Should I cash out my annual leave before or after EOFY?

V

vincpixrecy

New Member
Hey everyone, is there a right time to trade in annual leave for cash?

My workplace offered to buy out my leave, and I'm thinking about doing it to pay off some debts, invest, and also fund a holiday.

I'm just wondering—is it better to do it before or after the end of the financial year? Or does it not really matter either way?

I've got abo ut two months' worth of leave I'm looking to cash out (and I'd still have some left over). I'm on just over 100k a year.
 
Cashing out annual leave? Yeah, it has downsides. You get cash. But the tax eats into it. Your super loses out. Company doesn’t have to pay super on cashed out leave. Like they would if you just took the time off. Lose leave loading too, if you get it. And it might mess with government assistance. Or your wife’s payments. Or childcare subsidy. It’s a trade off. A raw one.
 
Work overtime. Anticipate next year's earnings. Compare to your current year to date. If it pushes you into a higher tax bracket this year, consider next year. Think if you anticipate less overtime.
 
Here's a super simple and exciting way to decide: just look at the interest rates you're paying!

1. Annual leave grows with your pay rise each year – awesome! So if you get a 10% payrise but you're in the 47% bracket, your actual return is only 5.3%. And yep, you'd also lose out on super contributions – bummer!

2. Then there's your home loan debt – typically 6 7% – and it doesn't change with tax, so no adjustment needed. But here's the kicker: there's zero risk to that return – how cool is that?

Usually, messing with your home loan or tax deductible debt isn't worth the hassle. But for credit card or personal loans? Totally could be a game changer!
 
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