Retirement and unused leave entitlements

The transition to retirement and how to strategically leverage your unused leave entitlements.

Retirement is a significant milestone in one’s life. It marks the culmination of years of hard work and the beginning of a new chapter. While the transition to retirement can be exciting, it also comes with its share of challenges and complexities, especially when considering financial decisions and entitlements such as your annual leave or long service leave.

Long service leave (or LSL), as outlined in the “Long Service Leave Act 1955 No 38 – NSW Legislation,” provides employees with an extended break from work or an additional payout after a specific period of continuous service with an employer. While the exact provisions and entitlements can vary based on jurisdiction and individual employment agreements, the core principle remains rewarding employees for their long-standing loyalty and service.

What are some of the strategic considerations for your accrued leave entitlements at retirement?

Seek early advice about retirement

As with many financial decisions, timing is everything. You could be planning your next chapter well before retirement to ensure that you have explored all opportunities related to either your accrued annual leave or long-service leave to provide the maximum benefits.

Boost retirement savings with leave entitlements

For many employees, accrued leave payments can be a significant component of their end of tenure entitlements. By strategically planning the use or payout of these entitlements, you could give your retirement savings a valuable injection to your funds.

Understand potential tax Implications

The way unused leave entitlements are treated can present you with tax implications, so it is vital to be aware of the difference between taking them before or after retirement and how this decision can impact your taxable income. It can also make a difference to your tax obligations based on the time of the financial year that you retire.

What are some practical steps to leverage unused leave entitlements such as long-service leave prior to retirement?

Review your entitlements

Start by understanding your long service leave entitlements based on your employment contract and the relevant state legislation. This will provide clarity on the amount of leave you have accrued and its monetary value.

Calculate your retirement timeline

Establish when you plan to retire and how your long service leave is incorporated into this timeline. For example, some people may choose to take their LSL as a lead-up to official retirement, effectively transitioning into retirement gradually.

Meet with a trusted financial advisor

Given the complexities surrounding long service leave and the implications on retirement savings and tax, discussing your situation with a trusted financial advisor is highly recommended. The right adviser can provide tailored advice based on your specific personal circumstances and goals.

Strategically time payments

Consider structuring any unused leave payments across two financial years to minimise tax implications. Similarly, the point in the financial year at which you choose to retire can have an impact what benefits you gain from cashing in on unused leave. Remember to discuss with your employer, as this may change their Super Guarantee payment obligations too.

Consider the impact on your pension

Any ongoing unused or long service leave payments may affect income-tested government pensions for eligible recipients. Lump sums may not be assessed but do discuss this with your financial advisor if this is relevant for you.

Retirement planning is certainly a big deal and while long service leave is just one component, ensuring it works for you is certainly worthwhile and can provide a welcome boost to your retirement funds early on.

By understanding the ins and outs of utilising your unused leave for retirement can help you make the most of your hard work. Assessing the options and implications well ahead of time is key to effectively enhance your financial security.

If you’re thinking about your retirement or superannuation and would like to talk to us about how to leverage your unused leave entitlements, speak to one of our friendly FuturePoint Wealth advisers today.

This information is general advice. We have not considered your objectives, personal or financial circumstances. You should consider the appropriateness of the advice for your circumstances before making any decision. You should obtain and consider the relevant Product Disclosure Statement and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.  


Timing it right – dealing with annual and long service leave upon retirement, Challenger, July 2023.

Long Service Leave Act 1955 No 38 – NSW Legislation.

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