It’s important to be aware of the impact redundancy could have on your super.
Info sheet - July 2022
If you leave work because of redundancy or approved early retirement, you could receive the following payments from your employer:
You may also be able to access your unrestricted non-preserved or restricted non-preserved super benefits.
Different types of termination payments are taxed differently.
|Payments made directly to you by your employer|
|Taxed as income||
|Not taxed as income||
|Employment termination payments (ETPs)||
Bona fide simply means genuine. Your redundancy is considered genuine if the job you were doing is no longer required and your employment is terminated for this reason. This means you will not be replaced by another person, and there is no agreement with your employer for you to be re-hired.
An early retirement scheme is a plan that offers you incentives to retire early or resign because your employer is rationalising or reorganising their business operations.
The taxation of both payments is the same.
Bill has been made redundant by his employer and receives a bona fide redundancy payment of $100,000. Bill has completed 10 years of service with his employer. The tax free element of his bona fide redundancy payment is calculated as follows:
Base limit ($11,591) + $5,797 for each year of service
So for Bill:
$11,591 + $57,970 ($5,797 x 10 years of service)
Bill’s tax free component of his redundancy payment is $69,561. The remaining $30,439 is classified as an ETP.
An ETP is a lump-sum payment made to you when your employment is terminated, and may receive concessional tax treatment. ETPs cannot be rolled into superannuation, however they can be used to make personal (after tax) contributions (subject to the non-concessional contributions cap) and a tax deduction claimed. If you are aged between 67 and 74, you must meet work test requirements to claim a tax deduction. If you are aged 75 or more you cannot contribute to your super account.
ETPs are taxed at different rates depending on your age, and combined must be $230,000 or less to fall under the lower-tax-rate cap.
Age is at 30 June during the year the payment is received. Tax rates above include the 2% Medicare levy. Limit of $230,000 is indexed annually by average weekly ordinary time earnings (AWOTE) in $5,000 increments. For more taxation information visit the Australian Taxation Office website at www.ato.gov.au.
Whether you can access your super depends on if you have reached your preservation age at redundancy, and in some cases your employment status.
|Date of Birth||Preservation age|
|Before July 1960||55|
|1 July 1960 - 30 June 1961||56|
|1 July 1961 - 30 June 1962||57|
|1 July 1962 - 30 June 1963||58|
|1 July 1963 - 30 June 1964||59|
|From July 1964 on||60|
You can access any unrestricted non-preserved benefits at any time, which generally comprise after-tax contributions paid into your account before 30 June 1999 (and their investment earnings up to that date) on leaving employment. Other amounts are required to remain in super until you permanently retire after reaching your preservation age.
You can access your entire super benefit after you have permanently retired. If you are still working, you can access your preserved benefits by opening a Brighter Super Transition to Retirement Pension account (TTR). With a TTR, you access up to 10% of your preserved benefits as a pension. See the Pension accounts Product Disclosure Statement for details. Otherwise you can access the same amount as when you were under preservation age.
You can access your total benefit on leaving employment, whether you are permanently retiring or not.
If you are a member of the Brighter Super Defined Benefit Fund and accept another role with a local government employer within 60 days, your defined benefit account will continue and you will be unable to access your super in cash. If you are considering a lower-paid role, you should contact us to determine what impact this may have on your super benefit and discuss the options available.
LGIAsuper Trustee (ABN 94 085 088 484) (AFSL 230511) (the Trustee) as trustee for LGIAsuper (ABN 23 053 121 564) (RSE R1000160) (the Fund) trading as Brighter Super. Brighter Super products are issued by the Trustee on behalf of the Fund. Brighter Super may refer to the Trustee or LGIAsuper as the context may be.
This info sheet provides general information only and does not take into account your individual objectives, financial situation or needs. As such, you should consider whether it is appropriate in light of your own objectives, financial situation and needs prior to making any decision. You should consult a licensed financial advisor if you require advice which does take into account your personal financial circumstances. You should also obtain and consider the Product Disclosure Statement (PDS) before making any decision to acquire any products. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the PDSs and TMDs at brightersuper.com.au/governance.