Helping a Member Navigate Redundancy: Key Tax Insights

Recently, we advised a member of the Staff Association facing redundancy. The HR team managing the process lacked understanding of critical tax implications, which could have negatively impacted the employee’s financial situation. By involving the Staff Association early, we provided crucial advice and negotiated a more tax-effective termination.

Key Insights and Actions

• Early Involvement of Staff Association Ensured accurate and timely guidance Addressed gaps in HR's knowledge
• Understanding Tax-Free Thresholds Genuine redundancy payments are tax-free up to a limit (2023-2024: $11,985 base + $5,994 per year of service) Excess amounts treated as Employment Termination Payments (ETP) with varying tax rates
• Negotiating Termination Timing Phased termination to take effect in the new financial year Spread financial impact over two tax years Reduced overall tax liability
• Additional Tax Considerations Concessional tax rates on unused annual leave and long service leave for genuine redundancies Explored Low Income Tax Offset (LITO) eligibility Discussed superannuation contributions for further tax benefits

This is just one of the many benefits members have access to when faced with challenging situations at work.