Covid-19 – What support am I eligible for?

To address the impact of the Covid-19 (Coronovirus) in Australia, the Australian Government in conjunction with the Reserve Bank of Australia (RBA) has unleased an increased total $189 billion wave of economic stimulus – equivalent to a substantial 9.7% of annual GDP. It is expected a third wave of Government spending is to be released in the weeks ahead.

Here is an outline of what you need to know about the current package which has targeted 3 key areas.

1. Supporting Individuals and Households

 

1.1 Income Support for Individuals

  • The Government is temporarily expanding eligibility to income support payments and establishing an additional Coronavirus payment of $550 per fortnight for those on income support. These changes are in place for the next 6 months.
  • The expanded eligibility means those accessing Jobseeker Payment and Youth Allowance Jobseeker income support to include those who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the economic downturn due to Covid-19.

 

1.2 Payment to Support Households

  • Two separate payments of $750 to be paid on the 31st of March and 13th July to social security, veteran and other income support recipients and eligible concession card holders. Approximately half of those benefiting will be pensioners. The second payment will not be made to those eligible for the Coronavirus supplement (outlined in 1.1).

 

1.3 Temporary Early Release of Superannuation

  • The Government is allowing qualifying individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and 2020-21, totalling $20,000.
  • Individuals will not need to pay tax on the amounts released.

 

There will also be a temporarily reduction in the superannuation minimum drawdown rates to support retirees, as well as reducing social security deeming rates that will benefit around 900,000 income support recipients, including 565,000 Age Pensioners.

2. Support for Businesses

 

2.1 Boosting Cash Flow for Employers

  • An expected $31.9 billion to support cash flow for businesses with a turnover of less than $50 million that employ staff.
  • This will benefit approximately 690,000 businesses employing 7.8 million Australians.
  • Providing up to a $100,000 payment to eligible SMEs (Small and medium Enterprises) and not-for-profits – with a minimum payment of $20,000.
  • Payments to be made from April through to October 2020 to support cashflow over a prolonged period, ensuring businesses can continue to operate, pay rent, bills, and wages.
  • The payments are tax free.

 

2.2 Temporary Relief for Financially Distressed Businesses

  • The Government is temporarily increasing the threshold for which creditors can issue a statutory demand on a company and the time companies have to respond to any demands they receive. The changes also allow temporary relief for directors from any personal liability or trading while insolvent.

 

2.3 Increasing the instant asset write-off

  • $700 million towards enabling the increase of the instant asset write off threshold from $30,000 to $150,000, and expanding this offering to businesses with annual turnover of up to $500 million (previous threshold of $50 million). This is in place until 30 June, 2020. In 2017-18 there were more than 360,000 businesses that benefited from the instant asset write-off in excess of $4 billion. The threshold is on an asset by asset basis, meaning businesses can write off multiple assets each valued up to $150,000.
  • This and the BBI measures will support over 3.5 million businesses (over 99% of businesses) that collectively employ more than 9.7 million employees. It has been targeted to ensure businesses continue with investments they had planned, and encourages business to bring forward investment to support economic activity and growth over the short term.

 

2.4 Backing Business Investment (BBI)

  • $3.2 billion to support investment in business by accelerating depreciation deductions. Businesses with a turnover of up to $500 million will be allowed to deduce an extra 50% of an asset price in the year it is purchased. This is in place until 30 June, 2021.

 

2.5 Supporting Apprentices and Trainees

  • Qualifying employers can apply for a wage subsidy of 50% of an apprentice’s or trainee’s wage for 9 months to 30 September 2020. Employers will be reimbursed up to $21,000 per apprentice or trainee ($7,000 per quarter).
  • This will support 70,000 small businesses, employing approximately 117,000 apprentices.

 

2.6 Support for Coronavirus-affected Regions

  • The Government will contribute $1 billion towards Covid-19 affected communities and related industries, such as regional locations with a strong tourism economy.

 

2.7 Support for Australian Airlines and Airports

  • $715 million to support Australian Airlines and Airports through reduced taxes and Government charges. This will apply from the 1st of February and apply over an 8-month period.

3. Supporting the Flow of Credit

 

3.1 Support for immediate cash flow needs for SMEs

  • The Coronavirus SME Guarantee Scheme will provide a Government guarantee of 50% to SME lenders to support and enable short-term unsecured loans. It will guarantee up to $40 billion of new lending.

 

  • Quick and efficient access to credit for small business
  • The Federal Government is cutting red tape by providing temporary exemptions from certain lending obligations for credit lenders providing loans to SMEs.

 

3.3 Reserve Bank of Australia (RBA) – supporting the flow of credit, and reducing the cost of credit

  • The RBA has made available a term funding facility for the banking system, enabling banks to draw upon at least $90 billion in funding at a fixed interest rate of 0.25%. The facility offers additional low-cost funding to banks if they expand their business lending books, specifically targets loan to SMEs. It has also cut the cash rate to 0.25% meaning lower mortgage rates for all mortgage holders.

 

3.4 Support for non-ADI and smaller ADI lenders in the securitisation market

  • The Government is extending $15 billion to support lending through non-ADIs and smaller ADIs (Authorised Deposit-Taking Institutions).

 

3.5 APRA Ensuring Banks are positioned to lend

  • APRA (Australian Prudential Regulation Authority) has made temporary changes to expectations around bank capital ratios. This will support banks’ lending to borrowers and help to ensure flow of credit throughout the economy.

 

According to the Treasurer, the measures passed by Parliament represent the most significant economic support since wartime.

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