Recently the USU Manager North became aware of the intention of some long term USU members to resign from their employment and to retire very soon.
When questioned as to when they were planning to retire, both members indicated it would be in the next month or two.
When asked, neither had considered the tax implications of receiving a lump sum payout of their accrued leave entitlements combined with the total amount of income they had already received this financial year from July 1st 2023 and the amount of tax they would have to pay based on the combined income if they retired in this financial year period.
Neither had given consideration to the NSW Local Government Award increase of 3.5% and the minimum $1000.00 (or 0.5% of the employee’s annual salary if higher) lump sum payment, due on the first full pay period after July 1st 2024 (this year).
Note: the lump sum payment applies to employees with at least 12 months continuous service with the employer as at the 30th of June 2024. Excluding casual or temporary employees.
Neither had thought about the impact of the proposed stage 3 income tax relief (currently in the news) and the reduction in tax they would have received by delaying their retirement date until after July 1st due to for the tax benefits, the award increase and the lump sum award payment due after the first full pay period after July 1.
Remember this pay period will vary between Councils based on the pay cycle due to weekly vs fortnightly pay and when the pay cycle commences for each pay period in that workplace.
In some cases, a member may not be able to continue to work due to illness or injury, however the closer they get to the new financial year, it may be more beneficial financially due to taxation cycles and pay increases, etc if they can delay their resignation or retirement.
USU members contemplating retirement should ALWAYS seek financial advice from their Super Fund, their accountant and confirm their personal pay out details and pay cycles with their employer.
Please ALWAYS seek appropriate financial advice based on your personal circumstances before locking in any resignation/retirement date, to ensure that you get the best outcome.