Redundancy Tax Calculator
Australia 2026-27

The ATO tax-free component equals a base amount plus a service amount: (base amount) + (completed years of service × per-year rate). For FY 2026-27 this is $13,598 + ($6,801 × years), so eight completed years gives a tax-free limit of $68,006.

These amounts are indexed annually to Average Weekly Ordinary Time Earnings (AWOTE) on 1 July. If the total redundancy payment is less than this formula result, the entire payment is tax-free.

The year that applies is the one in which you RECEIVE the payment, not the year you were told: a termination paid on or after 1 July 2026 uses the 2026-27 figures, while a payment received in FY2025-26 uses $13,100 + ($6,552 × years). Always verify the current year's limits at ato.gov.au before lodging.

A genuine redundancy is a specific category defined by the ATO — the job itself must be made redundant, and the payment cannot exceed what would be paid 'at arm's length'. The tax-free component only applies to genuine redundancies (and approved early retirement schemes).

The portion of the payment exceeding the tax-free limit becomes an Employment Termination Payment (ETP), which is taxed at a concessional rate of 32% (under 60) or 17% (60+) up to the ETP cap ($270,000 for 2026-27). Because a genuine redundancy is an 'excluded payment', the $180,000 whole-of-income cap does not apply to it.

If the situation doesn't qualify as a genuine redundancy, the entire payment may be taxed as an ETP or as regular income.

Not to a genuine redundancy. The whole-of-income cap is $180,000 less your other taxable income for the year (fixed, not indexed), and it limits the concessional rate only on NON-excluded ETPs — a golden handshake, a non-genuine redundancy payment, severance pay, a gratuity, pay in lieu of notice or unused sick leave paid outside a genuine redundancy.

The part of a genuine redundancy (or early retirement scheme) payment above the tax-free limit is an EXCLUDED payment under section 82-10 of the Income Tax Assessment Act 1997, so only the ETP cap applies: $270,000 for 2026-27 ($260,000 for 2025-26), indexed in $5,000 steps. Up to that cap the taxable ETP is taxed at 32% (under 60) or 17% (60+) however high your salary is; anything above it is taxed at 47%.

Unused annual leave paid out in connection with a genuine redundancy is included in your assessable income, but you are entitled to a tax offset that stops the income tax on it going above 30% (section 83-15 of the Income Tax Assessment Act 1997); the 2% Medicare levy is charged on top, so the most you pay is 32%. Unused long service leave accrued after 17 August 1993 gets the same 30% cap on a genuine redundancy (section 83-85); leave accrued before that date has older rules not modelled here.

If your marginal rate is below 30% you simply pay your normal rate. The cap applies only to leave paid with a genuine redundancy, early retirement scheme or invalidity payment — on an ordinary resignation, unused leave is taxed at your marginal rate.

Yes. The concessional tax rate on the taxable ETP component is 32% (30% base + 2% Medicare levy) if you are under your preservation age (generally 60 for those born after 1 June 1964).

If you are 60 or above, the concessional rate drops to 17% (15% + 2% Medicare levy). This can make a significant difference: on a $100,000 taxable ETP, the tax difference between 32% and 17% is $15,000.

Note: the preservation age for those born before 1 July 1964 may be 55-59.

For a payment to qualify as a genuine redundancy: (1) The job must be genuinely made redundant — not merely the person. (2) The employee cannot be a relative or associate of the employer (for small businesses). (3) The payment cannot exceed what would be reasonable in an arm's length transaction. (4) The employee must not be age pension age (67) or older at the time of dismissal. (5) The employer must have followed the award, EBA, or employment contract obligations. If you're uncertain, your employer's HR/payroll team or a tax agent can confirm the classification.

Your redundancy payout itself is not a superannuation contribution — it's paid directly to you as employment income (partly tax-free, partly concessional ETP). However, some employees use part of their redundancy payout (the after-tax portion) to make personal non-concessional super contributions if they're under 75 and meet the work test (if required).

Voluntary after-tax contributions to super don't generate a tax deduction (unless a s.290-180 notice is lodged), but the money then grows in the super tax environment. Always consider your preservation age and access conditions before contributing to super.

Yes. While your employer withholds tax on ETP and leave components (and the genuine redundancy tax-free amount is not withheld), you must still lodge a tax return for the year in which you received the payment.

The tax-free genuine redundancy component should not appear as taxable income. The ETP taxable component and leave payouts will appear on your income statement.

If too much tax was withheld (which sometimes happens when employers use default rates rather than marginal rates), you may receive a refund. A registered tax agent or the ATO's myTax can process your return.