Preparing for a Redundancy from your employer.
If you are leaving your employer due to genuine redundancy, you have a great opportunity to make a fresh start. A Genuine Redundancy will generally be provided to a person under age 65. It is given if your employer has determined that your position no longer exists and you are not replaced by another employee.
Now could be the best time for you to think about a career change, become self-employed or consider retiring if you are close to
retirement. But regardless of what your next steps might be, it’s important that you:
– understand the payments you may receive from your employer and what tax treatments apply.
– consider the financial issues likely to be relevant to your age and career goals, and
– speak to a financial adviser to find out how you could manage your redundancy payments effectively.
The information in this article assumes you’re departing due to a genuine redundancy.
Redundancy - Some key points to consider
The types of payments you may receive in the event of a genuine
– A genuine redundancy payment, which is tax-free up to a limit based on your full years of service with your employer.
– An Employment Termination Payment (ETP), which is a lumpsum payment you may receive when your employment arrangement has come to an end. Examples include genuine redundancy payments exceeding the tax-free limit, unused sick leave, unused rostered days off, payments in lieu of notice and golden handshakes (also known as ‘ex-gratia’ payments).
– Other payments you receive from your employer including accrued annual leave, accrued long service leave and your final pay.
When you take a redundancy, you will need to decide what you are going to
do with the payments you are eligible to receive. Other financial issues you
may need to consider will depend on whether you intend to find a new job or
you plan to retire.
If you plan on finding a new job, some of the important questions you should address include:
1. How will you meet your living expenses until you find another job?
2. Will you be eligible for the Newstart Allowance or other relevant social security benefit?
3. Will you need to move your superannuation to another fund?
4. Should you merge your superannuation into one account?
5. Will any insurance policies taken out on your life cease when you leave
6. What should you do with any left-over redundancy pay when you find another job?
Some key questions to consider if you’d like to retire upon leaving your employer are:
1. Have you accumulated enough wealth within and outside superannuation
to provide an income to meet your ongoing lifestyle needs?
2. Should you start a pension with your superannuation money?
3. Are you eligible for the Age Pension or other relevant social security benefit?
4. Do you need to review your estate plans?
5. Do you need to review your insurances?
We recommend you speak to us to help you:
– Decide what to do with the payments you are eligible to receive from your employer.
– Make the most of your super to help you become financially secure in retirement.
– Ensure you and your family are financially protected in the event of death or disability, by having appropriate insurance cover, and
– Determine whether you are eligible for any Government income support payments.
We can assist you with a range of other needs which may include:
– Improving your cash flow
– Growing your investments
– Managing your debt, and
– Considering your estate planning needs.