COVID 19 UPDATE: Home loan relief | Small biz support | Time to refinance? | Tax breaks | Super
There have been so many developments in the past few days regarding COVID-19.
We continue to work to help support you during these challenging times.
As this is an evolving pandemic, it is important for you to stay up to date with stimulus updates and what this means for you and your business.
Below we share the most crucial updates for homeowners and business owners and what help is available for you. For more information you should only rely on the information from the government websites. All information provided has been extracted from https://treasury.gov.au/coronavirus or https://preview.nsw.gov.au/news/health-boost-and-economic-stimulus
WORRIED ABOUT YOUR BUDGET? YOU CAN PAUSE YOUR REPAYMENTS
If you're struggling with your home loan repayments because of the coronavirus crisis, help is available. And the sooner you act, the more options you’ll have. Banks and lenders across Australia have announced a range of relief measures for mortgage borrowers, including the deferral of repayments for up to six months It's important to note that while your repayments are on hold, interest may be capitalised to your loan , which means your repayments and loan amount will increase once the pause period ends. Although not confirmed at this point, doing this may impact your credit score in the future. Lenders are also offering relief to business customers, with measures such as:
Repayment holidays for loans and credit cards (interest capitalisation)
Interest rate cuts
Extra funds set aside for unsecured borrowing
Restructure and consolidation of existing loans
Early access to term deposits
All lenders have hardship teams ready to help customers in tough times. Links to more information is being loaded to each lenders website daily. Check these sites before calling your bank as wait times can be very long at the moment.
INTEREST RATES ARE TUMBLING – SHOULD YOU REFINANCE?
The Reserve Bank of Australia has slashed official interest rates to record-low level at an emergency meeting last week. This was the second rate cut in March, seeing the cash rate drop 50 basis points in less than a month.
In response to the drops, many lenders failed to pass on the entire 50-point saving but almost all made significant reductions.
So now that rates are at an all-time low, is it a good time to find a better home loan?
The answer isn’t so black and white.
Borrowers with a lot of equity in their homes are well-placed to take advantage of these big rate cuts.
Other borrowers, though, might struggle to find savings, because valuers are being very conservative about property values, which means some people might find they have less than 20% equity in their home – making it hard to switch.
If you’re wondering whether to refinance, let’s talk about your specific circumstances and if a better deal exists.
SWITCHING YOUR LOAN REPAYMENTS TO INTEREST-ONLY IS ANOTHER OPTION
If your income has taken a hit due to the coronavirus crisis, you might be thinking of switching your home loan to interest-only. This would have pros and cons. The main benefit of switching from principal-and-interest to interest-only repayments is that your repayments would be lower during the interest-only period. However, switching to interest-only would also have drawbacks:
You wouldn’t reduce your outstanding debt during the interest-only period
You would pay more in interest over the life of the loan (although this might deliver tax benefits if you were an investor)
You might not be prepared to revert to higher repayments once the interest-only period ended
A switch to Interest Only is not as simple as a phone chat and will usually require an assessment of your circumstances
BIG BANKS SUPPORT $20BN BUSINESS LOAN GUARANTEE
Announced on Sunday night, Australia’s biggest banks have thrown their support behind a new federal government plan to support the nation’s small and medium-sized businesses. The government will guarantee 50% of new loans issued by eligible lenders to SMEs, with a pledge of $20 billion to support $40 billion in loans. You will have to apply for these loans through the normal channels. Three of the big four banks immediately announced concrete support for the government plan, with measures including:
Extra funds made available for business loans
Rate cuts for unsecured business loans
Bank staff proactively contacting businesses to offer support
If you need a business loan please get in touch.
ATO OFFERS TAX RELIEF FOR PEOPLE, BUSINESSES
The Australian Taxation Office has promised relief measures to help those affected by COVID-19. Anyone impacted by COVID-19 can call the ATO’s emergency support infoline on 1800 806 218. The ATO will “work with individuals experiencing financial hardship” and will “apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation”. Individuals The Morrison Federal Government has increased the Income Support Payment to a rate of $550 per fortnight. The income support payment categories eligible to receive the Coronavirus supplement are:
Jobseeker Payment 1 (and all payments progressively transitioning to JobSeeker Payment)
those currently receiving Partner Allowance, Widow Allowance, Sickness Allowance and Wife Pension
payments formerly known as ‘newstart’.
