Redundancy and your super

What payments could I receive?

If you leave work because of redundancy or approved early retirement, you could receive the following payments from your employer:

• Unused leave payments, such as accrued annual or long service leave.
• A bona fide redundancy payment or approved early retirement scheme payment.
• An Employment Termination Payment (ETP).

You may also be able to access your unrestricted non-preserved or restricted non-preserved super benefits.

Different types of termination payments are taxed differently.

*These rates apply to the 2024/25 financial year.

What is a bona fide redundancy or an approved early retirement scheme?

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.

An early retirement scheme is a plan that offers you incentives to retire early or resign because your employer is rationalising or reorganising their business operations.

The taxation of both payments is the same.

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. The tax-free element of his bona fide redundancy payment is calculated as follows:

The tax-free component of Bill’s redundancy payment is $75,164. The remaining $24,836 is classified as an ETP.

What is an ETP?

An ETP is a lump-sum payment made to you when your employment is terminated, and it may receive concessional tax treatment. ETPs cannot be rolled into superannuation, however they can be used to make personal (after-tax) contributions (subject to the non-concessional contributions cap) and a tax deduction can be claimed up to the concessional contribution cap.

If you are aged between 67 and 74, you must meet work test requirements to claim a tax deduction. If you are aged 75 or older, you cannot contribute to your super account.

How is the taxable component of my ETP taxed?

ETPs are taxed at different rates depending on your age. Combined, they must total $235,000 or less to fall under the lower tax rate cap.

Age that applies is at 30 June during the year the payment is received. Tax rates above include the 2% Medicare levy. The limit of $235,000 is indexed annually by average weekly ordinary time earnings (AWOTE) in $5,000 increments. For more information visit ato.gov.au.

Can I access my super on redundancy?

A redundancy is not, in itself, a condition of release. You can usually only access your super as a lump sum or pension (or a combination of both) when you:

• Permanently retire after reaching your preservation age,
• Reach age 60 and then either stop working or change jobs, or
• Turn 65 (even if you are still working).

For more information see our Accessing your super information sheet.

Important note for Defined Benefit Fund members

If you are a member of the Brighter Super Defined Benefit Fund and accept another role with a local government employer within 60 days, your defined benefit account will continue and you will be unable to access your super in cash. If you are considering a lower-paid role, you should contact us to determine what impact this may have on your super benefit and discuss the options available.