Tax
What you are owed, what is taxed, and what actually lands in the account
A redundancy payout is four or five separate payments taxed four or five different ways. The letter gives you one gross number. The difference between that number and what arrives is routinely tens of thousands.
One gross figure on the letter. Five different tax treatments underneath it.
A redundancy payment is not a payment. It is severance under the National Employment Standards or your award, plus notice or payment in lieu, plus unused annual leave, plus unused long service leave, and sometimes an ex gratia amount on top. Each of those is taxed differently, and the boundaries between them are where the money is.
The genuine redundancy tax-free limit is $13,598 plus $6,801 for each completed year of service, and it is tax free outright. Anything above it becomes an employment termination payment, taxed at 32% below preservation age, 17% at or above it, and 47% above the caps — of which there are two, the ETP cap at $270,000 and the whole of income cap at $180,000, and the one that applies is the lower of them in a way most people get wrong. Unused leave is taxed at a flat 32% on a genuine redundancy, which is not the rate on ordinary leave paid out.
Whether the payment is a genuine redundancy is not a description you choose. It is a test, and it turns partly on your age — the concession is not available once you have reached age pension age of 67.
What it works out
- What you are owed, before tax. The NES scale, up to 16 weeks, or your award or agreement scale where that is more generous, plus notice, plus accrued leave.
- The tax-free limit on your own service. $13,598 plus $6,801 a year, applied to completed years, and what falls above it.
- Both ETP caps, and which one binds. This is the single most common error in a redundancy calculation and it is worth 47% of the amount it is wrong about.
- The leave components at 32%, separated from the ETP because they are not one.
- Every lawful way of handling the payment, ranked. Including a catch-up concessional contribution against up to $175,000 of unused cap, which for some people is the largest single lever in the whole exercise.
What the full report adds
- The whole income year, not the payment. A payout lands into a year that already has salary in it, and the marginal rate on the last dollar is what decides most of these choices.
- The superannuation options priced. Concessional contributions, the $32,500 cap, carried forward amounts, and where Division 293 at $250,000 takes some of it back.
- The Medicare levy surcharge exposure, which a large one-off payment can trigger at $105,000 single or $210,000 family income without anybody warning you.
- What to expect while you are between jobs, including the liquid assets waiting period at $5,500 single and $11,000 partnered.
What it will not do
It does not give tax or financial advice and it does not tell you whether to accept an offer. It applies the published rates and caps to the figures you enter and ranks the lawful options on what they leave you. Whether the redundancy is genuine, and whether your award or agreement provides more than the NES, are questions about your particular arrangement — Fair Work and a registered tax agent are the people who answer those. Everything here runs on the 2026-27 rates and caps.
What people ask before they run it
How much redundancy pay am I entitled to in Australia?
Under the National Employment Standards the scale runs from 4 weeks of pay after one year up to 16 weeks at nine years, then drops back to 12 weeks at ten years and stays there. An award, an enterprise agreement or a contract can pay more, and many do. A small business employer with fewer than 15 people does not have to pay redundancy pay under the standards at all, although notice and accrued leave are still owed.
How much of a redundancy payout is tax free?
If it is a genuine redundancy, $13,598 plus $6,801 for every completed year of service is tax free in 2026-27. That part is not income at all: it never appears in your taxable income, it attracts no Medicare levy, and it counts towards no income test. Anything above it is an employment termination payment. Unused annual leave and long service leave are never part of the tax-free amount and are taxed separately.
What is the ETP cap and why does it matter?
The taxable part of a termination payment is taxed at 32% under 60, or 17% at 60 and over, but only up to a cap. In 2026-27 the employment termination payment cap is $270,000. A second cap of $180,000, reduced by the rest of your income for the year, applies to golden handshakes and payments in lieu of notice — and where both apply the smaller one wins. Above the cap the rate is 47%, and that jump is where most of the tax on a large payout ends up.
Will a redundancy payout stop me getting JobSeeker?
It can delay it. Services Australia treats a termination payment as income for the number of weeks of pay it represents, which is the income maintenance period, and separately imposes a liquid assets waiting period on savings above $5,500 single or $11,000 partnered. The two run at the same time, so the wait is the longer of them, and on a large payout the income maintenance period can run for months.
Why does this report cost this when an adviser charges thousands?
Because the arithmetic is the part most people are missing, and arithmetic scales. A one-off statement of advice from a licensed adviser typically costs from $3,300 and includes a personal recommendation this service is not licensed to make and does not attempt. This is an information service: it applies the published rules to the figures you enter, ranks the options on one stated measure — what you keep — and shows every working.
Everything on Redundancy Payout
The estimate is free, and it is a real one.
Works out an Australian redundancy payout in full — the National Employment Standards scale or an award or agreement scale, notice or payment in lieu, unused annual leave and long service leave — then applies the genuine redundancy tax-free limit, the employment termination payment caps and the flat rates on leave, and ranks every lawful way of handling the payment on what it leaves you.
Start the Redundancy Payout calculator
