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1 redundancy advice
2 what you need to
plan for
3 action checklist

what you need to plan for

After redundancy, you will be looking at a cheque and worrying about the next one. It’s a legitimate concern as you need to ensure you make it to the next job or retirement. 

ipac can help you focus on these four key areas:

1. your basic living expenses

It’s important to draw up a household budget. You’ll be surprised at how far your money will stretch when you take a disciplined approach to managing it.

You may qualify for government assistance. Your payout may count towards the Centrelink means test and it is a good idea to register early as there are waiting periods and their job seeking services can help you find another job. Visit the Centrelink website or call 13 28 50 for details.

2. your debts

A portion of your redundancy payout can be used to pay off debts and even some of your mortgage.

It’s a good idea to talk to your mortgage provider and find out how far ahead you are, what their policies are if you fall behind, and if they offer a redraw, as it’s important to consider the benefits of making a big deposit versus the need for cash. You may be able to put your repayments on hold for a few months, draw on some of your equity or redraw on advance payments.

3. your retirement

If you’re over your preservation age (currently age 55) you can draw on your super through an account-based pension. In this way, you can use some of your super to carry you through, and you can still work again. It’s using a transition to retirement strategy.

If you’re over age 60, you can access the money tax-free.

4. your tax

There are numerous ways to help your children and grandchildren financially, depending on your needs and theirs.

A redundancy payout creates a complex tax situation, and you may need professional tax advice before you make any final decisions.

First, there is a legal and tax treatment difference between a genuine redundancy and if your employment is terminated. In the broadest terms, a genuine redundancy is when your employer does not replace you. In this case, some or all of your payout may be tax-free. Tax on your payout depends on how long you were with your employer. You can find out what the applicable Australian Taxation Office rates for genuine redundancy are here.

Secondly, if you have shares in an employee share scheme, you will need to be aware of the implications, as in some cases you may need to pay to keep them.

And if you have been paying for benefits such as health care through salary sacrificing, you can’t afford to let this lapse. It might be a good time for a review.

As you can see, redundancy also creates opportunities and the financial issues can be quite complex. Speaking to a qualified financial advisor before making any significant decisions will help you get your finances in order and take one more concern off your plate.

To make sure your money goes where you want it to, you need to think about estate planning.

Estate planning is more than just having an up to date Will, it also takes into account your superannuation, insurance polices and powers of attorney. The rules are complex and subject to change, and so are your own circumstances and wishes so you need to make sure that you regularly review these arrangements.

Our advisers help retirees make the most of their money and make good financial decisions every day. So, make sure you get the retirement life you want and talk with an ipac adviser.

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next step: action checklist

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