Being made redundant or fearing you may be in the near future can be an extremely stress-inducing time.
With the loss or impending loss of your job, you may suddenly be faced with fears about how your redundancy will impact your financial world, anxiety about the process of finding a new job or perhaps even confusion about whether or not to continue working.
According to the Fair Work Ombudsman, redundancy is defined as the termination of employment and is a form of dismissal by an employer. It has implications that the termination of the employee’s employment is involuntary on the employee’s behalf. However, rather than being a fault-based dismissal like being let go, redundancy is usually caused by external factors such as economic conditions, business efficiency or technological development.
In other words, there may be a number of reasons why you may be currently facing redundancy – many of which are completely out of your control.
Even so, I understand how personal and hurtful being made redundant can feel. And as you begin to think more about the impact your redundancy will have on your financial wellbeing, it can be easy to feel overwhelmed.
That’s why we just wanted to remind you: take a deep breath, then another, and then keep reading.
In fact, that’s why we decided to create this guide on what to do if you’ve recently been made redundant or expect a redundancy in the near future, covering the following topics:
Facing a redundancy doesn’t have to mean saying goodbye to your plans for achieving financial success and security. This guide is the perfect place to start getting back on track to achieving the financial future you deserve.
A legal redundancy, which is sometimes referred to as a “genuine” redundancy, can only occur if your employer no longer requires any person to perform the specific role you currently perform. We mentioned it before but this can occur for a number of reasons, such as a shift in business direction, external economic factors and even the insolvency of the company itself, and usually isn’t personal. Essentially, since the role you perform is no longer needed, you by extension are no longer necessary as well within the company.
Redundancies can also occur if your employer has decided to divide and redistribute the responsibilities of your role to others within the workplace.
What is most important to keep in mind is that a redundancy has nothing to do with your personal performance and so shouldn’t feel like a reflection on your ability to do your job well.
If you feel that you’ve been unfairly let go under the guise of a redundancy – which may be the case if the role you previously performed is still in existence at your workplace – further information is available on what options are available to you on the Fair Work website.
Okay now that we’ve covered why redundancy may occur, let’s take a look at what your employer is obligated to offer you as part of your redundancy.
Under the National Employment Standards (NES), your employer must make the following minimum payments if you are made redundant:
However, it should be noted that depending on your type of employment or how long you had been working for your employer, you may not be eligible for redundancy pay.
If you’ve experienced a genuine redundancy and are eligible, you may receive a number of payments from your employer.
While there are many parts of an overall redundancy-related payout, the payments are usually broken down into:
The tax-free component of a genuine redundancy payment is only available to employees who are under age pension age at the time of dismissal. For most Australians born on or after 1 January 1957, age pension age is 67. If you are at or above age pension age when made redundant, your entire payout will be treated as an ETP rather than a genuine redundancy payment.
If you’d like to know more about what your personal redundancy pay-out may look like, Fair Work currently offers a redundancy calculator that may assist you.
Redundancy payments can have significant tax consequences, and the amount of tax you pay will depend on the type of payment you receive.
If your payment qualifies as a genuine redundancy payment, part of it may be tax-free. For the 2025-26 financial year, the tax-free amount is calculated using a base amount of $13,100 plus $6,552 for each completed year of service with your employer.
For example, if you have worked for your employer for 10 completed years, up to $78,620 of a genuine redundancy payment may be received tax-free.
Any amount above the tax-free threshold is generally treated as an Employment Termination Payment (ETP) and taxed under the ETP rules. For 2025-26 the ETP cap is $260,000. The tax treatment will depend on factors including your age, the amount received and whether the payment falls within the applicable ETP cap. Amounts below the cap may be taxed at a concessional rate. Amounts above the cap will be taxed at the top marginal rate.
Other amounts paid when your employment ends, such as unused annual leave and long service leave, are taxed under separate rules and may receive concessional tax treatment where they are paid as part of a genuine redundancy. The exact treatment varies depending on the type of leave and when it accrued. For current guidance refer to the ATO’s page on redundancy and early retirement payments.
While Employment Termination Payments cannot be rolled directly into superannuation, you may be able to contribute some or all of the after-tax proceeds to super as a personal contribution, subject to contribution caps and eligibility requirements.
