Case study – Centrelink entitlements

Paul was retrenched when the mill he had worked at for 17 years closed down because of poor profitability. 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 or that of a financial counsellor, he would have been advised of the waiting period that would apply. He then could have used his redundancy payment to live on  until he found a new job. It is important to talk to Centrelink before making significant payments of such income.