Your Financial Questions, Answered: September '20

General

September and the beginning of spring has finally arrived, marking the end of another financial quarter. While COVID-19 restrictions were eased in many of Australia’s states and territories, Victoria and Melbourne entered into a renewed lockdown period, revealing how the economic effects of COVID-19 continue to impact on many everyday families across the country.

With a number of financial changes taking place in recent months, we wanted to share our thoughts on two topics we believe may impact on either your financial world of those of your friends and family.

This Q&A from your dedicated team of financial experts covers the following topics:

Recent amendments to superannuation laws for employees
The upcoming changes to the JobSeeker and JobKeeper payments

Changes To Superannuation Laws for Employees

In late August, the Australian Federal Government passed a new bill that gave workers the right to choose their own superannuation fund. This bill was introduced to parliament in a bid to step employers forcing their employees into enterprise bargaining agreements (or EBAs) that had previously tied them to a mandated super fund.

The new bill, which has been dubbed the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019, estimated that roughly 800,000 Australians, or around 40 per cent of all employees, are covered by an EBA. Those who were covered by an EBA likely also had another super account, either selected by themselves or recommended by a previous employer, from their work history prior to joining their current company.

Those with multiple superannuation accounts will be statistically up to 6% worse off at retirement than those with a single account they contribute to their whole working life. This is due to the fact that having multiple super accounts also means you’ll have multiple sets of fees and administration costs taking up a portion of your growth.

The changes introduced by the Your Superannuation, Your Choice Bill will come into effect on the 1st of January 2021. This means that if you know anyone who was previously restricted to a specific super fund by their employer, they’ll now be able to choose their fund when their existing employer enters in a new trade agreement with them after the 1st of January 2021.

As superannuation forms such a vital cornerstone of the journey to success and security, we thought we’d share our two cents in how the passing of the Your Superannuation, Your Choice Bill may impact you or your loved ones’ financial worlds:

Your Super Questions Answered

Q. My loved one had a pre-existing super fund before joining their current employer and is now covered by an EBA. What should they do?

If someone you know has multiple super funds due to currently being with an employer that has a mandated EBA, the first thing we’d recommend them doing is to reach out to their financial advisor for help.

You see, in order to ensure their able to achieve financial success and security, it’s very important that their super is optimised to their specific financial situation and goals.

A financial advisor will be able to help them by first assessing their current financial world and working with them to select a super fund that is right for their financial needs and goals. An advisor will also be able to ensure their fund is structured correctly according to their investment risk tolerance and ethical considerations.

Finally, an advisor can also ensure their extra super funds are closed down and the funds currently existing in them transferred to their new, preferred fund.

Not sure if they have a financial advisor they can turn to? We’d love to help them by offering them the same expert financial guidance and support we’re proud to provide to you.
Q. I’d like to move to a different super fund than the one my company recommended now that I’m able. What should my next steps be?

Since the effects of the Your Superannuation, Your Choice Bill won’t come into effect until the 1st of January 2021, you likely won’t be able to change super funds until after this date. However, the interim period provides a great opportunity to revisit discussions surrounding your super you may have previously had with your financial advisor.

When you first sat down with us in our initial meetings, it’s likely that we would have discussed what you’d like from your super fund, your specific financial goals and risk tolerance, and any ethical considerations you may have. Your financial advisor may also have recommended a fund that would suit your particular financial needs.

With the implementation of the effects of the Your Superannuation, Your Choice Bill in the new year, now has never been a better time to touch base with your advisor to confirm whether this super fund is still right for you.

Once you’ve confirmed the suitability of your chosen super fund, you will then need to enter into a new agreement with your employer after the 1st of January 2021 to begin the process of moving your current super into your new fund. The team at My Wealth Solutions can provide you with more information on how you can do this closer to the date the effects of the bill are introduced.

If you, or someone you know, is currently under an EBA agreement but would like to change to a super fund that is more in line with their financial goals and eliminate multiple super accounts, we’d recommend getting in touch with your financial advisor to get your super sorted today!
Q. Why was it important the government introduced these changes?

We mentioned it before but research conducted before the Your Superannuation, Your Choice bill was introduced revealed that around 40 per cent of all employees in Australia are currently covered by EBA and are unable to choose their superannuation fund.

It is also likely that of these workers covered by an EBA, a significant portion would have multiple super funds due to having pre-existing funds from previous employers. The government, in constructing the bill, also found that there were around 10 million ‘zombie’ super fund accounts taking fees without any active engagement with the fund.

