Advisers need to start preparing their COVID-affected clients for a significant drop in income in September, with the government looking unlikely to extend extra support for the unemployed beyond its initial six-month timeline, a fintech group has said.
In a statement released on Thursday, knowIT Digital technical and policy manager Rob Lavery said advisers needed to be mindful that the government’s JobKeeper supplement was due to cease in September, while regular unemployment benefits would revert to their usual levels and stricter assessment processes.
“Those who were on JobKeeper stand to see their income drop $750 per week. For those on JobSeeker, the $275 per fortnight coronavirus supplement will disappear, and the standard rate of JobSeeker will apply,” Mr Lavery said.
“The asset test and various waiting periods, such as the liquid assets waiting period and ordinary waiting period, will also resume for new JobSeeker applicants at the end of September. The result will be that some JobSeeker claimants will see their benefit end altogether.”
Mr Lavery added that clients on JobKeeper should be made aware that when the supplement ceased, the transition process to receiving regular unemployment benefits may not be smooth.
“What makes the situation even harder is that former JobKeeper recipients will not necessarily be immediately eligible for JobSeeker in September either – often due to the operation of these waiting periods or significant asset levels,” he said.
“The upshot of all of this is that clients in financial distress need to be planning ahead for this time when government support will aggressively contract.”
In addition, the government’s early super release scheme would cease at the end of September, meaning if clients wanted to consider withdrawing funds to get them through a tough period coming off JobKeeper or JobSeeker, they would need to make a decision soon.
“One way to manage this September period is to withdraw $10,000 from super to tide eligible clients over. The catch being that, if the clients wait until the end of September to apply for the withdrawal, it will be too late – withdrawals cease on September 24,” Mr Lavery said.
“If action is taken before June 30, two lots of $10,000 may be accessible, giving the client greater breathing room when the government turns the stimulus off.
“Ultimately, nimble thinking and forward planning are the best tools clients have to manage the stresses ahead.”
The comments come following the government’s reluctance to actively consider extending the JobKeeper scheme, which Treasury said had so far paid out over $8 billion in wage supplements.
In a recent press conference, Treasurer Josh Frydenberg said talk of extending the scheme at this stage was “very premature”.
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