addition to this, a further $10,000 will be made available in the following financial year to eligible individuals.
Amounts withdrawn will be tax free and will have no affect on Social Security payments.
To be eligible for early release under this provision, you must satisfy one or more of the following:
- Are Unemployed; or
- Eligible to receive a job seeker payment, youth allowance for job seekers, parenting payment, special benefit or farm household allowance; or
- On or after 1st January 2020:
- You were made redundant; or
- Your working hours were reduced by 20% or more; or
- Assuming you’re a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more.
Depending on your age, super balance and circumstances, this will have varying financial impact on your retirement outcome, so if this is something that you would like to discuss, feel free to reach out.
The Australian Government’s Response to the Coronavirus Pandemic: Support for Business
The Government has also introduced a series of measures aimed to support Australian businesses to manage their cash-flow needs and retain employees. Recognising that several of our clients are business owners themselves, we’ve summarised the following measures:
1. PAYG Withholding Refunds
This is one of the most immediate benefits for business and a benefit that will apply to most small businesses out there. It is an initiative that should pump some much-needed liquidity into small business and is designed to make it more manageable to maintain staffing and other operating costs.
It is applicable for small to medium sized business and not-for-profits who employ staff and have annual turnovers under $50 million.
Eligible employers will be entitled to receive a refund equal to 100% of PAYG withheld from 1st January 2020 and the remainder of the financial year ending 2020, up to a maximum of $50,000.
Under this measure regardless of how much is withheld, if eligible, employers will at least receive a minimum of $10,000, even if they are not required to withhold tax.
The payment will be delivered by the ATO as an automatic credit upon the lodgement of your Monthly or quarterly BAS statements.
Further to the above, another payment is being introduced for the July – October 2020 period. Eligible entities will receive a further payment equal to the total of all PAYG Withholding refunds received, meaning that eligible entities will receive at least $20,000 and up to a total of $100,000 under both payments.
2. Temporarily increasing Instant Asset Write-offs
The Australian Government’s Response to the Coronavirus Pandemic will temporarily increase the instant asset write-off threshold from $30,000 to $150,000 and expand the eligibility criteria to include businesses with aggregated annual turnovers of less than $500 million.
This will remain in place until 30/06/2020 and will revert to $1,000 for small businesses, (Those with turnovers less than $10 million) from 01/07/2020.
3. Relief for businesses in financial distress
In the short term, the Australian Government is increasing the threshold at which creditors can issue statutory demands and the time that company has to respond to statutory demands received. In addition, their will also be relief for directors from any personal liability for trading while insolvent.
The aim of the above is to give businesses the breathing space they need whilst dealing with the slowdown as a result of the Coronavirus and health measures attempting to prevent its spread.
4. Support for Apprentices & Trainee employers
The Government is aiming to support small businesses and assist them to retain their apprentices and trainees.
Employers who are eligible are able to apply for a wage subsidy of 50% of the apprentices or trainees wage for 9 months from 01/01/2020 to 30/09/2020.
Should the small business not be able to retain an apprentice, the subsidy will then transfer to a new employer that employs that apprentice. The employer will be entitled to be reimbursed up to a maximum of $21,000 per eligible apprentice or trainee.
To be eligible the small business must employ less than 20 full-time employees and retain an apprentice or trainee, with the apprentice or trainee being trained with the business as at 01/03/2020.
Access to the subsidy will only be available after an eligibility assessment is undertaken by an Australian Apprenticeship Support Network (AASN) provider.
5. Higher allowance for depreciation
If you were planning to do any significant expansion of plant or machinery and are in a financial position to do so, the Government will be allowing a time limited 15-month acceleration to allowable depreciation deductions. This measure is aimed to incentivize investment and economic growth in the short term and is an opportunity to consider.
Business with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset on installation, with existing depreciation rules applying to the balance of the assets cost going forward.
What you need to know
It’s important to reiterate that due to the changing nature of the Covid-19 pandemic and the Australian Governments response to it, all of the above is subject to legislative change.
If any of what you’ve read makes you feel anxious or concerned about your financial position or you simply wish to understand how the Governments stimulus may affect you, please get in contact with the professional team at Yield Financial Planning.
Another resource available that you may find useful is the Government’s Coronavirus Australia app, for more information click here!