Tax and your redundancy payout

Redundancy payments are taxed differently to normal payments from your employer.

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 Age Pension age, 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. However, you may continue to make contributions into your super, subject to eligibility criteria and contribution caps.

    Note: if you're over Age Pension age, you're not eligible for a genuine redundancy payment and your entire payout will be 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. However, you may continue to make contributions into your super, subject to eligibility criteria and contribution caps.

  • 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.

    • 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.

How does the date of your redundancy change your tax?

Depending on individual situation, you may wish to consider deferring    your redundancy date until after the end of the financial year, when your marginal rate of tax may be lower, or entitlements higher. Understandably, this may not always be possible, however you may be able to use your long service leave or accumulated leave to delay your departure date. You may want to discuss this with your HR department.

We're here to help

At TelstraSuper we're here to help you build a secure financial future. TelstraSuper Financial Planning can help you work out the best ways to manage your super in retirement. If you'd like to discuss your retirement plans or if you have any other financial advice queries contact us on 1300 033 166 or fill in our online contact form. There’s no additional charge for our phone based service as this is included in your TelstraSuper membership.

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