Over the past weeks, the Federal Government has announced three economic packages to cushion the impact of the Coronavirus. These actions provide timely support to affected workers, businesses and the broader community.
The Government is supporting individuals and families affected by Coronavirus through a range of measures, announced as part of these three economic packages. We look at some of these key support measures and what they could mean for you.
A welcome combination of measures for an extraordinary challenge
The Government has announced a total of $213.7 billion in support measures aimed to help keep Australians in work and support those in need. This includes:
- $17.6 billion from the Government’s first economic package
- $66.1 billion in the second economic support package announced on the 22 March, and
- the $130 billion JobKeeper Payment package.
There is also a $90 billion facility by the Reserve Bank of Australia to support business lending in addition to the Federal Government’s $20 billion pledge to deliver easier access to finance for small-to-medium businesses.
Altogether, these budget and financing measures amount to around 15% of Australia’s national income as measured by GDP. This significant action has been taken in national interest and is a welcome combination of measures for an extraordinary challenge.
What does the Government’s support package include?
The Government’s economic response targets three areas:
- Support for households and individuals including casuals, sole-traders, retirees and those on income support.
- Assistance for businesses to keep people in a job and help in managing short-term cash flow challenges.
- Supporting the flow of credit in the Australian economy through the regulatory protection and financial support for businesses to stay in business.
The Government has designed the support packages to position the Australian economy to recover strongly once the health challenge has been overcome. The International Monetary Fund (IMF) and the Organisation for Economic Co-Operation and Development (OECD) have also indicated that Australia is in one of the best positions to provide fiscal support without endangering debt sustainability.
Support for individuals and households – key measures that could benefit you
The Government is providing financial assistance to many Australians to support them through the economic impact of the Coronavirus. This assistance includes the JobKeeper Payment, income support payments, payments to support households and temporary early releases of super.
On 30 March, the Government announced the $130 billion JobKeeper Payment. The JobKeeper payment is a temporary scheme open to businesses and self-employed individuals impacted by the Coronavirus.
Under the JobKeeper payment, businesses that meet certain criteria and are significantly impacted by the Coronavirus outbreak will be able to access a subsidy from the Government to help continue paying their employees. This assistance will help businesses to keep people in their jobs and re-start when the crisis is over. For employees, this means they can keep their job and earn an income—even if their hours have been cut.
Affected employers will be able to claim a payment of $1,500 per fortnight per eligible employee from 30 March 2020 until 27 September 2020. Eligible businesses can register their interest in participating in the payment on the ATO website.
Eligible employees will receive a minimum of $1,500 per fortnight, before tax. It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper payment. To find out more on the JobKeeper payment, and to understand whether you’re an eligible employer or employee, visit the Federal Government’s JobKeeper payment website here.
Income support for individuals
Over the next six months, the Government is also temporarily expanding eligibility to income support payments and establishing a new Coronavirus entitlement to be paid at a rate of $550 per fortnight on top of their qualifying existing income support payment. This will be paid to both existing and new recipients of specific income support payments including Jobseeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance, Farm Household Allowance and Special Benefit.
Payments to support households
The Government is providing two separate $750 payments to certain social security income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020.
Temporary early release of super and reducing super minimum drawdown rates
The Government is temporarily allowing individuals affected by the Coronavirus to access up to $10,000 of their super early in 2019-20 and a further $10,000 in 2020-21. This measure is estimated to draw on $1.2 billion in super balances over the forward estimates period.
Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. You can find out more about this measure, and whether you are eligible to apply, on our dedicated early release of super webpage.
If eligible, you’ll be able to apply for early release of super from 20 April 2020 directly to the ATO through your myGov account at my.gov.au.
The Government is also temporarily reducing minimum drawdown requirements for account-based pensions and similar products by 50 percent for 2019-20 and 2020-21. This measure will benefit retirees with account-based pensions and similar products, by reducing the need to sell investment assets to fund minimum drawdown requirements. This means a retiree will receive a lower pension payment during this period, if they elect the new minimum.
Reducing social security deeming rates
On 12 March, the Government announced a reduction in both the upper and lower social security deeming rates. The deeming rate is the rate of income the Government assumes a person’s financial assets to earn. This is used to calculate a person’s income and can affect how much pension a person receives.
As of 1 May 2020, the upper deeming rate will be 2.25 percent and the lower deeming rate will be 0.25 percent. The reductions reflect the low interest rate environment and its impact on the income from savings.
Reserve Bank of Australia — supporting the flow of funds throughout the economy
In addition to the Federal Government’s support measures, the Reserve Bank of Australia (RBA) announced a package on 19 March 2020 that will put downward pressure on borrowing costs for households and businesses. This included 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 lower cash rate by reducing funding costs for banks, which in turn will help reduce interest rates for borrowers.
In addition, the RBA announced a further easing in monetary policy by reducing the cash rate to 0.25 percent. It is also extending and complementing the interest rate cut by taking active steps to target a 0.25 percent yield on 3-year Australian Government Securities.
Troubling times require astonishing policy measures
We are living in extraordinary times. Across the world, countries are facing twin battles against the Coronavirus. The virus is both a health danger as well as a threat to economic prosperity. The Government’s commitment of $213.7 billion to manage the outbreak in Australia will help strengthen both our health system and support the Australian economy.
Monetary policy is also responding with around 70 central banks across the world easing policy in 2020 so far. Australia’s position heading into this crisis is stronger than many, with both the International Monetary Fund and the Organisation for Economic Co-Operation and Development having forecast Australia to grow faster than comparable economies, including the United Kingdom, Canada, Japan, Germany and France1.
The Federal Government has made a number of sources of financial assistance available, and if you have been financially affected by the Coronavirus pandemic, then you could be eligible to receive support through any of the schemes above. We strongly encourage you to speak with your financial adviser, or if you don’t have a financial adviser, please call us on 132 652 if you wish to discuss your options.
You can click here to access the Government’s full Coronavirus support packages for individuals and households, or by typing treasury.gov.au/coronavirus/households in to your browser.
Important information and disclaimer
This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. The information in this article is current as at 9 April 2020 and may be subject to change. The information in this article is general in nature and does not take into account your objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. An investment with NULIS is not a deposit with, or liability of, and is not guaranteed by NAB or other members of the NAB Group. Opinions constitute our judgement at the time of issue. In some cases information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the NAB Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication. Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market.