Making the most of your redundancy

If you are leaving your employer due to redundancy, you have a great opportunity to make a fresh start.
Now could be the best time for you to think about a career change, become self-employed or consider retiring if you are close to retirement.
But regardless of what your next steps might be, it's important that you:
- understand the payments you may receive from your employer and what tax treatments apply
- consider the financial issues likely to be relevant to your age and career goals, and
- speak to a financial adviser to find out how you could manage your redundancy payments effectively.

If you are leaving your employer due to redundancy, you have a great opportunity to make a fresh start.
Now could be the best time for you to think about a career change, become self-employed or consider retiring if you are close to retirement.
But regardless of what your next steps might be, it's important that you:
- understand the payments you may receive from your employer and what tax treatments apply
- consider the financial issues likely to be relevant to your age and career goals, and
- speak to a financial adviser to find out how you could manage your redundancy payments effectively. Note: The information in this article assumes you're departing due to a genuine redundancy. This will generally be the case if you are under age 65, your employer has determined that your position no longer exists and you are not replaced by another employee.

Types of payments
The types of payments you may receive in the event of a genuine redundancy include:
- A genuine redundancy payment, which is tax-free up to a limit based on your full years of service with your employer. 
- An Employment Termination Payment (ETP), which is a lump sum payment you may receive when your employment arrangement has come to an end. Examples include genuine redundancy payments exceeding the tax-free limit, unused sick leave, unused rostered days off, payments in lieu of notice and golden handshakes (also known as ‘ex-gratia' payments). 
- Other payments you receive from your employer including accrued annual leave, accrued long service leave and your final pay. 
Each of these payments are paid as cash, less any applicable taxes. The table in the Appendix summarises the tax treatment of these payments in the 2014/15 financial year in the event of a genuine redundancy.

Financial issues to consider
When you take a redundancy, you will need to decide what you are going to do with the payments you are eligible to receive.
Other financial issues you may need to consider will depend on whether you intend to find a new job or you plan to retire. 
If you plan on finding a new job, some of the important questions you should address include;
1. How will you meet your living expenses until you find another job?
2. Will you be eligible for the Newstart Allowance or other relevant social security benefit?
3. Will you need to move your superannuation to another fund?
4. Should you merge your superannuation into one account?
5. Should you use some of your superannuation to pay yourself a pension (for people aged 55 and over only)?
6. Will any insurance policies taken out on your life cease when you leave your employer?
7. What should you do with any left over redundancy pay when you find another job?

Some key questions to consider if you'd like to retire upon leaving your employer are:
1. Have you accumulated enough wealth within and outside superannuation to provide an income to meet your ongoing lifestyle needs?
2. Should you use some of your superannuation to pay yourself a pension (for people aged 55 and over only)?
3. Will you be eligible for the Age Pension or other relevant social security benefit?
4. Do you need to review your estate plans?
5. Do you need to review your insurances? 

Value of advice
After reading this information, we recommend you speak to a financial adviser, who could help you: • 
- decide what to do with the payments you are eligible to receive from your employer
- make the most of your super to help you become financially secure in retirement 
- ensure you and your family are financially protected in the event of death or disability, by having appropriate insurance cover, and
- determine whether you are eligible for any Government income support payments.

A financial adviser can also assist you with a range of other needs which may include:
- improving your cashflow
- growing your investments
- managing your debt, and
- considering your estate planning needs.

Important information and disclaimer
Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance or other decision. Please seek personal advice prior to acting on this information.

Information in this publication is accurate as at the date of writing (May 2015). In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. 

Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy, not accept any responsibility for errors or omissions in this document. 

Case studies in this publication are for illustration purposes only. The investment returns shown in any case studies in this publication are hypothetical examples only and do not reflect the historical or future returns of any specific financial products. 

Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. 
If any financial products are referred to in this publication, you should consider the relevant Product Disclosure Statement or other disclosure material before making an investment decision in relation to that financial product. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns