Long service leave and the impact on the age pension.

(LSL) Long service leave. When retiring don’t take it as a lump sum! In some cases…..

It is important every individual seeks advice relevant to their situation and don’t just follow “what your friend did with their long service leave pay out”.

For example, there are many benefits of taking long service leave over a period of time, i.e. super contributions may still get paid, and you might be able to spread your income and therefore tax over multiple financial years.

But there are also other considerations to take in. For example, if you take long service leave as a lump sum - this may mean you are entitled to the Age Pension quicker (if you are age pension age). So, it is always good to weigh up the potential extra age pension you will get from taking it as a lump sum and what the missed benefits may be from not taking it over a period of time.

In some scenarios you might be selling an investment property next financial year and realise significant capital gains - so again taking it as a lump sum this year may help reduce your tax next year. Every individual is different regarding what they want to achieve and there are usually different ways to get there.

If you are partnered, this can also add some complexity into your considerations. Additionally, most other Centrelink entitlements like the JobSeeker Payment and Disability Support Pension will apply what’s called an income maintenance period and preclude you from getting any entitlements for a period of time if you take LSL as a lump sum. It is just the age pension that won’t apply any income maintenance periods after taking a lump sum LSL payment.