Redundancy Tax Calculator
Australia 2025-26

The ATO tax-free component equals a base amount plus a service amount: (base amount) + (completed years of service × per-year rate). For FY 2024-25, this is $12,524 + ($6,264 × years). These amounts are indexed annually to Average Weekly Ordinary Time Earnings (AWOTE). If the total redundancy payment is less than this formula result, the entire payment is tax-free. The amounts are updated each financial year — always verify the current year's limits at ato.gov.au before filing.

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+), subject to the whole-of-income cap ($180,000) and ETP cap ($245,000). If the situation doesn't qualify as a genuine redundancy, the entire payment may be taxed as an ETP or as regular income.

The whole-of-income cap is $180,000 (fixed, not indexed). It limits how much of an ETP can receive the concessional rate. If your other income already exceeds $180,000, none of your ETP qualifies for the 32% / 17% concessional rate — it's all taxed at 47%. If your other income is $100,000, then only the first $80,000 of ETP receives the concessional rate, with the rest at 47%. This is separate from the ETP cap (~$245,000), which is a lifetime cap per employer.

Unused annual leave paid out on genuine redundancy is included in your assessable income and taxed at your regular marginal income tax rate — there is no concessional treatment for annual leave payouts. The same applies to unused long service leave accrued after 16 August 1978 (pre-1978 leave has different rules). Your employer withholds tax at a flat 32% for leave payments made on termination in many cases, but your actual tax may differ when you lodge your return.

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.