Given the unemployment rate jumped to 6.2 per cent in April thanks to COVID 19, many Australians are left wondering how they will be managing their debt for the remainder of 2020.
Whether you are a landlord or rent your home, read on to see how you can manage your bills during the Coronavirus epidemic.
Better management of your finances is essential during the pandemic. However, many of us are in unchartered waters and need professional advice to move forward. Questions such as “Should I invest?” or “Should I turn my investments to cash?” are commonplace.
“This is the rainy day that we’ve all been taught to save for, and I feel for people who don’t have a financial safety net or a rainy-day fund with a minimum of a few months’ expenses.”
– Fox & Hare financial adviser Jessica Brady
But what if your rainy-day fund isn’t adequate? Here’s a guide to Managing Debt During COVID 19.
If you are left with limited savings or cash flow options during coronavirus, contact your debt providers for “financial hardship” options. These are not normal times and many banks are offering financial relief, such as a hold on your mortgage or lower interest rates.
“Pay the minimum because you don’t want to draw on liquid assets or draw on equities while the market is so down,” she says. “For those who are really affected and under strain, it’s about contacting your bank and asking them what they can do in giving you an interest break or reductions in the payments. The major banks are already taking that stand.” – Fox & Hare financial adviser Jessica Brady
What should I do with my redundancy?
If you have received a cash payment because of a redundancy during coronavirus, make sure you create a budget for the next 6 months before paying off any debt. Given the high unemployment rate, you may need your redundancy package to sustain you for a long period of time.
Should I take money out of my superfund?
Superannuation compounds over time for a larger return. It’s important to consider what its value might be in the long term before making any decisions. Make sure you consider what effect this may have on your retirement funds.
What if you still have your job? How much should you have in savings?
If you are still working during COVID 19, it’s important to prepare for the worst. If you have the opportunity to pad out your savings, it’s advised to budget for at least 3 monthsworth of expenses.
Are you a small business? ls there a way you can make it through COVID 19 and what are your strategies for one month, three months and six months.
Thanks to JobKeeper, small businesses in Australia have a little breathing room to figure out their next step. Business owners can receive $1500 per employee per fortnight if their business was affected by the outbreak. Other government initiatives to take advantage of during coronavirus include;
- Increased instant asset write-off. From March 12 to June 30, 2020 the instant asset write-off threshold for each business asset acquiredgoes up five-fold to $150,000 (from $30,000 before Covid-19). The eligibility has also changed to include businesses with an aggregated turnover of less than $500 million (up from$50 million).
- Backing Business Investment (BBi). The government has substantially changed the rules around depreciation deductions. This is for all assets purchased between March 12 and June 30 next year (2021). For example, before March a $1 million business asset would have been able to claim deductible depreciation of $150,000 in the first year using the general small business pool . Under the new rules, the same asset would result in a claim of $500,000 in deductible depreciation under the BBi Accelerated Depreciation Options.
- This BBi claim will be increased if the business is a “SBE” Small Business Entity. It will be eligible for a deduction of 57.5% of the purchase price (ex GST) in the first year.
Do you need financial advice on how to best take advantage of the above government schemes during COVID 19? Aspect Accountants and Advisors in West Perth are offering FREE consults during coronavirus.