Is super paid on redundancy payments?

Find out more about payments that count as OTE on the Australian Taxation Office (ATO) website.

What happens to your super if you’ve been made redundant?

Generally, not much changes in the short term. While you’d no longer receive SG contributions until you find a new job, you can stick with the same super fund. Things like fees and costs and how you invest your super normally don’t change as a result but you should check with your fund.

Also, if your super account becomes an inactive low-balance super account, it may be transferred to the ATO. Generally, this happens if all of the following criteria are met:

• no money has been added to the account within the last 16 months
• there’s less than $6,000 in the account
• you haven’t met a prescribed condition of release (retirement, death, terminal medical condition, permanent incapacity, attaining age 65 and attaining preservation age)
• the account is not a defined benefit account
• there’s no insurance on the account
• the account is not held in a self-managed super fund (SMSF) or small Australian Prudential Regulation Authority (APRA) fund.

If you don’t want your super account to be transferred to the ATO, you can tell your super fund in writing. There are also other circumstances where the account is not considered an inactive low-balance account if you take certain actions in relation to your fund.

Read more about inactive low-balance super accounts on the ATO website.

What happens to your insurance under super if you’ve been made redundant?

Generally, you can still keep your insurance cover as long as you have enough super balance to pay for the insurance premiums. However, you should check with your fund whether your redundancy can impact your cover in any way under the applicable terms and conditions.

For example:

• calculations of Income Protection benefits might be based on the last 12 months of income, and time out of work may reduce this
• if you were insured under Rest Corporate, you’ll be moved to the Retained Category within Rest Corporate or to Rest Super, depending on your insurance cover type. This may have an impact on your premiums and the level of cover.

And although your insurance cover won’t be cancelled directly because of your redundancy, it might be cancelled if:

• you don't make any contributions or rollover funds to your super account for 16 continuous months (for Rest members, this period is 13 months)
• you haven’t told your super fund that you want to keep your cover.

It might sound a bit complicated, but staying across your insurance is important, especially during times of change like losing your job. If you're unsure about anything, it's a good idea to talk to your super fund or a financial adviser. If you’re a Rest member, you can also check the terms and conditions in the relevant Insurance Guide.