What you are owed, what the tax takes, and what actually lands in your account

Under the National Employment Standards you get 4 weeks of pay after one year, rising to 16 weeks at nine years. Then it falls to 12 weeks at ten years and stays there. That drop is written into the law, not a mistake. An award, an enterprise agreement or your contract can pay more, and many do: three or four weeks for every year of service is common. A small business employer with fewer than 15 people does not have to pay redundancy pay under the standards at all, though notice and accrued leave are still owed.

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 shows up in your taxable income and it attracts no Medicare levy. Centrelink still counts it, though. 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.

Yes, but not all of it, and not all at the same rate. On a genuine redundancy the tax-free amount of $13,598 plus $6,801 for each completed year is not taxed at all. The rest of the redundancy pay is an employment termination payment, taxed at up to 32% under 60 while it stays under the cap. Unused annual leave and long service leave follow their own rules and are taxed separately.

The ETP cap is the limit on how much of a termination payment gets the lower tax rate: $270,000 in 2026-27. Up to the cap, the taxable part is taxed at 32% under 60, or 17% at 60 and over. A second cap of $180,000, reduced by the rest of your income for the year, applies to golden handshakes and to payments in lieu of notice where the termination is not a genuine redundancy. 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.

On a genuine redundancy, unused annual leave is taxed at no more than 32%, including the Medicare levy. On a resignation or an ordinary dismissal it goes to your marginal rate instead, which for many people is higher. Leave loading paid out on termination is taxed the same way as the leave. Either way, leave is never part of the tax-free redundancy amount and uses none of the $270,000 cap.

None of the payment is tax free. Without a genuine redundancy there is no tax-free amount, so the whole payment is an employment termination payment. The $180,000 whole-of-income cap can then apply on top of the $270,000 one, and your unused leave goes to your marginal rate instead of the flat 32%. What decides it is the facts of how the job ended, not the heading on the letter.

It can delay it, sometimes for months. Services Australia treats a termination payment as income for the number of weeks of pay it covers. That is the income maintenance period. It also sets 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, not both added up. The tax-free part of a genuine redundancy is tax free but not Centrelink free: it is money in the bank, so it counts for both.

Yes, it can matter a lot. A termination payment is taxed in the income year you receive it. On 1 July the tax brackets start again, the $270,000 cap starts again, and the whole-of-income cap resets to $180,000 before your new year's income reduces it. Which side of that date the payment lands on is very often the largest single number in the report.

Yes, but not directly, and the useful question is how much. A termination payment cannot be salary sacrificed or paid straight to a fund. It is paid to you in cash, and you then contribute it yourself and lodge a notice of intent with your fund. Up to $32,500 can go in this year, or as much as $175,000 where five years of cap have gone unused and your balance at the last 30 June was under $500,000. The fund takes 15% on the way in, and you cannot reach the money before 60. The report works out the amount rather than guessing it.

Not under the National Employment Standards if the employer has fewer than 15 employees. That exemption does not remove your notice, your accrued leave or anything an award, agreement or contract promises, and some modern awards bring redundancy pay back for small business staff. The count of 15 includes regular casuals and staff of related businesses, so a business that feels small is not always small on this test.

It is usually right for what payroll could see, and that is not the same as right. Your employer withholds under the ATO's tax tables using the figures it has on the day you leave. It cannot see income you earn afterwards, it usually cannot see a second employer, and it works out the whole-of-income cap from its own records. The final figure is settled when your return is assessed, months later. The report shows both numbers and the gap between them, so you know in advance whether to expect a refund or to set money aside.

Because the maths is the part most people are missing, and maths 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.

No. This is an information service: it applies the published rules to the figures you enter and shows what they produce, with every working visible. It ranks options on one stated measure, what is left of the payment, and it does not recommend one. 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.