What a week it’s been! Gladstone has a very new look council. Congratulations to all the successful candidates. I hope and trust the people of Gladstone have elected a group of positive and proactive City governors.
Meanwhile, unfortunately there are still many companies in the city shedding employees –which brings me to the topic for this week. Recently we have had several clients who have come in with their redundancy packages querying the high level of taxes being applied.
In many cases the redundancies are being offered to long standing staff. Many people don’t realise that where an employer offers a genuine redundancy package, it usually comes with concessional tax rates attached. Genuine redundancy payments comprise a tax free amount and an assessable amount. The Tax Free component is usually non-assessable and the amount above the non-assessable component is considered to be an employment termination payment or ETP if it qualifies as such a payment under the Tax act.
Now - everyone’s entitled to the concessional tax rates for a genuine redundancy unless of course you are 65 years or over. Those who are over 65, unfortunately miss out on the concessional rates that apply to the severance payment. For example – looking at 2 employees aged 66 and 63. If both commenced on the same day – let us say 2nd January, 1977. Assuming all things are otherwise the same, both receive gross redundancy packages of about 94,160. The 66 year old gets a cheque for $78,420 while the 63 year old gets to pocket about $93,730. A difference of $15,310!
This suggests that those who are leading up to 65 years of age and are seeing redundancy packages being offered to their fellows workers, perhaps need to give serious consideration as to whether it is actually worthwhile considering redundancy early, especially when the packages are reasonably attractive.
It is so important to give additional consideration to getting professional advice on this issue. Feel free to call the team at Sothertons on 4972 1300 to maximise your take home package and ensure the timing works for you.