Originally posted on https://www.jvafs.com.au/what-to-do-when-made-redundant/
Redundancy brings with it some of your biggest lifestyle decisions. That’s why it’s important to be informed about your entitlements and any potential implications so you can make the best decisions for your future.
Regardless of what you plan to do after redundancy, you’ll want to know your entitlements and how you may be taxed.
Your redundancy pay includes:
Knowing which entitlements you received and tallying these can help you set your financial goals for the months ahead, and our financial experts are always here to help guide you.
Your redundancy payment was given to you as either a Genuine Redundancy Payment (GRP) or as an Employer Termination Payment (ERP). The first means your position was abolished. The second is given when you were dismissed for any other reason.
In tax terms, the GRP is tax-free up to a limit based on your years of service with your employer. Indexation changes the tax-free limit on 1 July each year. For more information see Redundancy payments at the Australian Government, Australian Taxation Office.
Your accumulated super usually remains in your funds, but your employer no longer contributes. You can provide your new employer with existing details, or roll your funds over to their preferred super fund provider.
As is the case with many, your past employer may have enrolled you under their Company Group Benefits Scheme, which means your premiums and benefits may change considerably once you leave the group plan and are transferred to an individual plan. It’s important for you to your Financial Adviser to ensure your super funds are not eaten in increased fees following your removal from any group schemes.
Your change in working situation may drive you to make some insurance changes. Your previous employer may have covered one or more of your insurances under the Company Group Super Benefits Scheme, so if you’ve had life insurance under your super fund, check with your provider to see what happens now that you’re no longer with the group scheme.
Your redundancy package blesses you with a buffer. How long it remains so is up to you.
What are your plans? How long do you plan to stay out of work? Want to retire? Take a trip, start your own business, or hit the road instantly? Your answer to those questions will determine how you plan to save/ spend your money.
Calculate how long you can be out of work:
|Your monthly expenses|
|Rent or Mortgage|
|Rates (council, water)|
|Utilities (power, gas)|
|Phones, internet & pay TV|
|Education & childcare fees|
|Insurance (car, home, health)|
|Car (registration, maintenance)|
|Loans & credit cards|
|TOTAL MONTHLY EXPENSES:|
|YOUR REDUNDANCY PAY OUT:|
|Months you can be without work:|
(this is your total pay out divided by your total expenses)
Dividing your redundancy payment by your total monthly expenses will approximate how long you can afford not to work.
Redundancy can have its silver lining in that it may make you reconsider career choices, your definition of fulfilment, and how you plan to spend the rest of your life.
Our personal financial advisors at JVA are well-versed in the options available to professional or trade personnel who are in need of redundancy advice and can support you as you work through your industry super, asset management, insurance and family protection solutions, to ensure you are setup with the right financial structure to live comfortably at every stage of your redundancy journey.
To find out more, download a copy of our full Redundancy Guide or contact us on 08 9383 8300 to find out how we can help ease your stress and maximise your outcomes.
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