USU Manager Northern Stephen Hughes recently spoke to a long term USU Delegate who was about to retire in March without seeking financial or superannuation advice.
“I suggested he look into delaying his retirement until the new financial year in July and after the first full pay period,” Stephen explained.
By following this advice he will now pay pay much less tax on retirement due to having his payout of accrued entitlements not lumped in together with his earnings for this financial year. That would have resulted in him being taxed at a much higher tax rate for much of his lump sum payout.
He also will now receive the award increase of 3.5% on his payout of accrued entitlements as well as the $1000.00 lump sum award payment and will also pay less tax due to the stage 3 tax cuts that come into effect on July 1.
Not to forget the additional accrual of leave and the superannuation contributions he is making in the meantime.
According to Stephen this is an issue members should seriously consider when timing their retirement or resignation.
“I also spoke to another long-term member who was seeing our Union Solicitor in our Rutherford office on an ongoing worker’s compensation matter, who also had gone as far as scheduling an appointment with Centrelink as he was planning to resign from his employment. On speaking to him he confirmed that he had ample leave accrued to more than get him through to the new financial year. He also hadn’t thought about the Award increase, the lump sum award payment, or the tax implications and that instead of resigning now and taking a lump sum payment now, that he should instead take his leave and delay his resignation until the new financial year.”
For members out there also contemplating retirement it is important to seek proper financial advice and superannuation advice first before putting in their notice to retire or resign.