Youth Allowance Jobseeker
Parenting Payment (Partnered and Single)
Farm Household Allowance
Special Benefit Recipients
Anyone who is eligible for the Coronavirus supplement will receive the full rate of the supplement of $550 per fortnight. The above stimulus is extremely important to those casual workers and sole traders who will be out of work for the duration of the shutdown period. There has also been a reduction in the means test, waiting times and expanded access to include someone who is caring for a Corona Virus (CV) patient. Households You may be eligible for two payments of $750 (paid between 12/3/20 to 13/4/20 and again on 10/07/20). To be eligible for the first payment; you must be residing in Australia; and be receiving one of the following payments, or hold one of the following concession cards, at any time from 12 March 2020 to 13 April 2020, inclusive: • Age Pension • Disability Support Pension • Carer Payment • Parenting Payment • Wife Pension • Widow B Pension • ABSTUDY (Living Allowance) • Austudy • Bereavement Allowance • Newstart Allowance • JobSeeker Payment • Youth Allowance • Partner Allowance • Sickness Allowance • Special Benefit • Widow Allowance • Family Tax Benefit, including Double Orphan Pension • Carer Allowance • Pensioner Concession Card (PCC) holders • Commonwealth Seniors Health Card holders • Veteran Service Pension; Veteran Income Support Supplement; Veteran Compensation payments, including lump sum payments; War Widow(er) Pension; and Veteran Payment. • DVA PCC holders; DVA Education Scheme recipients; Disability Pensioners at the temporary special rate; DVA Income support pensioners at $0 rate. • Veteran Gold Card holders • Farm Household Allowance To be eligible for the second payment; you must be residing in Australia and be receiving one of the payments above or hold one of the concession cards that were eligible for the first payment, except for those who are receiving an income support payment that is eligible to receive the Coronavirus supplement. Income support recipients that are eligible to receive the Coronavirus supplement are: • JobSeeker Payment (and payments progressively transitioning into JobSeeker Payment) • Youth Allowance Jobseeker • Parenting Payment (Partnered and Single) • Farm Household Allowance • Special Benefit The second payment is expected to be made to around 5 million social security, veteran and other income support recipients and eligible concession card holders. Around half of those that benefit are pensioners. Businesses The new initiative ‘Boosting Cash Flow’ for employers is aimed at Not For Profit and small to medium sized businesses that employ people with a minimum PAYG Withheld Payment of $20,000 per financial year. This applies to businesses with turnover of under $50 million and Not For Profits with turnover above $50 million. This payment will be made via a credit on your next BAS in the form of 100% of your PAYG withheld amount up to $50,000 with the minimum payment being $10,000. This will be a tax free payment and available at this stage to October 2020. If you employ staff and do not withhold tax as they are under the threshold, you will still receive a payment of up to $10,000 as a credit on your BAS. YOU DO NOT NEED TO APPLY as it will automatically be applied via a credit to your BAS upon lodgement. Monthly BAS lodgers will be eligible from March to September and quarterly lodgers from March 2020. Employers of apprentices will receive $21,000 to go towards wages or a maximum of half of their annual salary. To access this payment you need to register via the Dept of Education or Australian Apprentices Website. Also the NSW state government has implemented a waiver of payroll tax for businesses with payroll up to $10 million for the remainder of 2019/20 financial year. They are increasing the payroll tax threshold for 2020/21 to $1 million. If you are in financial distress contact the ATO immediately and discuss your options. These options may include payment plans, debt relief and/or debt cancellation.
INSTANT ASSET WRITE-OFF
The Morrison Government announced some changes to their previous communication.
The instant asset write-off will increase from $30,000 to $150,000 for businesses with turnover less than $500 million until June 30 2020.
For those who have purchased assets before March 13 2020, you will be able to claim 50% deduction up front via depreciation if the asset is purchased after July 1 2019 and is installed before June 30 2020.
YOU CAN NOW GET EARLY ACCESS TO YOUR SUPER – BUT BEWARE
Individuals suffering from COVID-induced financial stress will be able to get early access to up to $20,000 of their superannuation. Eligible individuals can apply online through myGov for access to:
$10,000 of their superannuation before 1 July 2020
$10,000 of their superannuation in the three months after 1 July 2020
These early withdrawals will be tax-free and will not affect any Centrelink of Veteran affairs payments. In order to access this, you must satisfy one of the following after January 1 2020: - you were made redundant; or your working hours were reduced by 20 per cent or more; - or if you are a sole trader - or your business was suspended or there was a reduction in your turnover of 20 per cent or more. However, early access to your precious retirement savings should usually be as an absolute last resort. First, see if you can:
Draw on other savings
Access other government relief packages
Tap into any equity you might have
Note also that the Superannuation minimum drawdown amount has been reduced by 50% for 2019/20 and 2020/21 helping to avoid self-funded retirees from selling assets to meet the drawdown rate. Applications can be made via www.my.gov.au and can be made from Mid April 2020. The best person to speak with about these changes would be your financial advisor.
Above all, we hope you and your family stay safe and healthy.
And remember now more than ever small business needs your support. Go to your local butcher, baker, fruiterer. Use your local broker, talk to your local advisers, engage your local real estate agent. Buy from the corner store, help out your neighbours and be kind to all around you and on the other end of the phone line.
We are here to help you in this time. Together we will get through! Stay strong, stay positive, work hard and contact us if you need any assistance. Our team is here to help.
The team at Sattout Accounting Services