Teika Porrins-Chinnery says that while the VTSS scheme still has a while to go before deadline, members thinking of taking a redundancy have a few decisions to make
By Teika Porrins-Chinnery*
If you’re planning to take a voluntary redundancy, then you’ve probably got a number of decisions ahead of you.
The Voluntary Targeted Separation Scheme 2017 (VTSS), announced by the WA Government in 2017, closes on 30 June 2018, so there’s still time to take control of your redundancy and maybe even take an early retirement.
GESB scheme members regularly ask us these important questions to help clarify their options and make the right decisions about their lump sum redundancy payment.
How much will I get paid when I’m made redundant?
You can expect to receive a single lump sum redundancy payment that includes all of your entitlements: your standard severance payment of up to 52 weeks, an incentive payment for resigning within three weeks of accepting your VTSS offer, potentially a payout in lieu of your notice period, and any unused leave that you are owed.
Will I have to pay tax on my redundancy payment?
That depends on whether the ATO considers your redundancy as ‘genuine’ or ‘non-genuine’.
Whether involuntary or voluntary, a genuine redundancy will occur if you are under age 65 and your job is genuinely no longer required by the employer.
If you receive a payment under a genuine redundancy or approved early retirement scheme, part of the payment may be tax-free based on the number of years with that employer.
To receive some of the payment tax-free, you need to be under age 65 at the time of your exit.
For the 2017/18 financial year, the tax free amount is $10,155 plus $5,078 for each completed year of service. This amount is indexed each year.
What happens to my super when I take redundancy?
Your current employer will not make any further contributions.
If you do start working again, only a WA public sector employer can once again make super contributions to your GESB scheme. Once you leave the WA public sector, contributions to your scheme are limited.
Each GESB scheme has its own rules, and we’re often asked by clients how they can make the most of their redundancy payment within the rules of their specific scheme.
If your super is in Gold State Super:
- You’ll no longer be able to make additional contributions or put your redundancy payment into your account
- If you’re 55 years of age or over you’re allowed to access your full benefit, but note tax will apply.
If your super is in West State Super:
- You can continue to make personal contributions to your West State Super and you can put your redundancy payment into your account. These contributions need to fall within the non-concessional contribution limits.
- You can still access your super at your preservation age as usual.
Can I turn my redundancy into an early retirement?
Once you’ve reached your preservation age you can start to access your super.
How much you can and need to access depends on whether you decide to semi-retire or permanently retire.
If you’d still like to work part time, you can work less and supplement your income with a Transition To Retirement (TTR) pension.
If you’re a member of Gold State Super or West State Super there’s extra rules you’ll need to take into account.
Where can I get help?
Redundancy can bring with it a range of emotions, from exciting to daunting. The good news is that help is available.
As part of the VTSS, the WA government will give you $500 towards the cost of getting financial advice or undertaking services or training to secure alternative employment.
That money is included as part of your final redundancy payment. Getting advice can help you decide how to use or invest your redundancy payment and potentially retire early.
Talk to a redundancy expert
The decision about what to do with your redundancy payment is complex. A redundancy expert can help you navigate the options available to you.
Contact Teika on [email protected] or 08 9214 4111 and Teika will introduce you to a local WA expert.
* Teika Porrins-Chinnery is the WA Employer Relations Manager with StatePlus.
StatePlus, formerly State Super Financial Services, is one of Australia’s leading providers of financial planning. Since 1990, our retirement experts have provided life-changing financial advice to public sector employees and their families. With a StatePlus planner by your side, you can feel confident about reaching your financial goals to live the retirement you really want.
This is general information only and does not take into account your personal objectives, financial situation or needs. It is important to seek financial and taxation advice that takes into account your personal objectives, financial situation and needs before making any decisions based on this information.
