Benefits of Getting Leave Paid out in Lump Sum (if Any?) When Leaving Job

Hi, I have been offered a new job - temporary maternity leave role for just under a year fulltime hours. I would be leaving my permanent fulltime job to chase potential progression in my career.

Would it be better to ask for long service leave and annual leave to be paid out in a lump sum with EOFY coming up? Or would it be better to ask if I can have my leave paid out week by week till it ends, so I also sustain super payments? I just wasn't sure if there were any tax benefits or other benefits by having it paid in a lump sum or not.

Any help would be great.

Thanks.

Comments

  • +2 votes

    Unfortunately I haven't spoken to an accountant about it. Its a question I just thought about, and I need to put in my resignation letter tomorrow to give 4 weeks leave, so I can start my new job. My accountant isn't contactable at this time of night. I was hoping somebody else had experience similar and knew ways to maximise resigning, etc.

    • +13 votes

      Once you leave your current employer, they’ll pay you all remaining $ owe to you… can’t see why they would still keep you on payroll to allow you get a paycheque from them after you’ve left.

  • +3 votes

    No business is going to let you sit on the books that long and get paid every pay cycle. Super will have to be paid by the employer whether u took the leave as a lump sum or had it paid out week by week. You would also be required to declare you have 2 jobs with the ATO & pay the top tax rate on the second job until you only have one job. Im an accountant

    •  

      Do you get taxed in a higher income tax bracket for that month because you get a lump sum payout?

      • +3 votes

        Yes, but it all evens out when you file your tax return

      •  

        Do you get taxed in a higher income tax bracket for that month because you get a lump sum payout?

        Yes but you'd get it back in your tax return

    •  

      I was actually hoping to stay on the books on a casual basis.. i'd even try and negotiate maybe on a part time basis to see if i could stay on as a permanent employee with minimal hours. I have been at the company for 10years. So will the super which is paid be the exact same with a lump sum payment and taking it over multiple weeks (if the employer allows)?

      • +6 votes

        You should check with your employer if such as option even can be entertained, otherwise you are overthinking on options that can’t happen.

        Thinking as a employer, I wouldn’t want to keep you on the books due to any employee entitlements whilst you are still on the books.

    • +4 votes

      Super isn't paid out on annual leave paid out on termination / redundancy / resignation. It is paid on annual leave cashed out during the normal course of employment. Employers have a huge incentive for you to take it as a lump sum on resignation, I've never heard of anyone successfully able to negotiate otherwise. The employer also benefits if you cash it out while working, since you accrue more leave while on leave, but do not accrue any on the paid out leave, which is why protections are there to prevent them from forcing you to take it as a lump sum while employed.

    •  

      It depends on the budget, my husband quit and they paid him weekly until his LSL ran out.

    •  

      " Super will have to be paid by the employer whether u took the leave as a lump sum or had it paid out week by week" " Im an accountant" LOL a quick Google search will show that you are not.

      •  

        The piece of paper on my wall & my employment over the last 16yrs disagrees with you

        • +1 vote

          Annual leave, long service leave, redundancy pay
          According to the Australian Taxation Office’s Superannuation Guarantee Ruling SGR 2009/2, lump sum payments on termination such as payment of unused annual leave or long service leave pay do NOT attract the superannuation guarantee because it is not considered to be ordinary time earnings (OTE)…… The ruling also provides that redundancy pay is NOT considered to be part of an employee’s OTE and, therefore, does not attract the superannuation guarantee.

  • +1 vote

    Last time I was made redundant my leave was paid out and the tax was reduced as it was a redundancy. I'm not sure if that applies if you quit. Have you considered going on leave from your current job and starting the new one. They'd keep paying your super and you'd also accrue more holidays.

    •  

      That's what i was thinking about doing, but i'm not sure my employer will allow it. Whilst on long service leave, do you still accrue annual leave?

      • +1 vote

        Not sure if it's uniform in all states but it's actually an offence to work while on LSL.

        https://business.vic.gov.au/business-information/staff-and-h...

        It is an offence to work while on long service leave or to employ someone who is on long service leave. This is unchanged from the 1992 Act. However, where an employee has more than one job (for example, two part-time jobs), the employee may continue to work at one job whilst they are on long service leave from their other job, providing they do not work during the part time hours from which they are on long service leave.

        But yes you do accrue leave while on LSL for what it's worth. Note in most states if you resign you don't get any pro-rata LSL paid out before 5/7/10 years (timeframe depending on state).

    • +1 vote

      The tax isn't reduced on paid out annual leave, the tax is only reduced on the portion in respect of the redundancy. So this is only relevant if you're made redundant. You're taxed the same on paid out leave vs any other payment, regardless of if you quit or are made redundant.

    •  

      as far as i know the reduced tax only applies to the redundancy
      any leave paid out is still taxed at your normal rate

  • +1 vote

    You will not get a choice on how this is paid. If you leave your job your employer will pay it out because then they stop accruing benefits to you as they would while you were on leave and it will cost them less. There's no tax advantage for you excepting if you'd do better by having it paid this FY year or next. In most cases the hassle / potential savings aren't worth a delay in being paid.

