COVID-19 Economic Response: Individuals and Households
As it stands, in terms of COVID-19*, globally, there has been a reported 1,273,990 cases, 69,444 deaths, and 260,247 recoveries. And, domestically, there has been a reported 5,687 cases, 35 deaths, and 757 recoveries.
While COVID-19 is first and foremost a public health issue, clear economic and financial issues have emerged.
In response to this, the Government has recently announced, and now legislated (where applicable), policies targeting three areas:
- Support for businesses;
- Supporting the flow of credit; and
- Supporting individuals and households.
In this article, part one of a two-part series, we provide an overview of the major policies pertaining to supporting individuals and households, as well as aspects of supporting the flow of credit.
Supporting individuals and households
Changes to social security deeming rates
The deeming rates for social security payments will be further reduced below those announced earlier, to:
- 0.25% for the lower deeming rate (down from 1.0%), which applies to the first $51,800 of financial assets for a single person (the first $86,200, for a pensioner couple); and
- 2.25% for the upper deeming rate (down from 3%), which applies to financial assets in excess of $51,800 (in excess of $86,200, for a pensioner couple).
This applies from 1 May 2020.
Early Childhood Education and Care Relief Package
The Government, via the new Early Childhood Education and Care Relief Package, will make payments to early childhood education and care services in lieu of the Child Care Subsidy and the Additional Child Care Subsidy.
For early childhood education and care services to receive these payments, they must:
Stay open, with at least one active enrolment, unless closed on public health advice or for other health and safety reasons;
- Ensure families are not charged a fee, including an out of pocket or gap fee;
- Continue and prioritise care to essential workers, vulnerable and disadvantaged children and previously enrolled children;
- Continue to record attendance of children; and
- Comply with all other provider obligations including National Quality Framework and other relevant conditions of approval under Family Assistance Law.
This applies from 6 April 2020 until the end of the 2019-20 financial year.
In addition to above:
- The number of allowable absence days will be increased from 42 to 62 for the 2019-20 financial year. Please note: Absences will not be counted during the Early Childhood Education and Care Relief Package period.
- For the period 23 March to 5 April 2020, a service will be able to waive a family’s out of pocket or gap fee, where the service was open but they did not send a child due to COVID-19. This is in addition to a service being able to waive out of pocket or gap fees, where the service closes on public health advice.
Increased and accelerated income support
Individuals who are an eligible payment recipient, will be eligible to receive a further $550 per fortnight supplement, the Coronavirus supplement:
ABSTUDY for students getting Living Allowance
- Austudy for students and apprentices
- Farm Household Allowance
JobSeeker Payment, Partner Allowance, Widow Allowance, Sickness Allowance and Wife Pension
- Parenting Payment partnered and single
- Special Benefit
- Youth Allowance for job seekers
- Youth Allowance for students and apprentices.
This applies from 27 April 2020, and will be available for an initial 6 months, however the Government may extend this period.
Please note: For all relevant payments, there will be expanded access (e.g. suspension of mutual obligation requirements for JobSeeker Payment), as well as an accelerated claim process and streamlined application process. And, for 6 months, from 25 March 2020, the following will be waived, in relation to the above payments:
- The Assets test, except for Farm Household Allowance and Special Benefit.
- The liquid asset test waiting period, newly arrived residents waiting period, ordinary (1 week) waiting period and seasonal work preclusion period.
While the JobKeeper Payment is payable to employers, we have included it here as the employer must pass the payment on to eligible employees. Employers – businesses (not subject to the Major Bank Levy), not-for-profits (including charities), and self-employed individuals – will be eligible for a wage subsidy to continue to pay their employees, if they:
- Have an aggregated annual turnover less than $1 billion and their turnover has been reduced by more than 30% to a comparable period a year ago (of at least a month); or
- Have an aggregate annual turnover of $1 billion or more and their turnover has been reduced by more than 50% relative to a comparable period a year ago (of at least a month).
Please note: The Tax Commissioner will be able to use their discretion where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover.
The subsidy, the JobKeeper Payment, is $1,500 per fortnight, per nominated and notified eligible employee. Businesses (including sole traders) can receive the payment for multiple employees and if they have no employees, in relation to a single individual.
Employers can register their intention to apply with the ATO from 30 March 2020. Employers will receive their first payment in the first week of May (backdated to a start date of 1 March 2020), payable for up to 6 months.
An employee is deemed eligible, if they:
- Are at least 16 years of age;
- Are not in receipt of a JobKeeper Payment from another employer;
- Were employed by the employer on 1 March 2020 (including those stood down or re-hired) and are employed at the time of the claim;
- Are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020); and
- Are an Australian citizen, the holder of a permanent visa, or a Special Category (Subclass 444) Visa Holder at 1 March 2020.
