Reducing tax on redundancy package

[Wank_Somemore]

I've been with my company exactly 20 years and i'm soon to be made redundant. It's going to come with a hefty redundancy package which I am extremely happy. However, my company aren't accepting my request to defer this for about 3 months to new FY (I was planning to take a year off). I'm usually in the mid 37% bracket, the package will push me up to the 45% bracket.

I only have 1 IP, which is -ve geared. No spouse/kids. My home is paid off. Multiple ETF's. I've almost maxed out my super concessional contributions for the year.

By my current estimate, I need to reduce it by 30k.

What are some ways to reduce my taxes?

My redundancy portion is below the tax free threshold. I haven't touched my long service and have a few weeks annual leave.

Yea I know, I should be asking my tax accountant but feel like asking the internet first haha

[aussiegaigin]

WE don't know your full financial situation, so any comments here will be guesswork.

Go see your account/FA before you get swamped with fanciful suggestions.

[BearOrigin]

Some options you can utilise depending on your heart, is do a superannuation self-contribution, a donation to a registered NPO or a combination of both.

Superannuation self-contribution may have a limit so you'll need to check with your accountant/superannuation agent on how much you can contribute.

[dotcumdotinyou]

You could give some to me

[fireball]

Not financial advice - maybe Bring forward/prepay some bills on the IP.

[GoldfishMan]

You could give some to me

And put it down as a charitable donation?

[rooter]

A brave man asking for financial advice on a punting forum ...

[Ragefrog]

Hmm… isn’t it payroll tax free? https://www.revenue.nsw.gov.au/help-centre/resources-library/rulings/payroll/pta004#:~:text=A%20payment%20arising%20from%20the, are%20exempt%20from%20income%20tax.

[Ajinomoto]

Given your situation, here are a few strategies to consider:

1. **Salary Sacrifice:** If your employer allows, consider sacrificing some of your salary into super before the redundancy payment is made. This can reduce your taxable income.

2. **Maximize Super Contributions:** Since you've almost maxed out your concessional contributions for the year, see if there's room to contribute more. Super contributions are taxed at a lower rate than your marginal tax rate.

3. **Offsetting Capital Gains:** If you have any capital gains from your ETFs, consider selling assets with capital losses to offset these gains and reduce your overall taxable income.

4. **Claiming Deductions:** Ensure you claim all relevant deductions such as expenses related to managing your negatively geared property, work-related expenses, and any other eligible deductions.

5. **Utilize Unused Annual Leave:** Since you have a few weeks of annual leave, consider taking this leave before receiving your redundancy payment to spread your income over multiple financial years.

These strategies can help reduce your tax liability, but it's essential to consult with your tax accountant to ensure they are suitable for your specific situation and comply with tax regulations.

[grstile]

Tbh - I'm not sure I'd bother worrying about it at that rate.

The difference between 37% and 45% on that 30k is only $2,400 - and while that's not exactly pocket change, I'm not sure it's worth too much stress chasing loopholes.

[aussiegaigin]

https://www.ato.gov.au/individuals-and-families/jobs-and-employment-types/working-as-an-employee/leaving-your-job/redundancy-payments


A genuine redundancy payment is a payment made to you as an employee if your job is abolished and you no longer have a job. This means your employer has made a decision that your job no longer exists, and your employment is to be terminated.

Redundancy payments are a type of employment termination payment (ETP).

Your genuine redundancy payment is:

tax-free up to a limit depending on your years of service
concessionally taxed as an employment termination payment (ETP) above your tax-free limit
taxed at your usual marginal tax rate for any amount above certain caps

The tax-free amount of a genuine redundancy is not part of the ETP. Your employer will report any lump sum amounts on your income statement or PAYG payment summary.