Redundancy and your super

Info sheet July 2014
Redundancy and your super
If you are facing redundancy or thinking about taking a lower-paid position, it is
important to be aware of the impact it could have on your super.
What payments could I receive?
When you leave work under these circumstances you
could receive the following payments:
• any accrued leave (paid by your employer)
• your redundancy benefit (paid by your employer)
• your LGsuper benefit
Payments made directly to you by your employer
Taxed as
income
Not taxed as
income
• unused long service leave,
annual leave and/or leave
loading
• salary, wages and allowances
owing to you for work done or
leave already taken
• bona fide redundancy payments
below the tax-free amount
($9,514 plus $4,758 for each
completed year of service with
your employer)
• unused rostered days off
• amounts in lieu of notice
Employment
termination
payments
(ETPs)
• unused sick leave
• a gratuity or ‘golden handshake’
• bona fide redundancy and
approved early retirement
scheme payments over the
tax-free amount
What is a bona fide redundancy?
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.
Example of how a bona fide redundancy is taxed
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
and as a consequence his tax-free limit will be $57,094.
This is based on the following calculation:
Base limit ($9,514) + $4,758 for each year of service
So for Bill:
$9,514 + $47,580 ($4,758 x 10 years of service)
This means the remaining amount of $42,906 is
considered taxable and will be classified as an ETP.
An ETP may contain a tax-free component in certain
circumstances.
What is 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 voluntary (aftertax) contributions (subject to the non-concessional
contributions cap). If you are aged between 65 and 74,
you must meet work test requirements. If you are aged 75
or more you cannot contribute to your LGsuper account.
page 1 of 2
redundancy and your super july 2014
How is the taxable component of my ETP taxed?
ETPs are taxed at different rates depending on your age, and combined must be $185,000 or less to fall under the
lower-tax-rate cap.
I am under
preservation
age (55)
My ETP is
under or
equal to the
lower-tax-rate
cap
I am of
preservation
age (55+)
My ETP
My bona fide
exceeds the
redundancy
lower-tax-rate
payment over the
cap
tax limit is over
$185,000
I will be
taxed at
47%
I will be
taxed at
32%
My ETP is
under or
equal to the
lower-tax-rate
cap
I will be
taxed at
17%
My ETP
exceeds the
lower-tax-rate
cap
I will be
taxed at
47%
Age is at 30 June during the year the payment is received. Tax rates above include the 2% Medicare levy. Limit of $185,000 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
Can I access my super?
Whether you can access your super depends on your age
at redundancy and in some cases your employment status.
Your age
Amount you can access from LGsuper
Under 55
After-tax contributions paid into your
account before 30 June 1999 (and their
investment earnings up to that date) may
be accessed on leaving employment. Your
benefit statement shows this amount.
Other amounts are required to remain in
super until you permanently retire after
reaching your preservation age.
55 - 59
Your total benefit can be accessed if you
are permanently retiring. If you are still
working, up to 10% of your benefit can
be accessed as annual income. See the
Pension accounts Product Disclosure
Statement for details. Otherwise you can
access the same amounts as someone
under age 55.
60 and
over
Your total benefit can be accessed on
leaving employment, whether you are
permanently retiring or not.
This info sheet has been produced by
the Queensland Local Government
Superannuation Board (ABN 94 085 088
484 AFSL 230511) (LGsuper) as Trustee
of the Local Government Superannuation
Scheme (ABN 23 053 121 564) for LGsuper
members. It provides general information
only and does not take into account your
personal objectives, financial situation
or needs.
The Board recommends you consult with
an authorised or licensed financial advisor if
you require advice which takes into account
your personal financial circumstances.
LGsuper has representatives that are
authorised to provide personal advice on
LGsuper products and superannuation.
Information on products offered by
the Board can be found in our product
disclosure statements.
If you are a local government employee (excluding
employees of Brisbane City Council, Queensland Urban
Utilities and other associated employers) and you
accept another role with a local government employer
within 60 days of leaving your previous employer, your
employment will be considered continuous and you will
not be able to access your LGsuper benefit in cash.
What if I accept another job with local government
for less pay?
If you are a local government employee (excluding
employees of Brisbane City Council, Queensland Urban
Utilities and other associated employers) and accept a
lower paid position within 60 days, you will not be able
to access your super in cash. If you are a member of the
Defined Benefits Fund or have a Defined Benefit account
you should contact us to find out if paying standard
member contributions based on your previous salary will
increase your super benefit.
Any questions?
LGsuper looks after almost $8.5 billion in retirement
savings for around 90,000 members. To discuss
the impact redundancy or accepting a lower-paid
position within local government could have on
your super benefit, call us on 1800 444 396 or visit
www.lgsuper.org.
GPO Box 264 Brisbane Qld 4001
[email protected] www.lgsuper.org
Toll free 1800 444 396
Facsimile 07 3244 4344
The Queensland Local Government Superannuation Board ABN 94 085 088 484
AFS Licence No. 230511 Local Government Superannuation Scheme ABN 23 053 121 564
page 2 of 2

Download Report