Employers must ensure that each eligible employee receives at least $1,500 per fortnight (before tax); however, it will be up to the employer if they want to pay super on any additional wage paid because of the JobKeeper Payment. For example, if an eligible employee:
- Ordinarily receives less than $1,500 in income per fortnight (before tax), their employer must pay them, at a minimum, $1,500 per fortnight (before tax).
- Ordinarily receives $1,500 or more in income per fortnight (before tax), they will continue to receive their regular income according to the prevailing workplace arrangements. The JobKeeper Payments will subsidise part or all of their income.
- Has been stood down, their employer must pay them, at a minimum, $1,500 per fortnight, (before tax). Alternatively, if they were employed on 1 March 2020, and subsequently ceased employment and then were re-engaged by their employer, they will receive, at a minimum, $1,500 per fortnight (before tax).
Please note: The receipt of the JobKeeper Payment by an employee may affect their eligibility for payments from Services Australia (e.g. JobSeeker Payment) as the JobKeeper Payment must be reported as income.
It’s important to note that this is still a proposed measure at time of writing, and legislation needs to be passed to make it effective. Changes could be made.
Reduction of the cash rate
Among other announcements, such as a term funding facility for the banking system, the RBA has further eased monetary policy by reducing the cash rate to a historic low of 0.25% (down from 0.50%).
Individuals that reside in Australia, and are a Pensioner, Commonwealth Seniors Health or Veteran Gold concession card holder, or eligible to receive one of the following payments at any time from 12 March 2020 to 13 April 2020 inclusive, will be eligible to receive a tax-free initial payment of $750:
- ABSTUDY (Living Allowance)
- Age Pension
- Bereavement Allowance
- Carer Allowance
- Carer Payment
- Department of Veteran Affairs Education Scheme
- Disability Support Pension
- Family Tax Benefit, including Double Orphan Pension
- Farm Household Allowance
- JobSeeker Payment, Partner Allowance, Widow Allowance, Sickness Allowance and Wife Pension
- Newstart Allowance
- Parenting Payment
- Special Benefit
- Veteran Compensation payments, including lump sum payments
- Veteran Income Support Supplement
- Veteran Payment
- Veteran Service Pension
- War Widow(er) Pension
- Widow B Pension
- Youth Allowance
- Department of Veteran Affairs Pensioner Concession Card
- Commonwealth Seniors Health Card
- Pensioner Concession Card
- Veteran Gold Card
Please note: Individuals that lodge a claim for an above payment or concession card at any time from 12 March 2020 to 13 April 2020 inclusive, and the claim is granted, they will also be eligible to receive the payment.
Furthermore, the above payment recipients or concession card holders will be eligible to receive a tax-free additional payment of $750. However, those payment recipients eligible for the Coronavirus supplement are excluded from receiving this additional payment.
The payments will not count as income for Social Security, Farm Household Allowance and Veteran payments.
The first payment will be paid automatically from 31 March 2020, and the second payment will be paid automatically from 13 July 2020.
Temporary early access to superannuation
Individuals will be eligible to access up to $10,000 of their super before 1 July 2020, and a further $10,000 from 1 July 2020 until 24 September 2020, if:
- They are unemployed; or
- They are eligible to receive a Farm Household Allowance, JobSeeker Payment, Parenting Payment, (partnered and single payments), Special Benefit, or Youth Allowance for jobseekers; or
- On or after 1 January 2020:
- They were made redundant; or
- Their working hours were reduced by 20% or more (including to zero); or
- They are a sole trader — and their business was suspended or suffered a reduction in their turnover of 20% or more.
The amounts released will not incur tax, nor will the amounts affect Centrelink or Veterans’ Affairs payments.
Applications for early release of super will be able to be made online through myGov from mid-April 2020.
Temporary reduction in super minimum drawdown requirements
The minimum drawdown requirements for retirement income streams, such as account-based pensions, will be reduced by 50% for the 2019-20 and 2020-21 financial years.
If you would like to discuss anything mentioned above, and its relevance to your financial situation, goals and objectives, please do not hesitate to contact us.
Written and accurate as at 6th April 2020.
*Center for Systems Science and Engineering (CSSE). GIS Dashboard: Coronavirus COVID-19 Global Cases by Johns Hopkins CSSE.
Sound Life & Superannuation Agencies Pty Ltd trading as Sound Life Financial Services is the Authorised Representatives of Synchron, AFS Licence No. 243313.
The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
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