With the mining boom slowing and increased pressure on Australian businesses to remain competitive in the global market, cost cutting strategies have become a natural part of today’s workforce. An inevitable consequence of this process is redundancy.

Figures show Australia’s unemployment rate was 6 per cent in January 2014 and it is forecast to go higher as the year progresses. In a tough economic environment, even well established and successful businesses are evaluating strategies, roles, expenses, and other areas of the business to identify cost cutting measures. With continual technological advancements and the rise of outsourcing, letting staff go is unfortunately a sign of the times.

The ever evolving workforce

Redundancy can quite often come as a shock and it’s important to try and not take it personally. It is a reflection of the changing nature of the workforce, not your personal performance. Your focus should be maximising your financial situation. The size of your payout is dependent on many factors; however, your phase in life will largely determine your approach.

Here are some points to consider

• Government Assistance

You may be eligible for some support from Centrelink (i.e. income support, Age Pension, Health Care Card etc) so it’s best to get in touch and see what options may be available.

• Make the most of your money

While you are working out your future plans you need to ensure your payout is working hard for you.

• Mortgage and other debts

You may consider using your package to pay off some of the mortgage or other debt obligations you have. Keep in mind you may not know how long you will be out of the workforce. Mortgage Offset accounts allow increased flexibility just be wary of any terms or conditions associated with withdrawals from that account.

You may also wish to contact your lender regarding your situation as you may be able to delay or restructure repayments or extend your loan term.

• Review your Insurances

It’s important to look into insurance details – are any of the policies you hold inside or outside Super affected by your loss of employment? A new occupation may also require changes to your premiums.

• Top up Super

Depending on your age, it may be worthwhile adding some of your payout to your Superannuation. Remember to understand the contribution levels first, as tax penalties apply for exceeding the limits.

Or a transition to retirement pension could be appropriate. There are rules and regulations surrounding this strategy and eligibility, but it can help you in building your nest egg.

Seek Financial Advice

As you can see, there are many factors to consider when you’ve experienced redundancy. Seeking financial advice can help you see the big picture and allow you to make informed decisions regarding your financial future. It’s important to be aware of the tax consequences of your decisions, to ensure your strategies are applied in the most tax effective manner.

For further information on how an Adviser can help you, speak to us today.