The decisions you make about how to use your redundancy payment will depend on your financial situation and personal circumstances. It will also depend on the amount of your redundancy payout.
Redundancy provisions can vary across organisations and employment contracts. You may receive payments in the form of:
- genuine redundancy payments – these are tax free up to a limit based on your years of service
- employment termination payments – these are payments for unused rostered days off, in lieu of notices, or a gratuity
- payments for time worked or leave already taken – this is taxed at your normal rate
- payments for unused annual leave and long service leave – these have special tax rates.
- For more information regarding tax implications for redundancy payments, visit www.ato.gov.au.
There are a few things that you will need to consider, including:
- what to do with your redundancy payout and leave payments
- how to make the most of your superannuation savings (for example, where to transfer them and what type of investment to select)
- whether to pay off your debts
- how to access social security (if you’re eligible)
- how to continue your life insurance cover.
Some of the ways you could use your redundancy payment include:
- reducing debts such as your mortgage, personal loans or credit cards
- rolling over the employment termination payment into superannuation, potentially saving tax (this is only possible with a transitional employment termination payment – check with your employer and be aware that if you rollover your payment, access to funds will be restricted until you retire)
- using the money to pay for day-to-day living expenses until you find a new job
- investing the money in things like property, shares or managed funds.
It may also be helpful to consult a licensed and authorised financial adviser or financial planner to help you make the right decision for your circumstances.