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Australia’s stimulus package and what it means for doctors

by Malcom Strain

I know it’s been a crazy few weeks for everyone and it’s hard to keep up with all the news, let along the nuances of the finance world. So I’ve put together this short(ish) summary of Australia’s Federal Government stimulus package, with the information that I think will be most important to our doctors.

The virus and the measures in place to get ahead of the curve have had an impact on doctors we work with in different ways. But, you do have options! The stimulus has options for individuals, sole traders and business owners affected by the current climate.

Your financial (and mental) wellbeing is important to us – don’t forget, we’re here to help. If your situation has changed, or you’ve got pressing questions, pick up the phone and give us a call. We’re here to work with you towards your financial goals and rest assured, the strategy we worked on together was designed to weather all kinds of situations and to seize opportunities as they emerge.

Options for self-employed, casually employed and unemployed doctors 

Government Support Payments

I’ll not include too much detail about the additional Income Support Payments from the government, but it’s worth highlighting that eligibility criteria has been relaxed for some situations. For example, if you are self-employed or are a sole trader whose income has been significantly reduced (or stopped), you could be able to access income support. The government has also noted that this support could include those who are required to care for someone affected by the Coronavirus. Also, if you’re an employee, and you are diagnosed with COVID-19 or are in isolation, you may be eligible for an income support payment.

The payments are not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

Casual employees able to access the Newstart ‘sickness payment’

While not part of the stimulus package, the Prime Minister has stated that casual employees required to self-isolate or who contract the coronavirus will be eligible for a sickness payment (jobseeker payment) through Newstart. The normal waiting period for this payment will be waived.

Early release of Superannuation

From mid-April, eligible individuals can access up to $10,000 from their superannuation before 1st July 2020. They’ll also be able to access up to a further $10,000 after 1st July 2020, for approximately three months (depending on the passage of the legislation).

There are a number of requirements that must be satisfied before super funds will be released. This is not a decision to take lightly so make sure you speak to us if you need help or want to consider this.

For businesses

Tax Payment Deferrals

The ATO are implementing a few different tax deferral options for businesses (and ABN holders):

  • Deferring by up to 4 months the payment date of amounts due through the business activity statement (including Pay As You Go instalments), income tax assessments, fringe benefits tax assessments and excise duty.
  • Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get faster access to GST refunds they may be entitled to.
  • Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
  • Remitting any interest and penalties, incurred on or after 23rd January 2020, that have been applied to tax liabilities; and
  • Allowing affected businesses to enter into low‐interest payment plans for their existing and ongoing tax liabilities.

Temporary Relief for Financially Distressed Businesses

The economic impacts of the Coronavirus and health measures to prevent its spread could see many otherwise profitable and viable businesses temporarily face financial distress. One of the aims of the government ‘safety net’ is to reduce this and to avoid unnecessarily pushing businesses into insolvency and closure.

The ATO will tailor solutions for owners or directors of business that are currently struggling due to the Coronavirus. This could include temporarily reducing payments or deferrals, or not carrying out enforcements like Director Penalty Notices and wind‐ups.

Instant Asset Write-off

From 12th March 2020, the instant write-off threshold increased from $30,000 to $150,000. This applies to new or second-hand assets used or installed ready for use by 30th June 2020. The increased write-off threshold will apply on a per asset basis until the end of June. Items that are not 100% work-related, will be divided proportionately.

Small Business Loans

Australian banks will provide support to eligible small businesses by deferring loan payments for up to six months, where assistance is required as a result of COVID-19. The intention is for banks to implement this as soon as possible. Speak to us about this and we can advise you and then direct to you your bank for the right help.

Bank Action – Repayment Deferrals

Specific COVID‐19 concessions have been announced by most of the major banks and regulators have said that lenders must publicly disclose the nature of any repayment deferrals.

It’s important to note that landing ‘holidays’ aren’t actually a holiday. In a repayment deferral, all they’re doing is capitalising your interest during the time you want to put things on hold, it won’t stop interest from accruing on your loan. Basically, that means your loan amount will continue to grow while repayments are on pause, as any unpaid interest will be added to your outstanding loan balance.

You should only be pausing your repayments if you have exhausted all options. If you’re not yet in dire straits, I recommend that you consider these two options first:

Make sure you are on the most competitive rate possible. We have had two very quick rate drops recently and traditionally lenders are slow to reduce rates for existing customers. If you are not sure whether the rate you are on is competitive with the rest of the market, please contact us.

Consider getting a cash out loan now as your safety buffer. Rather than pausing your repayments, funding your current repayments via an additional facility will mean that when things are okay again, you can focus on paying down any additional debt you have accumulated. However, the key difference is rather than trying to catch up from an arrears position, you can pay down the additional money at your own pace. In addition, if you want to apply for future debt, you will be able to do so as you are not behind on your current mortgage.

The key message is that a lot is happening at the moment. Everyone’s situation is different, so speak to us and we can guide you through the rapidly changing situation.

Put your mind to rest, arrange your free financial health check here.

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