Being made redundant can be emotionally and financially devastating if you weren’t expecting it. But large lump sum payouts also present an opportunity to reset your career and finances.
Chrystal Dias rebounded from being made redundant from her marketing job in health by switching to a role with a professional basketball team. It meant a different industry and relocating from Melbourne – where she had recently bought a property – to Hobart, home of the Tasmania JackJumpers.Hers is one of many recent job losses, with more likely to come as the economy softens.
The redundancy payment will be tax-free up to a limit and based on years of service. For 2024-25, the tax-free component is $12,524, plus $6264 for each completed year of service. Typical mistakes range from miscalculating accrued leave entitlements and the tax-exempt component of redundancy payments through to deducting the wrong amount of tax from leave entitlements, says Peter Bembrick, a tax partner with HLB Mann Judd in Sydney.
“Maybe it is time for a career break, or perhaps you want to get straight back into the workplace and look for that perfect role,” he says. “For those with a mortgage, initially parking the money in an offset account would likely give you a higher after-tax return than a term deposit or cash at call account,” Haddan says.
“A lump sum into a portfolio is a great way of supercharging your investment goals. Keep in mind that it may be difficult to fund any additional purchase cost if you are not currently employed.”“Your mantra should be ‘no rash decisions’ and this includes discretionary spending such as holidays, cars, and home improvements,” Haddan says.
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