It has been almost a decade since the topic of redundancy was made a buzz word in Geelong at a time when Alcoa, Target and Ford were all making mass layoffs. Unfortunately, there has been a resurgence of redundancies on the back of turbulent financial times which has warranted a revisit of our earlier articles which cover the key considerations when being laid off.
A summary of each is outlined below;
Taxation – Genuine redundancy payments are given special tax treatment, including a tax-free amount related to years of service. If you have leave, it may also receive preferential tax treatment upon being paid out. It is particularly important to understand your tax position following a redundancy because strategies exist to mitigate tax.
Superannuation – If you are part of an employer supported Superannuation fund, you may need to rollover your Superannuation benefit upon being made redundant. You may also need to replace any insurance cover you had with your previous super fund. When planning for a redundancy, Superannuation can be used to offset some of the tax you incur from your payout or you may be eligible to access to your Superannuation to help with cashflow.
Debt – If you have a home loan and are struggling with repayments, you may be able to reduce or even temporarily pause repayments while you are out of the workforce. Applying for a new loan or refinancing can be difficult post redundancy which can be an issue if you were planning on moving home.
Cashflow – Your lump sum payment might be your last pay packet for a while, so draw up a budget. This will help you identify areas where you can economise until you find a new job. You may be able to access Superannuation, Centrelink or draw on your assets to help meet your cash flow needs.
Centrelink – You may be eligible for income support and concessions from Centrelink. Be aware that waiting periods and income and asset tests apply. Muirfield can assist in determining your eligibility and applying for a benefit.
Insurance – A review of your insurance may be required if you are made redundant. For example, you may no longer be eligible to claim on income protection policies. It would therefore be good to review if you should maintain your various policies.
Each of these areas require careful consideration to ensure the redundancy can work for you both financially, and more importantly, emotionally.
One of our skilled financial advisers can assist you in unpacking your package to ensure you make the most of what you have.