Paul was retrenched when the mill he had worked at for 17 years closed down because of poor profitability due to the economic downturn. He received a total termination payment of $25,000 comprising $4000 for eight weeks holiday pay, $4000 for eight weeks long service leave and $17,000 redundancy pay, calculated at two week’s salary for each year he was employed there.
Knowing that in the current market he was unlikely to have an immediate equivalent income and believing he would be eligible for a Centrelink payment, Paul used his termination pay to get rid of his outstanding debts and made a substantial advance payment on his mortgage.
Paul went to Centrelink hoping to claim Newstart Allowance to help him manage financially until he had an income again. He was told he was not eligible for a Centrelink payment for 50 weeks under the waiting period rules that count weeks of pay in a termination payment as payment in advance for the equivalent number of weeks. His waiting period was based on his 16 weeks of paid leave and 34 weeks of redundancy payment.
Had Paul sought the advice of Centrelink earlier or that of a financial counsellor, he would have been advised of the waiting period that would apply, and encouraged to keep more of his termination payment available for his living costs until he found a new job.