Tax and your payout
When you're made redundant you'll receive information about your redundancy payments from your employer. Your payment will consist of up to three components:
- genuine redundancy payment (the tax free portion). Note if you're over aged 65, you're not eligible for a genuine redundancy payment and your entire payout will be treated as an ETP.
- an employment termination payment (ETP), and
- other redundancy payments.
Genuine redundancy payment
If you’re receiving genuine redundancy some (or all) of your payment will be tax free and received as cash. You cannot roll this into your super.
Note if you're over pension age, you're not eligible for a genuine redundancy payment and your entire payout will be treated as an ETP.
Taxation of other employer redundancy payments for the 2023/2024 financial year
Tax-free limit is $11,985 plus $5,994 for each complete year of service with your employer. These amounts are indexed to Average Weekly Ordinary Times Earnings (AWOTE) each July. Amounts in excess of the tax-free limit are treated as an ETP.
Employment Termination Payments (ETPs)
When you leave your employer, you may be entitled to an ETP. ETPs (including genuine redundancy payments over the tax-free limit) consist of a tax-free component and a taxable component. Amounts that may be included in an ETP are:
- genuine redundancy payments over the tax-free limit
- unused rostered days off and sick leave
- payments in lieu, gratuities, compensation payments for loss of employment.
You can't roll your ETP payment into your super. You can make an after-tax (non-concessional) contribution if you wanted to take advantage of the 15% tax rate on investment earnings in your super. Contribution caps apply.
Taxation of the taxable component of an ETP
Age Tax on taxable component Under Preservation age† First $235,000 taxed at 32% Preservation age or older† First $235,000 taxed at 17% All ages† Above $235,000 taxed at 47%
† On the last day of the financial year in which the payment was made.
Other redundancy payments
On leaving your employer as a result of a termination or redundancy, you may also be eligible to receive a range of other cash payments.
- genuine redundancy payments within the tax-free limit
- unused annual and long service leave salary and wages owed to you.
Leave that's not considered an ETP as a result of a redundancy is taxed at concessional rates.
Taxation of genuine redundancy payments for the 2023/2024 financial year
Annual leave 100% of lump sum is taxed at 32%† (maximum) Long service leave accrued before 16 August 1978 5% included in assessable income taxed at your Marginal Tax Rate† Long service leave accrued after 15 August 1978 100% included as assessable income and taxed at 32%† (maximum)
† Includes Medicare Levy (if applicable)
Options for your lump sum payment
Your redundancy payment could be one of the biggest payments you'll ever receive. TelstraSuper Financial Planning can help you work out the best long-term strategy for your money. Here are some possible options to consider.
Put it in your bank account
While it may be tempting to immediately spend some of your redundancy payment on paying off debts or purchasing new items, you should remain as financially flexible as possible while you consider the next steps in your life.
Reduce or pay off debts
If you have high levels of debt you may want to consider paying it off with your lump sum payment. It's important to plan for your future. If you pay off your debts with your payment you may not have the money to pay for your day to day expenses.
Put it in your Mortgage offset account
You can park your redundancy package in an offset account and reduce the amount of interest you pay on your mortgage, whilst retaining flexibility to access your funds if required in future.
- Contribute to super
Find out about Centrelink payments
You may be eligible to receive Centrelink income assistance. Waiting periods may apply, so you should contact Centrelink as soon as possible to get the right information. Contact Centrelink online or call 13 28 50 (Employment Services) or 13 23 00 (Retirement Services).
Set a budget
Preparing a budget will give you an idea of the cash reserves you're likely to need in the coming months. Use our Budget planner and remember to take into account the length of time it may take you to find new employment and include any entitlements to Centrelink payments you may receive.
Consolidate your super accounts
Do you have more than one super account, eating away your savings in unnecessary fees? You can check if you have any other super accounts instantly by logging into your online account. You can also combine them together in a few clicks, it takes less than five minutes and could save you heaps in the long run. Make sure you read our list of things to think about before considering consolidating your accounts into one super fund.
One of the benefits of being a member of TelstraSuper is access to general and simple personal advice about your account over the phone at no additional cost. TelstraSuper Financial Planning has a team of experts who can explain your options and help you make important decisions. Some of the things they can help you with are:
To speak with an adviser call 1300 033 166 or request a call by filling in the online form.