Investing your Payout
We can help you invest your payout to meet your short term needs, as well as providing for your eventual retirement.
We can also develop investment strategies to help you qualify for Centrelink benefits (if this is appropriate for you) and to minimise tax on your payout and your income.
What is the best way to manage your finances after accepting a redundancy offer?
When you accept a redundancy offer you may receive a number of payments including a redundancy payout, other non-super or ‘ordinary’ money, and superannuation. Correct use of these monies should enable you to optimise your finances during any period of unemployment and your re-entry to the workforce.
Considerations if you will be unemployed
Your redundancy payment:
This payment may have two components. The first is the non-taxed component for every year of completed service.
You may also receive a second component called an Employer Termination Payment (ETP). Any part of this ETP that relates to pre-July 1983 service will be tax free, and the remainder will be taxed at a rate depending on your age and other assessable income. You cannot ‘roll over’ this payment into superannuation.
Your other non-superannuation payments:
This money usually comes from payments in lieu of annual leave and long service leave and is generally subject to tax at rate of 32%. It cannot be rolled over into a super fund.
Your preserved superannuation:
Some or all of your superannuation may be ‘preserved’. This means it must remain in the superannuation system at least until your preservation age. This money should therefore be invested to generate greater returns over the long term. You need to consider which asset allocation and investments will help you to do that.
Your non-preserved superannuation:
If you have any superannuation money which is not ‘preserved’, it might be prudent to roll it over into a super fund which has a no-fee cash option. This will give you easy access to the money if you need it whilst you are unemployed… and it may help you to qualify for Centrelink benefits and save tax.
Your mortgage and other debts:
If your mortgage has a re-draw facility, it might pay to park some of your payments there. This strategy could save you interest and tax, and may help you to qualify for Centrelink benefits. And, importantly, the re-draw facility should mean you can withdraw money as you need it.
If your mortgage does not have a re-draw facility, consider making only the minimum monthly repayments. The same advice applies to your other debts. The objective is to help you keep as much cash in reserve as possible while you are looking for a new job.
Qualifying for Centrelink benefits:
You may qualify for Newstart Allowance if you are aged 22 or over and under Age Pension age, are unemployed, and satisfy the income and assets tests.
Considerations on re-entering the workforce
Your superannuation:
All of your superannuation should be invested to generate greater returns over the long term. You need to consider which asset allocation and investments will help you to do that. A Self Managed Superannuation Fund may be an option for you.
Your wealth and retirement planning:
You may need to seek financial advice to determine how much you now need to be contributing to superannuation and other investments in order to achieve your wealth and retirement objectives.
Your mortgage and other debts:
A prudent strategy can be to use your cash reserves to repay some or all of your mortgage and/or other debts once you are re-employed. This could save you a significant amount in interest repayments, and free up salary to fund other investment strategies.
Your risk insurance:
You may need to re-apply for health, life, trauma, TPD and/or income protection insurances if these were covered by your previous employer or superannuation fund.
Contact us today to discuss how we can work with you.
Damian Jenkins is an Authorised Representative of Personal Financial Services Limited (PFS) ABN 26 098 725 145, AFSL 234459. This information has been prepared by PFS. The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current laws and their interpretation.
This information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Because of this you should, before acting on it, consider its appropriateness, having regard to your objectives, financial situation and needs.
