COVID-19 Stimulus Updates – Understanding the package
March 23, 2020
The Federal Government has announced another range of initiatives and also changes to those previously announced, to help support individuals, households and businesses cope with the impacts of Coronavirus. Here, we look at the key measures and what they could mean for you.
Income support for individuals
Over the next six months, the government is temporarily extending eligibility to income support payments and establishing a new, time-limited coronavirus supplement of $550 per fortnight. This will be paid to existing and new recipients of JobSeeker (formerly known as Newstart), Youth allowance jobseeker, Parenting Payment, Farm Household and Special Benefit payments.
Payments to support households
The government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession cardholders who aren’t in receipt of the $550 supplement. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those that benefit are pensioners.
Temporary early release of superannuation
The government is allowing individuals affected by the coronavirus to access up to $10,000 of their super this financial year and a further 10,000 in 2020-21 (i.e.before and after 1 July 2020). The amounts released won’t be taxed and won’t affect Centrelink or Veterans Affairs payments. To apply for the early release you will need to satisfy a number of requirements.
Temporarily reducing superannuation minimum drawdown rates and changes to deeming rates
The government is temporarily reducing the superannuation drawdown (pension) requirements for account-based pensions and similar products by 50% for 2019-20 and 2020-21.
Upper and lower social security deeming rates are also being reduced by a further 0.25 percentage points in addition to the 0.5 percentage point reduction to both rates announced on 12 March 2020. 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.
Support for coronavirus-affected regions and communities
$1 billion is being set aside to support regions most significantly affected by the Coronavirus outbreak. These funds will be available to assist during the outbreak and the recovery.
Boosting cash flow for employers
The government is enhancing the Boosting Cash Flow for Employers measure it announced on 12 March 2020, by providing up to $100,000 to eligible small and medium-sized businesses, and not-for-profits (NFPs) that employ people, with a minimum payment of $20,000.
These payments will help businesses and NFPs with their cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff.
Under the enhanced scheme, employers will receive a tax-free payment equal to 100 percent of their salary and wages withheld (up from 50 percent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
An additional payment is also being introduced in the July – October 2020 period. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments they have received. This means that eligible entities will receive at least $20,000 up to a total of $100,000 under both payments.
The cash flow boost provides a tax-free payment to employers and is automatically calculated by the Australian Taxation Office (ATO). There are no new forms required.
Support for immediate cash flow needs for SMEs
Under the Coronavirus SME Guarantee Scheme, the Government will provide a guarantee of 50 percent to SME lenders, to support new short-term unsecured loans to SMEs. The Scheme will guarantee up to $40 billion of new lending to provide businesses with funding to meet cash flow needs, by further enhancing lenders’ willingness and ability to provide credit. This will assist otherwise viable businesses across the economy who are facing significant challenges due to disrupted cash flow to meet existing obligations.
Quick and efficient access to credit for small business
The Government is providing a temporary exemption from responsible lending obligations for lenders providing credit to existing small business customers. This reform will help small businesses get access to credit quickly and efficiently.
With many businesses being reluctant to borrow funds, the Commonwealth is also offering to guarantee unsecured loans of up to $250,000 for a term of up to three years.
Reserve Bank of Australia – Supporting the flow and reducing the cost of credit
The RBA announced a term funding facility for the banking system. Banks will have access to at least $90 billion in funding at a fixed interest rate of 0.25 percent. This will reinforce the benefits of a low cash rate by reducing funding costs for banks, which in turn is designed to help reduce interest rates for borrowers. To encourage lending to businesses, the facility offers additional low-cost funding to banks if they expand their business lending, with particular incentives applying to new loans to SMEs.
In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 percent.
Supporting you
We are here to help. Please call us on 07 3217 2477 or email us should you wish to discuss any of these measures and what they mean for you.