Because redundancy payments can involve multiple tax components, it is worth seeking professional advice before making decisions about how to use or invest the funds you receive.
Being made redundant can be an intense and challenging time both emotionally as well as financially. That’s why we recommend taking a short period of time for yourself to grieve the loss of your job and everything it meant to you.
By taking the time to say goodbye and process the ending of this previous chapter of your life and reflect on what you would like the future to look like, you’ll be in a much better position to make decisions that are right for you and your financial needs.
Don’t be afraid to reach out to friends, colleagues, or even a professional for support if you find yourself struggling or feeling overwhelmed by the effects of your redundancy. Remember: the sooner you ask for help, the sooner we can begin to help you get back on track to achieving the brighter financial future you deserve.
Once you’ve accepted the end of the previous chapter in your working life, it’s time to ask yourself some tough questions about what you’d like to be doing next.
For those of you reaching the end of your working years, being made redundant may provide an opportunity for you to reassess your priorities in life and decide on an early retirement. If you would like to take this route, we recommend getting in touch with your financial advisor to discuss whether this would be the right move for you and your particular financial circumstances.
Alternatively, for those with time left until retirement or who would like to continue working, being made redundant can also allow you the opportunity to change career paths or head back to university to develop your skills in an area that interests you.
Redundancy doesn’t have to mean the abrupt end to all of your plans, instead it can provide the opportunity to reflect and decide on a new path forward that is right for you.
Now that you’ve decided on what your new direction should be, it’s important to make sure that your financial goals reflect this.
Your financial advisor can help you to reassess your financial goals and create a new financial plan that is tailored to your unique financial goals, circumstances and needs. They will also be able to make sure that the direction that you wish to take on your financial journey will support you in being able to achieve financial success and security.
We touched on it earlier, but any redundancy payment you receive can come with a number of tax obligations attached. That’s why we recommend reaching out to your accountant once you have received more detailed information on what your redundancy payment may look like.
Your accountant will be able to assess the impact that your redundancy payment will have on your particular financial circumstances and will provide recommendations for how you can best manage your new obligations.
Alternatively, if you do not currently have a dedicated account you’re comfortable with, the My Wealth Solutions team would be happy to assist you by connecting you to our trusted network of accountants and other financial service professionals.
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If you’ve recently been made redundant you may be eligible to receive financial support from your insurance provider or through government benefits.
You may also be able to make an income protection claim through your superannuation fund or other insurance provider if you previously held this cover.
Your financial advisor will be able to help you learn more about which financial support options are available to you and how you can successfully claim them.
Depending on the terms of your superannuation fund, you may be eligible to claim early access to your super if you have experienced a redundancy.
Being able to do so will depend on how your super is classified:
However, you should keep in mind that if you are aged under 60, any super you access early will be taxed at your usual concessional rate. If you are aged over 60, your super can be accessed tax-free.
If you’re unsure about whether accessing your super early is the right move for you, considering the tax implications, don’t be afraid to reach out to a financial professional for advice based on your particular financial situation.
Being made redundant and suddenly losing access to the income on which your current financial plan was likely based may have a significant impact on your retirement plans. That’s why it’s essential that you take the time to review and adjust these plans as required once you’ve settled on a direction forward.
While we strongly believe that a redundancy doesn’t have to mean completely throwing your initial retirement plans out the window, it may mean making adjustments to accommodate the effects of your redundancy.
This could mean anything from moving your retirement age forward or backwards a few years to reassessing the avenues through which you will draw your income in retirement.
Moving forward from being made redundant can feel like an uphill battle if you try to tackle it on your own.
Having the right team of financial professionals behind you, including a financial advisor and accountant you trust, is the key to ensuring that you will successfully get back on track to achieving financial success and security.
With an experienced team at your back, you’ll never have to worry about whether an option you’re considering or a decision you have to make is right for you because access to expert financial support and guidance will only be a phone call or email away.
In other words, you’ll be able to move forward with the confidence of knowing your financial world is being taken care of.
Ready to get back on track to building a brighter financial future?
Ben is a founding partner of My Wealth Solutions and is passionate about helping his clients achieve their financial goals.
Grad. Dip. FP, SMSF
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