$66B Coronavirus Stimulus Packages: A Brief Explainer
Australia has now passed the second of its government stimulus packages, bringing the grand total up to $189 billion. This is nearly 10% of the country’s entire GDP, and a significant enough number to help countless families.
So what does this mean for you and your family in the midst of this pandemic?
Here’s a brief look into what the Coronavirus Stimulus package covers, how it’s being divided, and what it could mean for you. We’ll also provide a quick look at Australia’s response when stacked up to the rest of the world, and how you can take advantage of these opportunities.
What Stimulus Packages Mean for Households & Individuals
We’ve seen the different faces of people impacted by the coronavirus pandemic — these are citizens from various industries who have lost their jobs due to the crisis. The coronavirus stimulus package is set to expand their benefits.
- Those in search of work can expect a $550 supplement per fortnight, doubling the current amount given to job seekers. This benefit is available for six months for both new and existing recipients of Youth Allowance, Parenting Payment, Farm Household Allowance, Special Benefit, and JobSeeker Payment (formerly Newstart).
- The government is also sending additional payments to veterans, those on social security, and eligible concession cardholders. With around half of all recipients being pensioners, the goal is to support domestic demand in the economy. The first payment will be $750 and is to be made at the end of March, with the second payment of $750 coming in July.
- In addition, about 900,000 income support recipients will also see reduced social security deeming rates. Your deeming rate is the amount the government deems your income to be from your financial assets. The calculated amount is used for your pension income assessment and can affect how much you receive from your pension. Reduced deeming rates means people can get more from their income. Since March 12, the rates have come down by a full .75%, giving recipients an average of $325 more per year.
- Finally, Australians will be given access to their superannuation funds, with the option of withdrawing up to $10,000 tax-free during the current financial year and up to an additional $10,000 for the 2020 – 2021 fiscal year as well. It is important to note that dipping into your superannuation too early can have negative effects in the long run. Since you may end up losing money and put a significant dent on your retirement funds, taking out your superannuation early should always be considered a last resort.
The payments for those on income support (including job seekers) will be done automatically, so there is no need to apply for consideration. If you choose to apply to access your superannuation early, you will need to first prove that your financial situation has drastically changed (such as job loss or hours cut).
- Businesses impacted by CoVid-19 will also be given access to JobKeeper payment where they can use government subsidy to keep paying their employees. Under JobKeeper, employers can claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.
What It Means for Businesses
- Improved Cash flow for employers
The government wants to improve cash flow for employers by providing up to $100,000 to eligible employers. The minimum payment is $20,000 for small businesses, medium-sized enterprises, and not-for-profits that qualify. Businesses must have an aggregated annual turnover of under $50 million to receive support. This is expected to help close to 700,000 businesses and up to 8 million people. These payments are directly connected to employee wage tax withholdings, giving businesses more incentive to retain their workforce.
- Access to the Government’s Guarantee Scheme
And in addition to the lowest interest rates in the history of the country, lenders have also been granted the benefit of a Guarantee Scheme. The Coronavirus SME Guarantee Scheme offers support for SMEs and provides them with a 50 per cent guarantee for new unsecured loans to be used for working capital. This will enhance a lender’s willingness and ability to provide credit, which will result in SMEs being able to access additional funding to help support them through the upcoming months. SMEs with a turnover of up to $50 million will be eligible to receive these loans.
This scheme is in effect from now until the end of September 2020 and is expected to inject at least $40 billion into the business sector.
- A relief for businesses to pay their debts
Creditors have also seen the limits increase for statutory demands on businesses who need more time to pay back debts. This temporary relief also protects directors who face personal liability for trading while insolvent under the Corporations Act of 2001. Business owners will also have more leeway when working with the ATO, which can result in a reduction of payments and/or penalty notices.
Payments for businesses are expected to be distributed soon, with an additional payment scheduled between July and October. This extra payment will be equal to the total amount of payments received under this benefit to date. All other programs, including the SME loans, are available as of now.
Business owners will find provisions included in the above benefits to account for unforeseen events. The goal is to control the COVID-19 situation as much as possible.
What Are Governments Around the World Doing?
Australia’s Coronavirus stimulus packages are not unlike those of other governments, even if the exact details vary from country to country. In countries like Japan, Italy, China, and the US, government officials are attempting to support the most vulnerable businesses wherever possible.
But this is not to say that individuals and households are being ignored. In the US, a $2.2 trillion package was recently signed to give the entire country hope through these difficult times. Government relief may come in any number of forms, such as tax cuts/credits, loan restructuring, or cash payments.
However, it has not always been easy for countries to agree on what the stimulus package should look like and how it should be distributed. Australia has taken swift action that has not been paralleled around the world. As other countries assess the situation, it’s likely that their stimulus packages will serve as more of a reaction to the overall economic fallout.
The Road Ahead and How Shore Financial Can Help
While there’s no need to paint a rosy picture of the current state of the world economy, there’s also no reason to despair. The Australian government has taken several measures to protect its citizens, and it will help all of us to focus on what can be done rather than the ways in which we are limited.
If you’re ready to learn more about your financial options throughout this pandemic, call Shore Financial today. We can help you figure out a way to secure your future finances, so you can be as proactive as you need to be in securing your future.