The government introduced the Your Superannuation, Your Choice bill to ensure that this portion of the workforce weren’t forced to have multiple funds and thus weren’t suffering from the duplicate fees and administration costs these funds would entail.

With superannuation likely forming a cornerstone of your income in retirement, it’s paramount that you do everything you can to ensure you optimise your super to ensure you’ll be able to rely on it for this purpose.

The Future of the JobSeeker and JobKeeper Programs

With the economic repercussions of COVID-19 continuing to affect countless workers across the country, it’s likely that you’re no stranger to the Federal Government’s JobKeeper and JobSeeker programs. However, you may not have heard that at the end of September 2020, the rate of pay for these two income support payments will be changing.

Currently the JobSeeker Payment, which replaced the Newstart Allowance at the outset of the COVID-19 Pandemic, with the coronavirus supplement is paid at a rate of $550 a fortnight. This $550 supplement is currently being paid as part of any pre-existing welfare payment you may have been receiving, such as Youth Allowance or the Farm Household allowance. However, from the 24th of September 2020, the rate of payment for JobSeeker with the coronavirus supplement will be dropping to $250 per fortnight.

Similarly, the rate for the JobKeeper payment program will also be reduced from the 28th of September 2020. Currently the JobKeeper program, which is paid by the Federal government directly to your employer who then passes it on to you through your usual pay, is paid at a rate $1500 before tax per fortnight.

From the 28th of September, this rate will be dropped to $1200 per fortnight for full-time employees or to $750 per fortnight for those who worked less than 20 hours a week on average during months of February or June 2020.

As of September 2020, the Federal Government has confirmed that both the JobSeeker and JobKeeper programs will continue to be offered until the 31st of December 2020, with further revisions expected in the first weeks of 2021. As the economic effects of COVID-19 continue to impact many in the My Wealth Solutions community, we wanted to break down how these upcoming changes may affect you:

Your Welfare Questions Answered

Q: I’m currently receiving JobKeeper. How will the changes affect me?

The JobKeeper program is designed primarily to support business owners by providing a financial buffer that lowers the amount they have to pay their employees out-of-pocket by having the Federal Government fill in the gap.

If you’re employed full-time and currently receiving a JobKeeper payment from your employer, it’s likely that nothing will change on your payslip except a change in how much of your regular income your employer pays you and how much comes from the JobKeeper program.

If you are a part-time employee or work casually for less than 20 hours a week on average, however, you may be currently receiving more than you would have usually earned due to the JobKeeper top-up.

With the JobKeeper rate for part-time employees being cut back to $750 per fortnight from the 28th of September, your pay slip may show a return to your pre-JobKeeper income level.

Recent media reports have shown that some economists and other financial professionals are concerned the reduction of the JobKeeper payment scheme may result in some workers being let go from their jobs as employers are unable to continue paying them without government support.

If you feel that this may happen to you, we’d recommend reaching out to your financial adviser for guidance as soon as you can. As your dedicated team of financial experts, remember that we’re always here to help – no matter what.
Q: I’m currently on a JobSeeker payment. What should I be prepared for?

If you’re currently on a JobSeeker payment with the coronavirus supplement, the upcoming changes to payment rates are likely to affect you the most directly. From the 24th of September, your payment rate will be decreased to $250 per fortnight.

However, while the rate of the JobSeeker payment is being reduced, the amount of income you can earn per fortnight before your JobSeeker payment is affected is increasing.

From the 24th of September, the amount of income you can earn before your JobSeeker payment is affected will increase to $300 per fortnight, resulting in a total possible fortnightly income of $550 per fortnight.

Depending on your particular financial circumstances the cuts to the JobSeeker program may affect you in different ways. That’s why we’d recommend getting in touch with your financial advisor to discuss your current financial situation and what your options are moving forward.
Q: Is it possible to receive both payments with the new changes? If so, what do I need to know?
With the reduction in payment rates for both the JobSeeker and JobKeeper payment schemes, it may be possible to be eligible to receive both payments from the 28th of September.

This is due to the fact that while previously both payments combined would have placed you over the income threshold for the JobSeeker payment, the upcoming cuts and the increase in amount of income that can be earned before JobSeeker is affected make this prospect a possibility for some.

In order to receive both JobSeeker and JobKeeper payments, you’ll need to:
- Apply and be approved for an income support payment from Centrelink, on top of which the coronavirus supplement may be applied
- Receive a JobKeeper income top-up from your employer
If you’re unsure about your eligibility for an income support payment from Centrelink, your financial advisor can help you assess your current financial circumstances and the options available to you for financial support.

Remember: we’re always only a phone call or email away to answer any questions regarding your financial world.