Making sense of the Economic Stimulus Package

In March and April 2020, a whole range of payments have been announced for Australians looking for financial relief as a result of the COVID-19 pandemic 
and economic crisis. Find out more about these measures and how your clients could benefit from the Federal Government’s economic stimulus package.

The global and local impact of the COVID-19 pandemic has introduced many new questions in conversations between financial planners and clients. With many Australians unemployed or facing uncertainty with their current employer, more and more people are finding themselves looking for advice about how to manage short-term cash flow problems as well as their longer term financial plan.

To offer relief to people facing these financial struggles, the Federal Government has made a series of announcements on Centrelink payments and other financial support measures for everyday Australians. Providing clients with advice to enable them to maximise their income from government support is an important part of helping them manage their household budget This kind of support can help them feel less stressed about their finances when their income from employment and/or investments is limited.

With the volume of enquiries and requests for advice that planners are experiencing, finding the time to stay informed about the details of these economic stimulus measures can be a challenge. To help you make sense of financial support available from the Government at this time, here’s a quick guide on who can benefit from different payments and support measures available:

The following information is correct as of Wednesday 22 April 2020:

For clients who have had their working hours/income reduced:

While many Australians are able to keep working on a full salary, others may have had their hours cut and less income coming in as a result. Some may work for employers who are under enough financial pressure to be considering redundancies in the future.

The new JobKeeper payment is designed to help businesses afford to keep employees in the workforce. It will provide a $1,500 per fortnight payment for each eligible employee to businesses who have been impacted by COVID-19. While these payments are being made to businesses, they must be passed on to eligible employees for the employer to be eligible for payments.

What this means: For clients who are still in employment or have been stood down, if their employer is eligible, they can be paid a minimum of $1,500 per fortnight before tax until 27 September 2020. Payments can be backdated to 30 March 2020 and will be paid to employers from the first week in May.

Find out more: download the JobKeeper fact sheet.

If clients are still struggling to meet essential expenses even with JobKeeper payments and/or other income, they may be considering making an early withdrawal from super. For most clients this would be a ‘last resort’ option, to be taken up only if all the other economic stimulus measures are not enough to see clients and their families through this difficult time.  

What this means: If a client meets the financial hardship criteria, they can apply to withdraw up to $20,000 from their super fund $10,000 before 30 June 2020 and a further $10,000 from 1 July 2020. Early withdrawal is available to people who are unemployed, have had their working hours/business income reduced by 20% since 1 January 2020 or are receiving Centrelink payments.

Find out more:
Download the early access to superannuation fact sheet.
Clients can apply for early access to superannuation with the ATO via the MyGov website.
Supporting clients with super choices during the COVID-19 crisis

For clients who have lost their job:

If a client is no longer earning an income, they could be eligible for a JobSeeker payment from Centrelink. Along with a number of other Centrelink payments, JobSeeker payments have been increased to include a new time-limited Coronavirus supplement of $550 per fortnight, effective from 27 April 2020 and for the next six months.

This Coronavirus supplement payment will also be made to people receiving a number of other Centrelink benefits including the Youth Allowance and Parenting Payments (Partnered and Single).

Find out more:

Download the income support for individuals fact sheet.

Clients can visit the MyGov website to apply for the Jobseeker payment and other Centrelink benefits.

If clients are receiving the Coronavirus supplement, they are also eligible for early access to their superannuation.

The government has also committed to one-off $750 support payments for JobSeeker recipients. To be eligible for the first payment, your client must have been on JobSeeker payments between 12 March and 13 April 2020. This payment will be made automatically by Services Australia from 31 March 2020.

Find out more: download the payments to support households fact sheet.
Centrelink support payments during the COVID-19 crisis

For clients receiving other Centrelink payments including the Age Pension:

For clients holding a concession card and/or receiving a number of other Centrelink payments, you will also receive the first $750 support payment from 31 March 2020. Should they continue to be eligible for a concession card or benefits on 10 July 2020, they will also be eligible for a second $750 support payment. This payment will be made automatically from 13 July 2020.

Clients receiving the Coronavirus supplement will not be paid the second $750 support payment in July 2020.

Find out more

To see if your client could be eligible for the $750 support payments download the payments to support households fact sheet.

Centrelink support payments during the COVID-19 crisis

For clients who are retired: 

Clients who are concession card holders and/or receiving the Age Pension can benefit from these extra support payments. But if they’re retired and not eligible for these payments, they may still benefit from two other measures announced by the Government as part of their support for retirees.

There is a temporary reduction in minimum drawdown rates for account-based pensions and similar retirement income products. This means clients can withdraw a smaller amount than would normally be required from their super assets in the 2019/20 and 2020/21 financial years. It could be important to take this into account when offering advice on managing their super savings and income during this time.

The government has also announced a further reduction in the upper and lower social security deeming rates. Together with the 0.5 per cent cut announced on 12 March, this additional 0.25 per cent cut will take the upper deeming rate down to 2.25 per cent and the lower rate to 0.25 per cent. These new rates will take effect from 1 May 2020.

If you have clients who don’t currently receive income support or the Age Pension, or they are receiving payments at a reduced rate, the deeming rate change could mean changes to their eligibility for Centrelink benefits under the income test.

 Find out more:

For more details on minimum drawdown and deeming rates download the providing support for retirees fact sheet.

Summary of economic stimulus measures:

The FPA is continuing to advocate for members’ interests at this challenging time and share relevant information about government measures. To stay up-to-date on the latest in policy and advocacy for our profession, FPA Community is a forum for members to find out more about recent developments.

For planners who may be experiencing impacts from increased workload and greater uncertainty, as well the challenges of working from home, FPA Wellbeing offers practical advice and support, including access to one-on-one counselling and fact sheets.

Original Author: Produced by moneyandlife.com.au and published on 27/04/2020 Source