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Learning, Sharing, and Teaching => Taxes => Australia Tax Discussion => Topic started by: deborah on March 04, 2019, 12:36:35 AM

Title: Entitlements and retirement - Australia
Post by: deborah on March 04, 2019, 12:36:35 AM
I wonder what people think is the best way to use your entitlements when you retire.

Recently, in the investment thread, someone planned to take his LSL and annual leave as cash when he retired. I did the opposite, and took LSL and annual leave as the first months of retirement, to test it out, then gave notice and retired. As a side effect, I got more annual leave, long service leave and employer superannuation guarantee, since these all accrue during both types of leave. In fact, although I took LSL at half pay, the entitlements accrued as if I was on full pay. Iím not sure if this is standard.

As a result, I suspect that I was better off than if Iíd just taken the money and left.

The other thing is that as I took LSL at half pay, my tax was lower for the year.
Title: Re: Entitlements and retirement - Australia
Post by: MrThatsDifferent on March 04, 2019, 05:12:53 AM
Thatís interesting as I never thought about it like that. I thought of the taking LSL and annual leave as a lump sum. Thatís actually pretty smart. Can you Force that? I thought that technically a company can deny when you take holiday and/or LSL?
Title: Re: Entitlements and retirement - Australia
Post by: lollylegs on March 04, 2019, 08:58:47 AM
I'm planning on taking my LSL at half pay when I retire- it works out much better tax wise. For me its about running the numbers and doing what gives me the best return- lump sums lose too much in tax. I'm also planning for my LSL to finish at end December so I get max tax back.

  But the decision might be taken out of my hands as there could be a redundancy offer next year, so I'm using up my annual leave & sick leave this year so I don't lose too much in a payout.
Title: Re: Entitlements and retirement - Australia
Post by: deborah on March 04, 2019, 10:33:17 AM
According to the Victorian LSL provisions (they tend to be state based, rather than federal)

"the employer must grant leave as soon as practicable following the employeeís request unless the employer has 'reasonable business grounds' for refusing the request"

I expect that other states have similar rules. If you give a lot of notice that you're taking LSL, they probably have to give it to you.
Title: Re: Entitlements and retirement - Australia
Post by: ozbeach on March 04, 2019, 01:06:03 PM
I took 14 months LSL at half pay starting in November (ie almost half way through a financial year), and I continued salary sacrificing into super. That gave me two financial years with substantially reduced tax.

My annual leave continued to accrue at full rate while I was on half pay LSL (turning 12 months leave into 14) but my super was paid at half rate.

So for me, there were definite financial benefits to using the leave vs cashing it as a lump sum on retirement. But more importantly I treated the time as a trial retirement, knowing that I had a job to go back to if I wanted. Which I didn't :)
Title: Re: Entitlements and retirement - Australia
Post by: marty998 on March 04, 2019, 01:12:25 PM
Yep, my parents took their LSL at half pay when it came time for them to retire. Much better tax wise for them, and it meant they could delay taking their super pensions for another 12 months too. Even though LSL is 3 months wages, because of their spending / savings rates, the net pay lasted a year. An extra year of compounding for dad when he retired meant his pension ended up being several thousand dollars a year higher than it would have been otherwise.
Title: Re: Entitlements and retirement - Australia
Post by: middo on March 04, 2019, 06:03:16 PM
I knew a teacher who is still in the process of retiring.  He left at the end of 2017, and took 12 months leave with out pay, giving him a better tas status for 2017-2018 year.  Then in 2019 he is taking his long service leave, at half pay for 6 months, again helping his tax 2018-2019 year.  Then he is retiring sometime later this year, presumably in July.

He could still return if he wants.  But as he said, why not milk the system if it is available to you.
Title: Re: Entitlements and retirement - Australia
Post by: happy on April 13, 2019, 06:43:25 AM
I also took 6 months LSL half pay, and have now tacked on accrued annual leave and will take another 6 weeks LSL on full pay, finishing up in July. I didn't know about losing super if I was paid out in a single termination payment, which is why I applied for the second batch of leave.

Around my neck of the woods, if you apply for annual leave, provided everyone is not on leave all at once,  your request pretty well has to be granted. LSL is another matter and needs to be taken at a time with mutual agreement from my employer. A few years ago, I did have LSL refused by the CEO, after it had been approved all the way up the line, and I was already on leave. When 2 IC asked why, she allegedly said "because I can". My boss and admin were very sheepish when it came to telling me. Apparently they drew straws to chose who would get to ring me up and tell me I wasn't being paid. The power of FU money...what I wanted was time off, not money, so I just stayed on LWOP. Mortgage? Meh, of course I've got enough money lying around to pay the mortgage.
Title: Re: Entitlements and retirement - Australia
Post by: chasingthegoodlife on April 24, 2019, 05:11:13 PM
Great thread idea.

If you work for a charitable institution and have access to salary packaging (16k additional tax free) remember that the limit is PER EMPLOYER per salary packaging year. So if you have been claiming pro-rata through the year you should talk to your packaging provider and payroll about increasing your claim once you've given notice. This could offset the tax on any entitlement payout. (And if you're eligible for packaging at a new job, make sure you split the 16k through the remaining pay periods for the salary packaging year - which is April to March I think).

If you're entitled to leave loading, confirm this has been paid on any termination payouts:

Title: Re: Entitlements and retirement - Australia
Post by: SaucyAussie on April 30, 2019, 06:26:05 AM
It always amazes me at how good the benefits are for retired people living in Australia.

After 20+ years in the US, my plan is to retire to Australia, or maybe split my time 50/50.
Title: Re: Entitlements and retirement - Australia
Post by: alsoknownasDean on May 03, 2019, 02:30:27 AM
If someone is paid out their LSL or annual leave in a lump sum upon resignation/retirement, it's typically taxed at marginal rates (at least the leave accrued after ~1993 is, leave accrued earlier may be taxed differently). Might be especially important for folks if they're thinking of finishing up working late in the financial year.

And yes, typically leave paid out upon resignation/retirement is not considered ordinary time earnings, and thus superannuation guarantee (the 9.5%) is not paid.