Redundancy is a stressful event, and understanding how it affects your superannuation can help you manage your finances during the transition. Here’s what you need to know.
Does Your Employer Pay Super on Your Redundancy Payment?
This depends on how the payment is classified:
| Redundancy payment component | Super required? |
|---|---|
| Genuine redundancy payment (tax-free component) | No — not ordinary time earnings |
| Severance pay (equivalent of notice) | Yes — SG applies |
| Unused annual leave paid out | Yes — SG applies |
| Unused long service leave paid out | Depends on state law — generally yes in most states |
| Employment termination payment (ETP) | No — ETPs are not ordinary time earnings |
Your employer must pay super on the last pay period including normal wages and notice/leave entitlements. The genuine redundancy tax-free component itself does not attract SG.
What Is a Genuine Redundancy Payment?
A genuine redundancy occurs when your position is abolished — not personal performance. Genuine redundancy payments have a tax-free threshold:
- FY2024–25 tax-free base amount: $12,524 + $6,264 per year of service
- Example: 10 years of service → tax-free amount = $12,524 + ($6,264 × 10) = $75,164
Amounts above the tax-free threshold are taxed as an Employment Termination Payment (ETP) — at concessional rates depending on your age and the amount.
Can You Access Your Super After Being Made Redundant?
Not automatically. Redundancy by itself is not a condition of release for superannuation. Your super remains preserved unless you have met preservation age AND one of the standard access conditions.
Exception — Severe Financial Hardship: If you have been receiving Centrelink income support payments for 26 consecutive weeks AND are unable to meet reasonable and immediate living expenses, you may be eligible to access a limited amount of super under the severe financial hardship condition. See your fund for details.
Super Contributions During the Transition
While between jobs:
- No SG will be paid (no employer)
- You can make personal voluntary contributions (non-concessional or personal deductible contributions)
- If below $500,000 in super, you may be eligible to use carry-forward concessional contributions when you return to work
Starting a New Job
When you start a new job after redundancy:
- The stapled super fund rules mean your new employer must pay into your existing fund unless you choose differently
- Make sure you provide your TFN and fund details to your new employer promptly
- Review whether any contribution gap during the redundancy period warrants catch-up contributions
Salary Sacrifice After Redundancy
If you receive a redundancy payment (including the taxable ETP component) and then find new employment:
- Consider whether salary sacrificing at a higher rate in your new role makes sense
- Carry-forward catch-up contributions can offset the missed SG period
For more: Salary Sacrifice Super, Career Break and Super, Early Access to Super. For advice on your situation, speak with a licensed financial adviser via MoneySmart.