Boosting cash flow for small business
The Government is providing up to $100,000 to eligible small and medium sized businesses, and not‑for-profits that employ people with a minimum payment of $20,000. The $100,000 payment will be split between the 2019/20 and 2020/21 financial years.
Employers will now receive a payment equal to 100 per cent of their wages withholding (up from 50 per cent announced as part of the first stimulus package), with the maximum payment being increased to $50,000 in each financial year. In addition, the minimum payment is being increased to $20,000.
The payment will be available from the 28 April 2020.
See the fact sheet from the Federal Government here.
Loan guarantees for small business
The Government will guarantee 50 per cent of unsecured loans taken out by small businesses in the six months starting from 1 April 2020 with banks who join the scheme.
Loans can be taken over a three-year term to a maximum amount of $250,000. In addition, loans will not have any repayment requirements for the first six months, but will not apply to existing customers refinancing.
Early release of superannuation for individuals
While superannuation helps people save for retirement, the Government recognises that for those significantly financially affected by the Coronavirus, accessing some of their superannuation today may outweigh the benefits of maintaining those savings until retirement. (We suggest you do the numbers on this based on your situation).
Eligible individuals will be able to apply online through myGov to access 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 for approximately three months (exact timing will depend on the passage of the relevant legislation).
The exact eligibility requirements will be formed in the coming days but broadly to apply for early release you must satisfy any one or more of the following requirements:
- you are unemployed; or
- you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020:
- you were made redundant; or
- your working hours were reduced by 20 per cent or more; or
- if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20 per cent or more.
People accessing their superannuation will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGov website: https://my.gov.au/.
Separate arrangements will apply if you are a member of an SMSF.
You will be able to apply for early release of your superannuation from mid-April 2020.
See the fact sheet from the Federal Government here.
Temporarily reduce superannuation minimum drawdown rates
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. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.
Individuals who have already taken their minimum pension amount for the 2019/20 financial year will not able to put that money back into his superannuation account under these changes.
Individuals who can access the ‘Coronavirus supplement’
The Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
The Coronavirus supplement will be paid for the next 6 months. Eligible income support recipients will receive the full amount of the $550 Coronavirus supplement on top of their payment each fortnight.
Payments to support households
The Government will provide a further $750 payment to social security, veteran income support recipients, and eligible concession card holders in addition to the $750 stimulus announced on 12 March 2020.
The first payment will be made from 31 March 2020 to people who will have been on one of the eligible payments anytime between 12 March 2020 and 13 April 2020.
This second payment will be made automatically from 13 July 2020.
Reducing social security deeming rates
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. The reductions reflect the low interest rate environment and its impact on the income from savings.
The change will benefit around 900,000 income support recipients, including around 565,000 people on the Age Pension who will, on average, receive around $105 more from the Age Pension in the first full year that the reduced rates apply.
The changes will be effective from 1 May 2020.
For example,
Leslie and Brian are an age pensioner couple. They have $550,000 worth of financial assets. They hold $300,000 in a superannuation account with a conservative investment strategy which returned around 5 per cent last year. They have invested $130,000 in a term deposit with an annual return of 1.5 per cent and hold the remainder in a cash transaction account earning a negligible rate of interest.
Under the former deeming rates, Leslie and Brian’s Age Pension would have been reduced by $65 each per fortnight. Under the new deeming rates, Leslie and Brian’s Age Pension will only be reduced by around $32 each per fortnight.
Seek out further advice and start your journey to being free around your money and creating wealth with understanding.
Scott Malcolm has been awarded the internationally recognised Certified Financial Planner designation from the Financial Planning Association of Australia and is Director of Money Mechanics. Money Mechanics is a fee for service financial advice firm who partner with clients in Melbourne, Canberra, Newcastle and Sydney to achieve their life and wealth outcomes. Money Mechanics Pty Ltd (ABN 64 136 066 272) is a Corporate Authorised Representative (No. 336429) of Infocus Securities Australia Pty Ltd (ABN 47 097 797 049) AFSL and Australian Credit Licence No. 236523
The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.