    Unless your employer very badly wants to keep you specifically working part time/casual, and is willing to entertain you working for an assumedly non-competitor for a year, I don't see much chance of this doing anything but causing friction. Super is not paid out on lump sums, so it would very much be better for you to take leave rather than be paid it out, because you'd both accrue more leave and be paid super on it, but your employer would be the one footing the bill, not the tax man, so there's an incentive for them to not allow this. Note that if you resign with say 4 weeks notice, and you plan to be on leave during this time, your employer can simply pay this out and end your employment early.

  •  

    When you're on leave, you continue to accrue entitlements such as annual leave. So it's highly unlikely your employer will entertain that given you are resigning

    I know people who have taken a leave of absence. May be worth seeing if you're employer has such a thing (eg go away for a year and come back). You would have to be valuable enough and they would need to have a means to do it. I don't know if there are limitations to it tho (if you're permitted to work for another organisation)

    •  

      I asked my employer about leave of absence, however, they said it wasn't really possible. I'm still typing it as my preference in my resignation letter. My employer indicated i should easily be able to stay in the casual pool. They always do need casuals - so it could be an easy way to earn extra money over a weekend and keep my foot in the door. I was just hoping for more guarantee of work in the next 12months though when the temp contract was up.

      • +2 votes

        I think your best bet is work hard at the new place, make yourself valuable and hope they decide to keep you on full time within the organisation after the contract is up

  • +1 vote

    I've always tried to push any lump sum into the next financial year when leaving a job for less substantial/sure income. Depends where you are coming from and going to in terms of income though.

  • +1 vote

    Once you put in your resignation then they have to pay you out at the date you leave in a lump sum at the tax rate applicable for the amount to be paid.

  • +1 vote

    Gee you dont really want your cake and eat it too do ya?

    •  

      Wants to stay on the books after resigning!
      Seriously OP if the company let you stay on after resigning they’ve got no idea what they’re doing or you’ve got a magical skill set they can’t find elsewhere (unlikely given inability to progress in current role)
      If they were to leave you on the books this would have lots of implications for them (think about LSL etc etc). If you want to jump ship they’ll pay out your leave owed in lump sum

    •  

      Just to clarify, I'm a healthcare worker and they are always after casuals.. Especially for weekend work. They are often short on staff, so staying on as casual is not such a bad thing for them and myself. It's a greater earning opportunity for me if I choose to work weekends, etc.

  • +1 vote

    The only benefit of getting a lump sum payment i can see would be across two different tax years.

    If you're going to make more money next financial year - get a lump sum payment prior to June 30.
    If you're going to make less money nest financial year - get a lump sum payment post June 30
    .

  • -1 vote

    I couldn't imagine more of a tax and LSL nightmare than what you are proposing. Just take the lump sum and be done with it, either way you have to pay tax on it all at your marginal rate.

    You can only claim the tax free threshold on one job (so you'll be taxed out the wazoo in one), you can't work while getting LSL, if you're working as a casual then you risk devaluing your LSL (the rate of pay is based on the past 52 weeks, if you're suddenly a casual you start dropping that quickly), your new employer needs to sign off on your working two jobs (and will probably won't look favourably on you trying to keep in with the old employer while with them), there's so much could go wrong.

    The benefits are… zero. Depending on your salary it might keep you out of bumping into a new marginal tax rate but even then that will be a pretty tiny hit. Plus you can have all the money in your pocket now and invest it instead (pay off debts, buy EFTs, whatever).

  •  

    OK, so I have put in my resignation letter to resign from permanent full time to go to casual. My employer has accepted that. Resignation from permanent fulltime is 25/6 and start date for casual contract is 28/6.

    Despite my enterprise agreement saying my long service leave can be paid out in a lump sum at anytime, law in nsw states long service leave CANNOT be paid out and must be taken. As I am dropping to casual, I am finding it difficult to understand how casuals can use their long service leave. Can someone show me an example? I will be working full-time at a different job and will only be able to be working casually on weekends at this job. I only planned to work one day every 2 weeks or so casually.

    I spoke with industrial relations and they stated that long service leave will be paid out at the average hours over the last 5yrs (which has always been full time). However, the average will come down once I start being casual. They mentioned that my situation is complicated going from fullyime to casual and I will be disadvantaging my long service leave. I'm struggling to understand why exactly.

    I'm really finding it hard to understand and want to make sure I'm not disadvantaged by not being able to take my leave because I am casual. I have read the fair work Ombudsman site and industrial relations site.. I even did the online learning module to understand better. But I'm still struggling. Payroll tried explaining it briefly, however, we didn't have time to clarify because I was too busy with patients. Can somebody help explain how casuals can use their long service leave and how I might be disadvanatged?
    Thanks