Redundancy your options 2014
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Redundancy… your options 2014 The Queensland Local Government Superannuation Board ABN 94 085 088 484 AFS Licence 230511 Local Government Superannuation Scheme ABN 23 053 121 564
Disclaimer This seminar provides general information only. It has been prepared without taking into account your individual objectives, financial situation or needs. You must not rely on this information alone as a sole or primary source of advice or guidance for the purpose of making decisions about your superannuation options. If you are interested in exercising your options in LGsuper, in relation to a matter referred to in this presentation, you should obtain the relevant Product Disclosure Statement and consider contacting a LGsuper representative who will be able to provide you with appropriate advice which does take into account your particular objectives, financial situation and needs.
Setting the scene • Contemplating redundancy • Considerations – Tax – Centrelink – Superannuation – Timing • How we can help
Tax considerations
Employer payments
Types of payments
• Redundancy payment
• Unused leave
– annual
– long service
• Amounts in lieu of notice
• A gratuity or ‘golden handshake’
See your employer for details
Employer payments
Tax treatment of redundancy payments
Tax-free Base limit $9,514
payment + $4,758 for each full year of service $ ?
$ ?
Tax-free portion relates to pre 1/7/1983 service
Employment
termination Taxable portion Under age 55 Age 55 and over
payment - Up to $185,000 32%* 17%*
- Over $185,000 47%* 47%*
* includes Medicare levy of 2%
* does not include Budget repair levy
All rates are for the 2014/15 financial year
Leave payments
Tax treatment of redundancy payments
Annual leave Lower of marginal tax rate OR 32%*
Accrued before 16/8/78 - 5% taxed at marginal tax rate
Long service
leave
Accrued after 16/8/78 - Lower of marginal tax rate
or 32%*
* includes Medicare levy of 2%
All rates are for the 2014/15 financial year
Tax considerations
2014/15 financial year
• Marginal Tax Rate
• Budget repair levy
• Medicare Levy increase
from 1 July
• Medicare Levy Surcharge
Employer payments
Example 1
• Bill is age 60 and receives a bona fide
redundancy payment of $55,000
• He has worked for the same employer
for 10 years and 4 months
• Tax calculation is:
> Tax-free limit = $57,094
$9,514 + ($4,758 x 10)
• Total redundancy payment is tax-free
Employer payments
Example 2
• Ann is age 50 and receives a bona fide
redundancy payment of $35,000
• She has worked for the same employer
for 5 years and 9 months
• Tax calculation is:
> Tax-free limit = $33,304
$9,514 + ($4,758 x 5)
> ETP = $1,696
$35,000 - $33,304
> Tax on ETP = $543
$1,696 x 32%
• Net payment is $34,457Employer payments
ETPs and superannuation
• Cannot rollover to super
• Can pay into super as an ‘after tax’ contribution
− $180,000 p.a. contribution limit, but under age 65 can bring
forward 2 years to pay in up to $540,000
− If made after age 65, must have met work testCentrelink considerations
Centrelink
NewStart allowance
Single Couple (each)
Full allowance – per fortnight $510.50 $460.90
– Rates effective 20 March 2014
– Source: Australian Government Department of Human Services
• Under Age pension age
• Waiting period based on redundancy
• Must satisfy income and assets testsCentrelink
NewStart allowance eligibility
Couple
Income and assets tests Single
(combined)
Fortnightly income less than $990.34 $906.17 (each)
Homeowner’s assets less than $196,750 $279,000
Non-homeowner’s assets less than $339,250 $421,500
− Rates effective 20 March 2014
− Source: Australian Government Department of Human ServicesCentrelink
Age pension
Couple
Single
(each)
Full Age pension – per fortnight $842.80 $635.30
– Rates effective 20 March 2014
– Source: Australian Government Department of Human Services
• No waiting period
• Must be Age Pension age
• Must satisfy income and assets testsSpeak to a FISO
Centrelink specialists
• Phone: 13 23 00
• Administer:
− Age Pension
− Disability Support Pension
− Newstart Allowance
− Carer Payment and Allowance
− Concessions Card
− Health Care Card
− Commonwealth Seniors Health CardSuperannuation considerations
Leaving local government?
• You can stay with
LGsuper
• New employers can
contribute
• 4-6 week processRetained benefit account • Contributions – member – employer • Investment choice • Insurance options • Access to funds (subject to preservation rules)
Pension account • Flexible income options • Access to capital • Investment choice – earnings are not taxed
Transition to retirement • Accessing funds while looking for work – supplement income • Taxation – pension income • Important to seek advice
Taxation considerations
• Age 60 plus
• Under age 60
– lump sum
– income stream
• Early releaseInvestment options
Things to consider
• Return expectation
• Risk tolerance
• Timeframe
• DiversificationWhat’s next?
Starting a new job
Still with local government?
• 60 day rule applies
• Option to protect calculation of defined benefits
− Can choose to keep paying standard member contributions based
on previous salary
− Important to contact LGsuper prior to making a decisionAbout LGsuper • Solid returns • Low fees – profits for members only • Warm, friendly, personal service • Rated a Platinum Fund (top 15%) by SuperRatings • LGsuper accepts contributions from any employer • Death, TPD insurance continues with IP insurance options • Access to your daily account balance through LGsuper online • Free investment switches
We’re looking after you • Website www.lgsuper.org • Knowledge centre • Helpline – Phone 1800 444 396 – Email info@lgsuper.org • Advice service
Thank you
Marginal tax rates
2014/15 financial year
Taxable income Marginal tax Medicare Budget repair
rate levy* levy
$0 to $18,200 0% 2% n/a
$18,201 to $37,000 19% 2% n/a
$37,001 to $80,000 32.5% 2% n/a
$80,001 to $180,000 37% 2% n/a
$180,000+ 45% 2% 2%
• Medicare Levy applies if taxable income is $20,542 or more (2013/14 threshold)
• Medicare Surcharge will only apply if income for MLS is more than $90,000 p.a.You can also read
