COVID-19 Economic Response

The Commonwealth Government Economic Response to Coronavirus

A Case Study

By Kim Nguyen

Background Information

  • John – 50 years old, and Mary, 48 years old.
  • John owns a hairdressing business;
  • Mary, sales assistant, recently unemployed;
  • Own their home, valued at $600,000, debt-free;
  • Own a rental property valued at $600,000, mortgage of $450,000.
  • Mortgage payments $2,500 per month;
  • Combined credit card debt $50,000;
  • ATO debt $18,000, payment arrangement in place $1,500 per month

Analysis of Case

John is a 50-year-old man who owns a hairdressing business. He is married to Mary, 48, who until recently was employed at a department store as a sales assistant. Due to the COVID-19 pandemic, the store has had to closed, and Mary’s employment has ceased.  

The couple’s home is mortgage free and valued at $600,000. Mary and John own a $600,000 rental property which has a $450,000 mortgage. The mortgage repayments are currently $2500 each month. Prior to the coronavirus outbreak, their rental property has been rented at a loss of $300 per month.

The couple has combined credit card debts totalling $50,000. Their other debt is to the Australian Taxation Office is for $18,000, for which they have entered into a payment arrangement of $1,500 per month.

The coronavirus outbreak has reduced John’s business turnover by 60%, causing him to worry that the government will place further restrictions which will not allow his business to operate at all. His concern is that he might not be able to meet his financial obligations. John and Mary have come to us seeking for advice.

  1. John and Mary are concerned that their tenant will not be able to pay rent as he has also recently become unemployed. John and Mary have relied on the rent they have received to pay the home loan and other rental expenses. For this reason, John and Mary should apply to have the banks freeze all their loans for 12 months so that they are only paying interest and no principal repayments. This should reduce their home loan obligation to a manageable sum.
  2. They can also apply to freeze their credit cards so that they are not paying interest on the balance.
  3. They can contact the ATO and defer the payment arrangement repayments (interest free) to 2021.
  4. Mary can apply with Centrelink for the individual income supplement of $550 per fortnight as she is no longer employed, she can also apply for the first $750 household support payment.
  5. John’s business will be eligible for the PAYG refund which will provide him some temporary financial relief.
  6. Mary can apply for early access to her super, which allows her to withdraw up to $10,000, if she applies before the end of the 2020 financial year (30 June 2020), and another $10,000 if she applies between 1st July 2020 and 24th September 2020.