1. Understanding Redundancy Payments Murray Wilkinson CFP
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2. Disclaimer and General Advice Warning
The information provided is of general nature only and does not take into account your specific needs, circumstances or objectives. Before acting on any information, you should consider the appropriateness of it having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.
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3. A genuine redundancy occurs when:
An employee is dismissed because their job has been abolished & can include:
A payment in lieu of notice
A payment of a number of weeks pay for each year of service &
A one off gratuity (golden handshake)
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4. What is NOT included in redundancy
Salary and wages owing to you for work done
Leave already taken for work completed
Lump sum payments of unused annual leave, unused long service leave or leave loadings paid on annual leave
Payments made in lieu of superannuation benefits
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5. The Tax Free redundancy payment
For the base limit is $10,155 + $5,078 for each complete year of service.
Murray started work 1 July Murray is paid 2 week’s redundancy for every year of service and his weekly earnings are $2,000. My tax free component is $10,155 + $4,000 x 10 = $50,155. The maximum cap in this example is $60,935.
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6. Employment termination payments above the Tax free amount
Above the tax free cap attracts 30% plus 2% medicare levy up to $200,000
above $200,000 attracts 45% tax plus 2% medicare levy
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7. How is unused annual leave treated?
Paid as a lump sum and added to your taxable income in the financial year of payment.
Tax is capped and limited to a maximum of 30% plus 2% medicare levy.
It must be paid to your bank account and CAN NOT be rolled over into super.
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8. How is unused long service leave treated?
Paid as a lump sum after tax deducted and CANNOT be rolled over into super.
Taxed depending on when you started employment- from 16 August 1978 the tax rate is 30% plus 2% medicare levy.
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9. Does a redundancy payment attract superannuation (SG)?
Lump sum payments or unused annual leave or long service leave do NOT attract SG because it is not considered Ordinary Time Earnings.
Payments in lieu of notice DO attract SG.
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10. Other Issues
Are you in an employer fund and can you remain with your employer fund, or must you rollover to a personal superannuation fund?
If you are rolling over from an employer fund, does your life insurance have a continuation option and how many days is it active for?
If your seeking new employment are you eligible for Newstart Allowance from Centrelink?
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11. Other Issues
What to do with the money? Pay of your mortgage – consider offset or redraw facilities?
How about superannuation – concessional payment to your $25,000 cap?
Are you eligible to commence a pension from superannuation and why would you?
At times of change have you reviewed your Budget?
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