Unfortunately, the chances of being redundant will increase over the coming 12 months as Government stimulus (JobKeeper payments) start to unwind. How you spend your time and money after redundancy can make a difference to your future financial wellbeing.
When your time at work comes to an end because of redundancy, it can stir up all sorts of feelings, ideas and possibilities. For some it’s a great opportunity to rethink how you want to be spending your time. Fear of the unknown can be a natural response too when redundancy leaves you without a steady income to rely on. But whether you’re looking at the glass as half-full or half-empty, there are some important steps you can take to get ready for this next phase in your life.
Your final payment is likely to include a few different components. In addition to your redundancy entitlement under a contract or award with your employer, you may receive further payments in lieu of annual leave, long service leave or any notice period you haven’t worked. There may also be a salary payment rolled into this final sum.
These amounts are all subject to different rates of tax:
The type of payments you’ll receive and how they’re taxed can be quite complex. Speaking to a professional can determine if you are receiving the correct entitlement.
Stopping work doesn’t just mean you’ll be without an income. You’ll also be missing out on guaranteed super contributions from your employer. It’s worth remembering that a gap in your super payments, however brief, can have quite an impact on future income in retirement. Some of your personal insurance policies – such as life insurance, total and permanent disablement and income protection – may also be arranged with your super fund. It is important to know, Federal Government legislation introduced on 1 July 2019 means that super members whose accounts have not received a contribution or a rollover (i.e. have been inactive) for 16 months could lose their insurance in super.
When you get your redundancy payment, it can seem like a big windfall and a chance to splash out on something you couldn’t normally afford, like a new car or dream holiday. But make sure you keep reality and your future in mind before you start spending big.
Taking time to figure out a comprehensive budget and spending targets – including immediate needs like groceries, bills and keeping up with rent, mortgage or other loan payments – can help you figure out just how long you can afford to be off work.
Are you unsure if you’re financially able to retire or do you want to consider what your options are? With some careful planning and advice on your finances, you have a much better chance of taking the time you need to feel positive about looking for a new job.
Seek guidance on a range of topics relating to redundancy, including:
WLM Financial Services can help. We can also advise on the best way to manage the payments you receive and provide guidance to make the most of your redundancy.
Find out more about our Financial Planning services or book a meeting for a friendly follow up.