COVID-19: breaking down the latest economic stimulus package
The Federal Government has taken the total value of announced stimulus packages in response to the COVID-19 crisis to more than $189 billion, after unveiling another $66.1 billion of measures on Sunday to cushion the economic impact of Coronavirus.
A further $40 billion in available emergency funding was negotiated by the Coalition and the Labor party on Monday, which can be accessed for further stimulus without Parliament having to be recalled.
Sunday’s package adds to the $17.6 billion pledged by the Commonwealth in its first stimulus package and $90 billion pledged by the Reserve Bank of Australia in funding for small and medium-sized enterprises. The total economic support is equivalent to 9.7 per cent of Australia’s GDP.
Among the measures announced on Sunday are:
Support for households including casuals, sole-traders, retirees and those on income support
- ‘Coronavirus supplement’ – $550 per fortnight, for those on income support, paid over the next six months, on top of existing payments. Note that waiting periods for the jobseeker payment will be waived if it is a result of Coronavirus.
- An additional $750 payment – on top of the $750 announced on 12 March 2020, to around five million social security, veteran income support recipients and eligible concession card holders.
- Funds will be made from 13 July, 2020 but those eligible for the Coronavirus supplement will not be able be eligible to receive this payment.
- Access to superannuation – individuals in financial stress can access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21, without tax or income payment penalty.
- Superannuation minimum drawdown – requirements for account-based pensions and similar products will be temporarily reduced by 50 per cent for 2019-20 and 2020-21.
- Social Security rates reduced – as of 1 May 2020, to a lower deeming rate of 0.25 per cent and upper deeming rate of 2.25 per cent.
Assistance for businesses to keep people employed
- Tax-free, cash payments up to $100, 000 – for small and medium sized businesses, and not-for-profits (including charities) that employ people, with a minimum payment of $20,000.
- As an incentive to retain workers, from 28 April 2020, employers will receive a payment equal to 100 per cent of staff wage tax withholdings (up from 50 per cent), with the maximum payment being increased from $25,000 to $50,000. In addition, the minimum payment is being increased from $2,000 to $10,000.
- An additional payment is also being made from 28 July 2020. Eligible entities will receive an additional payment equal to the total of all of the Boosting Cash Flow for Employers payments received.
- SME Guarantee Scheme – the Government will guarantee 50 per cent of new loans issued by eligible lenders to SMEs, to allow $40 billion of lending to SMEs.
- Supports the RBA’s announcement of a $90 billion term funding facility for authorised deposit-taking institutions, that will reduce the cost of lending, with incentives to lend to small and medium enterprises.
- Insolvency changes – temporarily increasing the threshold at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive.
- The Corporations Act 2001 will be amended to provide temporary and targeted relief, including temporary relief for directors from any personal liability for trading while insolvent.
Jennifer Kirk is an Associate Director in Cannings Purple’s Government Relations team and spent more than seven years in Canberra working for the Commonwealth Department of Finance, the Department of the Prime Minister and Cabinet and the Commonwealth Treasury. If you need help mapping out your government engagement, contact Jennifer.
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