Redundancy Checklist: Financial Decisions Before and After Your Final Day

A redundancy payment is several different payments, not one pool of cash

The first task after receiving a redundancy proposal is to separate the legal, tax and financial decisions.

Your final payment may include wages, notice, genuine redundancy pay, an employment termination payment, annual leave, long service leave, bonus or commission amounts.  

Employee equity may be forfeited, preserved, accelerated or given a shorter exercise deadline. Super, insurance and other benefits may change when employment ends.

Each component can have different legal and tax treatment. Do not decide how much can be spent, invested or contributed to super until the components, timing and likely tax have been confirmed.

Use this sequence:

1. protect legal rights and deadlines;
2. reconcile every payment and equity entitlement;
3. confirm the tax treatment;
4. preserve cash for tax and essential costs;
5. review super, insurance and estate arrangements;
6. make longer-term investment decisions after the immediate facts are clear.

First 48 hours

Do not sign under pressure

Ask for the proposal, separation agreement and calculations in writing. Note any response deadline. An employment lawyer or union can review contractual rights, releases, restraints, confidentiality clauses and whether the redundancy process and entitlements are correct.

The Fair Work Ombudsman provides information about minimum entitlements under the National Employment Standards, awards and enterprise agreements. Executive contracts can contain additional rights or obligations beyond those minimums.

Secure your records lawfully

Save personal copies of:

• employment contract and later amendments;
• applicable award or enterprise agreement;
• redundancy letter and calculation;
• recent pay slips and leave balances;
• bonus or commission plan;
• RSU, option and other equity plan documents;
• grant, vesting and exercise records;
• share trading policy;
• super and insurance details;
• performance and remuneration reviews relevant to contractual entitlements.

Do not copy confidential employer, customer or commercially sensitive information that you are not entitled to retain.

List every deadline

Record:

• the proposed final day;
• response or negotiation deadline;
• notice period;
• final pay date;
• option exercise or share-sale deadline;
• vesting and trading-window dates;
• health or insurance conversion deadlines;
• tax lodgment and payment dates;
• any time limit for a Fair Work Commission application.

Some dismissal applications have short statutory limits. Seek legal advice promptly rather than relying on a financial checklist.

Payments, tax and employee equity

Final pay should include outstanding wages and unused annual leave, including applicable leave loading. Depending on the circumstances, it can also include payment in lieu of notice, redundancy pay and accrued or pro rata long service leave.

Build a line-by-line schedule:

Check the employment contract, award or enterprise agreement for timing. Many awards require final pay within seven days, but the applicable instrument and payment type determine the actual rule.

Confirm whether the redundancy is genuine for tax purposes

The ATO applies specific conditions to a genuine redundancy. Broadly, the employer must decide that the job no longer exists and terminate employment for that reason. Voluntary departure, expiry of a contract, dismissal for performance or discipline, and some age-related circumstances are treated differently.

If the payment qualifies, part of the genuine redundancy payment may be tax free up to an indexed limit based on a base amount plus an amount for each completed year of service. The part above that limit may be an employment termination payment.

Do not apply an old threshold from an online article. The limits are indexed annually. Ask an accountant or registered tax agent to:

• verify genuine redundancy treatment;
• identify each payment component;
• use the correct threshold for the year the payment is received;
• apply the relevant ETP cap rules;
• check withholding against the expected liability;
• consider leave, bonus, equity and foreign tax issues;
• advise how the payment affects instalments or the tax return.

The amount deposited into your bank account is not proof that the final tax has been settled.

Review RSUs, options and deferred incentives

Employee equity can be one of the most time-sensitive parts of an executive redundancy.

For every award, confirm:

• vested and unvested quantities;
• forfeiture and good-leaver provisions;
• whether redundancy produces different treatment from resignation;
• any accelerated or continued vesting;
• the deadline to exercise vested options;
• exercise funding required;
• trading restrictions or blackout periods;
• how an acquisition, restructure or garden leave affects the award;
• ESS reporting and tax consequences;
• whether an agreement asks you to release equity-related claims.

Use an employment or equity-plan lawyer for contractual rights, a registered tax practitioner for ESS treatment, and a financial adviser for the cash-flow, investment and concentration decision.

Cash flow and income support

A redundancy payment may arrive before the next role is clear. Treat flexibility as the first objective.

