For mining and resources executives, redundancy can feel like a major change — one moment, you’re in a secure role and contributing to your organisation, and the next, you’re navigating an unexpected transition. While it can be unsettling, redundancy also presents an opportunity to reset, regroup, and reposition both financially and professionally.
However, without a clear plan, you could be paying more tax than necessary, not managing your executive share schemes (ESS) effectively, or missing key financial opportunities that could set you up for long-term security. That’s why understanding tax implications, structuring payouts effectively, and making strategic career and financial decisions are essential.
Here’s how to turn redundancy from a setback into a stepping stone.
Understanding the Financial Impact of Redundancy
While a redundancy payout can feel like a windfall, it’s important to understand how your payout is taxed, and available strategies you can use to minimise tax liabilities.
Key tax considerations include:
- Tax-free thresholds: A portion of genuine redundancy payments may be completely tax-free, depending on your years of service.
- Concessional tax rates: Any amount exceeding the tax-free threshold is taxed at a concessional rate, but only up to a certain cap—after that, it’s taxed at your marginal rate.
- Super contributions: Depending on the timing of your redundancy and your superannuation balance, making top up concessional contributions in the financial year of your redundancy may reduce the tax you pay
- Superannuation contributions: Rolling some of your redundancy payout into superannuation can provide long-term financial security and potential tax benefits.
Read more about how mining and resources executives can take a tax-smart approach to redundancy windfalls here.
Executive Share Schemes and Redundancy
One of the biggest financial grey areas in redundancy for executives is what happens to your ESS. If you’re heavily invested in company shares, redundancy could have a major impact on your holdings—and your tax bill.
What to consider:
- Unvested shares: Most ESS plans have ‘good leaver’ and ‘bad leaver’ provisions. If your role is made, you’re generally considered a ‘good leaver’, meaning you may be entitled to pro-rated vesting or, in some cases, a full vesting of unvested shares.
- Tax implications: Depending on how your ESS is structured, you might trigger a tax liability upon redundancy, at vesting, or when you eventually sell.
- Overexposure to employer shares: It’s common for executives to be heavily invested in the company they work for. Consider whether that makes sense or if you’re ESS top heavy, and how a well considered approach could better protect your financial future.
For more in-depth guidance on ESS and redundancy, check out our detailed executive share scheme guide.
Managing Finances and Structuring Investments Post-Redundancy
A redundancy payout can provide the financial flexibility to take a step back, explore new opportunities, and strengthen your long-term wealth. But without a solid financial plan, it’s easy for those funds to dwindle faster than expected—leaving you unprepared for what comes next.
Smart ways to manage your payout:
- Offset accounts: Parking your redundancy in an offset account against your mortgage can immediately reduce interest payments while keeping your money accessible.
- Debt reduction: Do you have a personal loan or credit card debt? Clearing these now save you significantly and can free up more of your cash flow in the long run.
- Superannuation contributions: If retirement planning is on your radar, topping up your super could be one of the most long term tax-effective moves you can make.
- Diversification beyond ESS: Overexposed to company shares? It’s a great time to consider rebalance your portfolio with more diverse investments.
Redundancy is a chance to reset your financial trajectory, ensuring you’re not just covered for the next few months, but setting yourself up for years to come.
Career Transition: What’s Next for You?
While redundancy can feel like an ending, for many mining and resources executives, it’s just the start of something new. Whether you’re considering another corporate role, stepping into consulting, or even pivoting into a different industry, a strategic approach is key.
Your next career move could be:
- A new executive role: If you’re looking for another corporate role, now’s the time to refine your personal brand, network strategically, and position yourself for new opportunities.
- Consulting or self-employment: Many executives use redundancy as a launchpad into independent consulting, but structuring it properly is crucial for maximising income and minimising tax liabilities.
- Legal and tax structuring: Thinking about working for yourself? Getting the right tax legal and tax structuring advice early on can save you both tax and time in the long run.
Avoiding Common Redundancy Pitfalls
We’ve seen it happen—executives make rushed financial decisions after redundancy and regret them later. Avoid these common mistakes:
- Overcommitting to new expenses: Upgrading your lifestyle too soon could leave you short if your next role takes longer to secure or results in a lower level of remuneration.
- Holding onto shares from your prior ESS for too long: Your loyalty to a former employer shouldn’t cloud your investment strategy.
- Jumping into a new role without a plan: Not every opportunity is the right one. Take time to ensure your next move aligns with your goals.
A well-structured financial and career plan will help you stay in control and avoid these missteps.
The key takeaway? Redundancy doesn’t have to be a step backward—it can be a leap forward into something even better.
Take Control of Your Redundancy Strategy
With the right strategies, you can minimise tax, maximise your payout, and set yourself up for long-term success.
Need expert advice on managing your redundancy payout, structuring your investments, or planning your next career move?
Contact Brett Cribb at +61 (0) 7 3007 2080 or email contact@executivestrategies.com.au for a personalised consultation.
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in the mining and resources sectors.
The information in this article is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate, we do not guarantee its currency and accuracy. You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.
