Redundancy payments and planning ahead

It’s important to know how much money you have, and how much you’ll need until you find a new job or move on to your next steps. This includes understanding your redundancy payment and managing your household expenses.

Your redundancy payment

Upon redundancy, you will receive some payments from your employer, each with different tax treatments. These include:

  • a tax-free genuine redundancy payment
  • an employment termination payment (ETP)
  • payments for any accrued annual and long service leave.

Tax-free genuine redundancy payment

Any payments that meet the conditions of a genuine redundancy are tax free up to a limit depending on your years of service with your employer.

The maximum amount of a genuine redundancy payment you can receive tax free in the 2022/23 financial year is $11,591 plus $5,797 for each completed year of service. These thresholds may be increased on 1 July each year.

Employment Termination Payment

The amount of the payment that exceeds the tax-free portion is treated for tax purposes as an employment termination payment (ETP). ETPs include payments for unused sick leave and rostered days off, in lieu of notice, and a ‘golden handshake’ or other incentive payment. The amount of tax payable depends on if you’ve reached preservation age.

Preservation age is the age you can access your super and varies depending on your date of birth.

Tax payable on ETPs in 2022/2023 (Genuine Redundancy)

Component Tax payble
If under preservation age First $230.000 taxed at 30% and excess at 45%
If preservation age or over First $230.000 taxed at 15% and excess at 45%

The above tax rates do not include the Medicare levy

Payments for any accrued annual and long service leave

Upon redundancy, you may also be eligible to receive a range  of other payments that must be taken as cash (ie can’t be rolled into super before tax has been applied). Termination payments that form part of a genuine redundancy and their tax treatment in the 2022/2023 financial year are shown here:

Payment Tax treatment in the event of a genuine redundancy When tax is paid
Accrued annual leave 100% taxed at a maximum rate of 30% Deducted by your employer
Accrued long service leave (pre 16/8/1978) 5% taxed at your marginal rate Deducted by your employer
Accrued long service leave (pre 15/8/1978) 100% taxed at a maximum rate of 30% Deducted by your employer

The above tax rates do not include the Medicare levy

If you have questions about your redundancy payment, please speak to your employer.

Planning your money

While it may be tempting to use your redundancy payment to pay down debts or buy an expensive item, it’s worth considering “parking” your redundancy payment in your bank account or home loan offset account. This way you can readily access the funds until you have a clearer picture of the future. Once you get a new source of income, you can then reassess  what to do with any leftover money.

Another important step is to prepare a budget. This will help you plan for your new financial situation and work out how long your redundancy payment will last. Use the Moneysmart Budget planner.

If you’re concerned about meeting mortgage or loan payments, contact your bank or lender to discuss options, for example putting payments on hold for a period of time. It is worthwhile doing this as soon as possible.

Centrelink benefits

If you have received a redundancy payment, you will be subject to an Income Maintenance Period ie a waiting period before you’re eligible to receive Centrelink assistance. For more information and to find out if you’re eligible for Centrelink payments go to the Centrelink Payment and Service Finder.

 

 

 

 

 

 

Looking after yourself

Looking after yourself

Look after your physical and mental health during this time and reach out for support if you need it.

Redundancy payments and planning ahead

Redundancy payments and planning ahead

It’s important to know how much money you have, and how much you’ll need until you find a new job or move on to your next steps.

Redundancy and Super

Redundancy and super

You can keep your super with us into your next phase of life. Learn answers to FAQs including how to take your First Super account to a new job and how to access your super if you’re thinking about retiring.

Resources for your next move

Whether you’re looking for a new job, interested in training, or thinking about retiring, here are some resources to help bring your plans to life.

Job search portal
  • Job search portal
  • Explore different jobs you might be skilled for
  • Training options
  • Local providers who can help you find a job.
Visit Workforce Australia
Information on finding and applying for work
  • Information on finding and applying for work
  • Training
  • Accessing assistance programs.
Visit What’s Next?

Thinking about or planning to retire?

For expert advice on how to access and use your super for retirement, make an appointment with our Financial Advice team by calling 1300 360 988 or booking online.

Thinking about or planning to retire?

Need support? Get in touch today.

If you have questions about redundancy and your super call 1300 360 988 or request a callback from our experienced local co-ordinators.