Changes to JobSeeker and JobKeeper take effect

Changes to JobSeeker and JobKeeper take effect

The first decrease in the government social security payment keeping more than a million people financially afloat during the COVID-19 pandemic drops by $300 today, while the other keeping millions more in work tapers too.

The welfare subsidies were introduced after 932,000 people lost their job in the March to June quarters, according to the Australian Bureau of Statistics (ABS) leading to $55 billion being spent in welfare payments and stimulus initiatives.

What’s changing in JobSeeker

The JobSeeker coronavirus supplement peppering the social security payments of 1.45 million people drops by $300 per fortnight today. It’s the first scheduled decrease in the supplementary payment to the unemployment benefit. 

The fortnightly payments going forward will be:

  • Single: $815.70
  • Single, with a dependent child or children: $86
  • Single, 60 or older, after 9 continuous months on payment: $862
  • Partnered: $760.80
  • Single principal carer: $1043.10

The remaining $250 fortnightly coronavirus supplement built into these payments is calculated to cost the government $3.8 billion.

Among the new changes is the ability for recipients to earn up to $300 a fortnight -- basically, the amount of the reduction -- without forgoing the payment or affecting their eligibility for the coronavirus supplement.

However, the previously waived testing criteria is being reintroduced. These include the assets test and the liquid assets waiting period, while the partner income test will have its criteria tightened.

JobSeeker is technically due to expire on 31 December 2020, but an update on its fate is expected to be provided during the unveiling of the Federal Budget on October 6.

What’s changing to JobKeeper?

The government payment subsidising the continual employment of 3.5 million Australians will drop by $300 a fortnight on 28 September in the first of two decreases. 

JobKeeper payments will drop from $1500 to $1200 a fortnight for full time employees, while those working less than 20 hours a fortnight will receive payments of $750.

The payments are scheduled to drop again on 3 January 2021. The full time rate will drop to $1000 a fortnight, while the ‘part-time’ rate will reduce to $650, before the subsidy expires altogether on 28 March. 

JobKeeper represents the largest employment subsidy in the federal government’s $55 billion coronavirus aid package, the ABS said, costing taxpayers an estimated $31 billion. 

Trim the fat and spend less

A number of seemingly small actions could help lower your financial footprint during this extraordinary time. Shopping smart and being disciplined can pay off. 
 
These include:

  • If you have a mortgage: Consider calling your bank and asking to go on the new customer interest rate. The RBA says existing customers are on an average rate of 3.22 per cent; yet the big four banks now have variable rates starting at 2.69 per cent. On a $500,000 loan your monthly repayment would drop by about $140 a month, according to a RateCity analysis.
  • If you are renting: Be honest with your landlord and consider asking for a rent reduction – currently rents are dropping across much of the country – so your landlord may be happy to reduce your rent to keep you.
  • Reviewing bank and credit card statements: Scanning your statements provides a black-and-white look at your cash flow. Forgotten subscriptions and indulgent purchases can be spotted here -- as can any mistakes made by your financial institution or bill providers.
  • Shop second hand: Not only is it more sustainable, but buying second hand clothes may help save a lot of money. Most schools have second hand uniform shops, while second hand marketplaces like Gumtree or facebook could have some promising used toys.
  • Sell what you don’t need: A helpful way to get hard cash quick is by selling unwanted stuff. A recent Gumtree report found the average Aussie hopes to make $5800 by selling 19 unwanted items this year.
  • Shop around for cheaper mobile and home internet plans: This is the kind of bill people sign up to and then forget, and so checking the latest bundles could leave you with a saving of about $50 a month.
  • If you have a child in daycare/preschool: Don’t be afraid to talk to your daycare and ask if they can offer you a shorter day at a lower rate or a discount. Many centres are losing families and may offer you a deal to stay. 

It may be worth getting personal finance advice if you’re feeling the financial squeeze of COVID-19. The government’s MoneySmart website features a tool that’ll locate a free nearby financial counsellor

 

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Learn more about savings accounts

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.