Pensioners and other welfare recipients are being told to spend their one-off $750 hand-out announced today to help keep the nation’s economy ticking over in the face of coronavirus COVID-19.
It’s part of the Commonwealth Government’s $17.6 billion stimulus package aimed at protecting the Australian economy. Additional measures include cuts to the pension deeming rates and a $2 billion health package.
The economic stimulus package includes $4.8 billion to people receiving government payments. A one-off $750 payment will go to pensioners, social security, veteran and other income support recipients and eligible concession card holders.
Pensioners comprise about half of all those who will benefit. The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient.
If a person qualifies for the one-off payment in multiple ways, they will only receive one payment. Payments will be from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April.
The government’s announcement came shortly after the World Health Organisation (WHO) declared COVID-19 to be a global pandemic, something the Australian Government anticipated weeks ago in order to maximise controls around the virus. WHO is calling on all countries to take "urgent and aggressive action". There are now more than 120,000 cases in 114 countries and more than 4,200 people have died.
Pension deeming rates have also been cut. The upper rate, which impacts about 40 per cent of payment recipients with deemed assets, will decrease from 3.0 per cent to 2.5 per cent. The lower deeming rate will be cut from 1.0 per cent to 0.5 per cent for financial investments up to $51,800 for single pensioners and $86,200 for pensioner couples.
Heart Financial Advisers welcomes the cuts but believe the rates are still way too high. Deeming, which the government uses to estimate what pensioners earn from their investments, is still well above the typical return on what pensioners actually receive.
We say the new rate is still balancing the budget on the backs of pensioners. The government is still deeming pensioners to be earning 2.5% on investments in excess of $51,800. But no bank is offering anywhere near 2.5% on their term deposits, in fact the Commonwealth Bank has a ‘special offer’ of 1.2% on its term deposit, not even half of what the government deems is the return. At the end of the day, the higher the deeming rate, the less money pensioners get.
Social Services Minister Anne Ruston says 565,000 pensioners and 323,000 other payment recipients with financial assets affected by deeming rates would benefit. She said that the changes will see age pensioners receive on average an additional $219 a year or $8.42 per fortnight, with the extra money to start flowing into bank accounts from 1 May 2020.
“It is important to remember that no everyone will be affected by changes to the deeming rate as this depends on the level of your assets.”
The changes to deeming rates are separate to the government’s $17.6bn coronavirus stimulus package and in response to the decline in the cash rate.
The government has also announced a $2.4 billion health package including $101.2 million specifically for the aged care sector to:
educate and train aged care workers in infection control, and enable aged care providers to hire extra nurses and aged care workers for both residential and home care
make available additional aged care staff for deployment to facilities as needed, where an urgent health response is required and to provide extra support for staff and training; and
provide additional funding for the Aged Care Quality and Safety Commission to work with providers on improving infection control.
The government has already announced $500 million in funding for the states and territories for COVID-19. The Commonwealth will pay for half of all additional costs incurred by states and territories in diagnosing and treating patients with COVID-19, or suspected of having the disease, and efforts to minimise the spread of the disease. This will be provided on a 50-50 basis for state health COVID-19 activities both within and outside hospitals.
The funding, beginning with an initial upfront payment of $100 million from the Commonwealth, is over and above ongoing public hospitals funding to the states and territories under the National Health Reform Agreement. The funding will be uncapped and demand driven.
Stu Varidel and Your Choice Financial Planning Pty Ltd trading as Heart Financial Advisers are authorised representatives of Sentry Financial Services Pty Ltd AFSL 286786.
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