Article by Patrick Lynch, Head of Operations
In a widely expected move, hot on the heels of the further mortgage relief announced by the Big Banks, last week the federal government announced changes to the JobKeeper and JobSeeker income support schemes.
What are the changes?
JobKeeper will continue to March 2021, with tapering of the amounts and rule changes.
- The current payment of $1,500 per fortnight will reduce to $1,200 after September and again to $1,000 for the first 3 months of 2021.
- People working less than 20 hours a week will receive $750 per fortnight, falling to $650 in 2021.
- Businesses will now have to prove they are in financial distress (at least 30% on pre-pandemic levels) each and all previous quarters to remain eligible after September.
The JobSeeker COVID19 additional supplement will initially continue for another 3 months, but
- Fall from $550 per fortnight to $250, meaning people on the program will receive a total of $815 per fortnight after September.
- The revised scheme will also allow recipients to earn $300 per fortnight (increased from $106) before facing a reduction in their Government payment.
- There are also increased requirements to seek employment as well as a reintroduction of an assets test and increased partner income test.
The initial support package in March assisted businesses stay open and keep staff whilst dealing with the economic impact of COVID19, and it is estimated c 5 million Australians receive payments from the schemes. Whilst it is hoped the approach will support a gradual transition to economic recovery, ensuring that those businesses who most need support continue to receive it, there are concerns that there are many zombie businesses (firms claiming financial viability when they are not) that won’t survive once payments end.
How are Banks and Lenders considering JobKeeper/ JobSeeker borrowers?
Lenders have tightened criteria, and there is limited appetite particularly for anyone in a highly impacted industry (e.g. travel and tourism, leisure, restaurants and pubs, etc.).
For individuals, Lenders want to know whether Borrowers are aware of any changes that may impact earning capacity and debt servicing due to COVID19 (e.g. to employment circumstances or income levels). Income via JobKeeper, or where borrowers are performing minimal or no duties, cannot be used to support applications for new lending. If the Borrower is performing normal duties but receiving a higher salary due to JobKeeper, the actual (i.e. lower) income will be used and needs to be confirmed by employer letter, pre-COVID19 payslip, etc.
Documentation needs are stricter. For example, with self-employed clients, Banks want the latest BAS and business bank account statements on top of historic financials and tax returns. A number of clients whose businesses were performing strongly and who would have been highly sought as a Borrower pre-COVID19 are finding finance tougher due to trading being paused during Victoria’s 2nd wave.
What should you do if affected?
We continue to advocate that anyone having trouble meeting their financial commitments speak up, whether to their Lender, a Broker, etc. No doubt people are doing it tough, but as the above (and previous articles show) there is help available. Take care & stay safe!
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