In today’s business environment, redundancy can occur unexpectedly. And at a time when you are dealing with complex and mixed emotions, the last thing you want to worry about is money. Here are some things to consider:
- What should you do with your payout?
- How will you cope with ongoing financial commitments such as your mortgage and credit card repayments?
- Where should you invest your superannuation benefits?
- How long will your redundancy payout last?
When you leave your job or if you are made redundant, you will receive a number of different employer payments. Typically, you can expect to receive:
- An employer payment on account of termination of employment due to redundancy.
- Any unused leave, including annual leave plus loading, if applicable.
- Any unused long-service leave.
- Superannuation benefits.
- Other entitlements, including employee share plans.
You may receive your superannuation benefit as part of your redundancy payout. If so, you will receive the benefits accumulated during your period of employment and may also receive amounts previously rolled into the fund from earlier jobs.
Your superannuation payment is an Eligible Termination Payment (ETP) and generally is not subject to tax if you roll it over. Upon cashing however, superannuation ETPs are taxed under special rules. Only certain components of your superannuation ETP may be cashed while others must be rolled over - it depends on whether the component is preserved or non-preserved. Employer payments can consist of tax-free and taxable components and it is common for a redundancy package to include both. Each is treated differently and how you use these payments could have a significant impact on your financial security.
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The preserved portion of your superannuation must remain in the superannuation system until you are at least 55 to 60 years of age. There are some exceptions for ill health and severe financial hardship, as defined by law.
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Non-preserved benefits are made up of unrestricted and restricted amounts and these can be accessed as follows:
- Unrestricted non-preserved - at any time.
- Restricted non-preserved - can generally be accessed upon termination of employment at any age, provided your employer has contributed to the superannuation fund on your behalf.
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- At retirement after age 55, but if the member is less than age 60 then only if the member does not intend to work again.
- The member is at least age 60, but under 65, and employment ceases.
- The member is disabled.
- The member dies.
- The member is entitled to early receipt of benefits on the grounds of severe financial hardship. This is decided by the fund trustees.
- Where the Australian Prudential Regulatory Authority (APRA) has approved the release of benefits on the compassionate grounds.
APRA will consider such cases where:
- The payments are sought to treat a life threatening illness.
- It will prevent the foreclosure by a mortgagee.
- Funds are needed, in the case of a disabled person, for medical transport, home and vehicle modification, palliative care, funeral and burial expenses.
- Even where APRA approves the payment, it is still necessary for the fund rules to be met.
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