Calculate six monthly figures

1. Essential costs: housing, food, utilities, insurance, health, minimum debt repayments and core family commitments.
2. Planned but adjustable costs: travel, renovations, discretionary schooling costs and other commitments that can be changed.
3. One-off transition costs: tax advice, legal advice, training, relocation, and job search.

Then set scenarios for the time to the next employment income:

Keep the likely tax reserve separate. Avoid investing money that may be needed for living costs, tax or an option exercise deadline.

Check government support and waiting periods

Services Australia may apply an income maintenance period where leave, termination or redundancy payments have been received. Other waiting periods and eligibility tests can also apply.

If you may need income support, lodge a claim promptly even if a payment has not yet arrived. Services Australia determines eligibility and timing. You may be asked to provide an Employment Separation Certificate from your previous employer.

Super and insurance

Check:

• whether all employer super contributions have been paid;
• whether payroll and super fund records agree;
• which insurance cover is held inside super;
• whether any cover depends on active employment or contributions;
• beneficiaries and nominations;
• investment settings and fees;
• concessional and non-concessional contribution history;
• whether a proposed contribution fits your access needs and caps.

Moving a large amount into super can have tax and retirement-planning advantages in some circumstances. But it also affects access to these funds and is subject to contribution caps, total super balance rules and personal eligibility. Preserve transition liquidity first and obtain advice before contributing.

Replace or review employer-linked protection

Employment may provide life, total and permanent disability, income protection, health or other benefits. Some stop immediately, some continue during notice, and some may offer continuation or conversion.

Ask:

• When does each benefit end?
• Can cover continue personally, and what is the deadline?
• Will a new medical assessment be required?
• What personal cover already exists inside or outside super?
• Would replacing cover create exclusions, waiting periods or higher premiums?
• Does the household now rely on one income?

Do not cancel existing cover until replacement terms are understood and accepted, if replacement is appropriate.

Your first 30 and 90 days

First 30 days

• Complete legal and tax reviews.
• Reconcile final pay and equity records.
• Establish tax and living-cost reserves.
• Update the household cash-flow plan.
• Confirm super and insurance continuity.
• Review loan offsets, redraw and refinancing constraints before income changes affect applications.
• Pause major irreversible investments until the transition horizon is clearer.

By 90 days

• Update the career and income scenarios.
• Reassess the cash runway.
• Decide how any genuine long-term surplus should be used.
• Review employer-share concentration after the role has ended.
• Update personal insurance, super contributions and investment strategy.
• Review your will, powers of attorney, beneficiaries and nominations.
• Record decisions and the advice used.

Checklist and next steps

Employment and legal

• Written proposal and termination date received
• Contract, award or agreement checked
• Notice and redundancy entitlements reviewed
• Separation terms and releases legally reviewed where appropriate
• All response and statutory deadlines recorded

Pay and tax

• Every payment component itemised
• Leave balances and loading reconciled
• Genuine redundancy status checked
• Current-year tax-free and ETP limits confirmed
• Tax reserve separated from available cash
• Employment Separation Certificate requested if needed

Equity

• Vested and unvested awards listed
• Leaver and forfeiture rules checked
• Option exercise deadlines recorded
• Trading restrictions checked
• ESS and CGT advice obtained

Financial plan

• Essential monthly costs calculated
• Short, planned and extended transition scenarios tested
• Debt and loan facilities reviewed
• Super contributions and insurance checked
• Estate documents and beneficiaries reviewed
• Long-term investment decisions deferred until true surplus is clear

These checklists may not be all inclusive for your situation but are designed to cover the majority of scenarios.

Build a redundancy financial action plan

A coordinated review can turn the proposal, payments, equity and household goals into one sequence. Bring the redundancy calculation, contract, equity plans, pay slips, leave balances, super and insurance details, asset and debt list, and expected monthly costs.

The relevant professionals may include an employment lawyer, accountant or registered tax agent, and financial adviser. Their roles should be explicit so that legal deadlines, tax treatment, and long-term financial choices are all addressed.

Our team of Sydney-based expert financial advisers can help you make the right decisions and build an action plan around your specific circumstances.  

Speak to an adviser

This article contains general information only. It does not take into account your objectives, financial situation or needs and is not financial, tax, employment or legal advice. Entitlements and tax outcomes depend on the law, contract, award or agreement, payment year, plan documents and individual facts.