With Covid-19 rapidly up-ending the way we live and work, the financial aspects can be as concerning as the potential health risks. Thankfully, the government and lenders are acting quickly to put in place strategies that can help cushion the blow for individuals, households and businesses. So what help is available to you now?
Relief from Lenders
As we covered in last month’s blog, Your Financial Safety Checklist, the major banks are now all offering relief to both personal and business customers, including such options as taking a mortgage holiday if you are suffering financial hardship. Contact your lender or visit their website to find out what assistance they have made available and how to apply.
Protection for your credit score
The Australian Banking Association (ABA) has confirmed that Australians who are given six-month deferrals on their loan repayments for mortgage or other credit product, including credit cards, will not have their credit rating affected by that deferral, provided they were up to date with repayments prior to COVID-19. Find out more here.
Macquarie has announced that it will shield the credit scores of home borrowers who miss loan repayments during the COVID-19 health emergency period. The bank has said it will not report missed loan repayments to credit agencies for customers affected by the crisis. Hopefully other banks will follow suit.
Support for businesses to protect jobs
The JobKeeper Payment is a wage subsidy program that aims to help businesses and keep people in jobs throughout the crisis. An estimated six million Australians will receive a fortnightly payment of $1,500 (before tax) through their employer thanks to JobKeeper. The hope is that this will help eligible employers retain their workforce so that they can quickly restart business once the crisis is over. The JobKeeper Payment is also available to people who are self-employed, even if they do not have employees. Register for JobKeeper updates from the ATO.
Income support for individuals and households
To help those who have lost their jobs due to Covid-19, the Government is temporarily expanding eligibility criteria for some income support payments for individuals to make it easier to claim. In addition, a new, time-limited Coronavirus supplement will also be paid at a rate of $550 per fortnight to both existing and new recipients of eligible Jobseeker (formerly Newstart) payment categories for six months from 27 April 2020.
Household support payments
Australians and eligible Australian residents receiving income support payments will also be automatically eligible for one or two of the Government’s $750 Economic Support Payments paid between 12 March and 13 April 2020, and from 13 July 2020.
Crisis support payments
A one-off Crisis Payment is also available for those in severe financial hardship who need to self-isolate or are caring for someone who is self-isolating. This payment is one week of an individual’s base income support payment.
Visit Services Australia for more information on payments and services if you're affected by COVID-19.
Early access to super
From 20 April 2020, some people can apply to access up to $10,000 of their superannuation early in this financial year (2019-20) and another $10,000 between 1 July 2020 and 24 September 2020, for the 2020-21 year.
Eligibility criteria include:
- Being eligible to receive a Jobseeker payment, youth allowance for jobseekers or parenting payment.
- Being a Sole Trader or Business that has suffered more than 20 per cent loss in turnover*.
- Having had your working hours reduced by more than 20 per cent*.
- Being unemployed or having been made redundant.
* On or after 1 January 2020
If you meet these requirements, you won't pay tax on the super you withdraw and it won't affect Centrelink or Veterans’ Affairs payments.
However, since accessing your super early may affect your savings to live on in retirement, it is well worth exploring what other options are available to you first, including financial support from the government or hardship relief from your lender, as discussed above.
Find out more about early access to your super on the Australian Taxation Office (ATO) website.
Reduced drawdown and deeming rates for retirees
If you have an account-based pension or a similar product, reduced superannuation drawdown rates will apply for both the 2019-20 and the 2020-21 financial year. This should reduce an individual’s need to sell investment assets to fund minimum drawdown requirements.
Changes to social security deeming rates will take effect from 1 May 2020. The upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. For more information on reduced superannuation minimum drawdown and deeming rates visit The Treasury website.
Support for affected businesses
New measures by the Government will also help financially distressed businesses. These include:
- Provide up to $100,000 to eligible small and medium-sized businesses and not-for-profits that employ people.
- Provide temporary relief for financially distressed businesses.
- Increase the instant asset write-off to $150,000.
- Provide a 15-month business investment incentive.
- Subsidise up to 50 per cent of apprentice and trainee wages for nine months.
For more information and updates on other financial support available in your state or territory, visit business.gov.au.
Emergency, crisis and legal support
There are also a range of free services that can offer help for those in need with food, housing and bills. See MoneySmart’s info on urgent help with money. Access to free legal advice and support is also available.
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Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.