"Fear of the unknown is the greatest fear of all" - Yvon Chouinard
I feel now is the best time to keep you all informed about the current state of response for the Australian population in regards to your personal finances.
The first thing to keep in mind is DO NOT PANIC!!
I have had many clients call me today all with similar questions and clarification on the information below. Many Australians are having their hours reduced or are being put on leave without pay. This is a very hard decision for most employers, however, to run a viable business and be able to continue into the future sometimes this is inevitable.
I truly believe that we will get through this. I cannot stress enough, the importance to reach out to your friends and family over the next few weeks and make sure they are okay physically, emotionally and financially. The government measures have been focused on assisting businesses to maintain staff (as long as they can) as well as households to combat the challenging time we have ahead of us all.
Increasing your financial literacy on the Government initiatives in place in Australia and reviewing and preparing for any changes to your financial situation will be very important over the coming months. This will ensure you are able to make informed decisions and decrease the negative energy you may be feeling in regards to your finances.
I have provided a plan below for those of you who may not know where to start or what resources may be available to provide you with the most accurate information at this time. Please feel free to forward this to your friends and family.
Step 1 -Analyse how you may be effected by the Covid-19 pandemic.
For my partner and I, this happened last week. We sat down and analysed what the worst case scenario would look like for our finances.
In order to get started, you will need to review the impact on your job and income over the next few months. Ask yourself the following questions:
Will you be working?
Yes
- if you will be working, will you have reduced hours?
- at what time may these reductions come into play?
- Can you top up your pay with annual leave or long service leave?
No
- what leave entitlements do you have?
- How much will be paid out in the event of you being made redundant?
- will your position remain open
- will be on leave without pay?
For those of your running a small business, it would be advisable to complete a cash flow analysis for the next few months and forward plan your jobs or shipments for this time to map out what impact this virus may have on your business if you haven't already done so.
Step 2 - Review your budget
Use the Women's Financial Education budget template or alternative budget to a ascertain what you expenses will be over the year. Please email me on kirby@womensfinancialeducation.com.au if you would like an electronic copy of my budgeting template.
Review the costs you have recorded in line with any reduction to income you may expect over the next few months and also the government initiatives and lenders initiatives in step 3 and 4.
Step 3 - Work out what government initiatives you may be eligible for
Both the states and federal government have been releasing measures to assist Australians with their household expenses and income.
For the reference of this blog post, and as state rules differ, I will only be mentioning the current Federal Government announcements. Please note that some of these have not yet been passed as legislation and may be subject to change.
For the most up to date information, I have been referencing the treasury website. This website can be accessed HERE.
The federal government has released many measures to assist households
INCOME SUPPORT FOR INDIVIDUALS
Over the next six months, the Government is temporarily expanding eligibility to income support payments and establishing a new, time-limited Coronavirus supplement to be paid at a rate of $550 per fortnight. This will be paid to both existing and new recipients of JobSeeker Payment, Youth Allowance Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
There is a fact sheet you can download on the treasury website (linked above) for more detailed information.
PAYMENTS TO SUPPORT HOUSEHOLDS
The Government is providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders. The first payment will be made from 31 March 2020 and the second payment will be made from 13 July 2020. Around half of those that benefit are pensioners. This payment will help to support confidence and domestic demand in the economy. The second payment will not be made to those eligible for the Coronavirus supplement.
There is a fact sheet you can download on the treasury website (linked above) for more detailed information.
TEMPORARY EARLY RELEASE OF SUPERANNUATION
The Government is allowing individuals affected by the Coronavirus to access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments.
There is a fact sheet you can download on the treasury website (linked above) for more detailed information
TEMPORARY REDUCTION IN SUPERANNUATION DRAW DOWN RATES
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees holding these products by reducing the need to sell investment assets to fund minimum drawdown requirements.
There is a fact sheet you can download on the treasury website (linked above) for more detailed information
REDUCING SOCIAL SECURITY DEEMING RATES
On 12 March, the Government announced a 0.5 percentage point reduction in both the upper and lower social security deeming rates. The Government will now reduce these rates by another 0.25 percentage points.
As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and its impact on the income from savings. The change will benefit around 900,000 income support recipients, including around 565,000 Age Pensioners who will, on average receive around $105 more of the Age Pension in the first full year the reduced rates apply.
There is a fact sheet you can download on the treasury website (linked above) for more detailed information
The federal government has also released measures to assist business. Details can be found HERE.
Step 4 - Negotiate with your current lenders or suppliers
There are a variety of resources out there to assist you to negotiate any liabilities you may have. One of those is the National Debt Helpline.
The National Debt Helpline states there are often two main reasons for financial hardship:
"1. You could afford the loan when it was obtained but a change of circumstances has meant you can no longer afford the repayments; or
2. You could not afford to repay the loan when it was obtained. If this is the case, get legal advice immediately.
If you are behind with your loan or lease repayments, it can be stressful. For loans and leases for personal purposes (where the credit law applies), you have certain rights to ask for a financial hardship repayment arrangement.
The creditor is required to respond to your request and be reasonable about making a repayment arrangement."
Visit the national debt helpline website for details on how to negotiate payments with creditors.
If you are in a situation whereby you believe your income may be effected by this pandemic then please contact your relevant providers and bill issuers to find out if there are any payment waivers they can apply. These providers could include:
- your mortgage provider
- your credit card provider
- your loan providers (car loan etc)
- your utility bill providers
- other bills
Step 5 - Remain Calm and be prepared
The most important thing we need to do over the coming weeks is to look after ourselves, our family, our friends and our community. Australia will get through this and the Government is here to help.
Stay safe
Kirby
Women's Financial Education
Women's Financial Education is in association with Two Mile Bay Pty Ltd. Two Mile Bay Pty Ltd is a Authorised Representative of Millennium3 Financial Services Pty Ltd. Australian Financial Services Licensee—Licence Number 244252. For Financial Services Products only. For Australian Residents Only. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement. The views expressed in this website are solely those of the author; they are not reflective or indicative of Millennium3 Financial Services position, and are not attributed to Millennium3. They cannot be reproduced in any form without the express written consent of the author.
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