Question 1

Is redundancy pay taxed in Australia?

Accepted Answer

Often much less than people fear — and sometimes not at all. If your redundancy is "genuine" (your role was abolished and you're under Age Pension age), the first part of the payment is completely tax-free: $13,100 plus $6,552 for every completed year of service in 2025-26. Only the amount above that limit is taxed, as an employment termination payment (ETP) at 32% (or 17% once you've reached preservation age, currently 60) up to the $260,000 ETP cap. Use the calculator above to see your own tax-free split.

Question 2

How is redundancy pay calculated?

Accepted Answer

The legal minimum comes from the National Employment Standards (NES): a set number of weeks of your ordinary base pay, scaled by years of continuous service. It starts at 4 weeks after one year, climbs to 16 weeks at nine years, then drops to 12 weeks at ten or more years (long service leave is assumed to take over). Your award, enterprise agreement, or contract can pay more than the NES minimum — many do — so check your agreement and override the weeks in the calculator if yours is more generous.

Question 3

What is the tax-free limit on redundancy payments?

Accepted Answer

For 2025-26 the genuine redundancy tax-free limit is $13,100 plus $6,552 for each completed year of service. After 8 completed years, for example, the limit is $65,516. Anything your employer pays as a genuine redundancy payment (severance plus any notice paid out) under that limit comes to you with no tax withheld, and it doesn't even appear in your assessable income. The limit is indexed each financial year, so longer service and later years both push it up.

Question 4

Is super paid on redundancy payouts?

Accepted Answer

Mostly no. Redundancy and severance payments, other employment termination payments, and unused leave paid out on termination aren't "ordinary time earnings", so the Superannuation Guarantee doesn't apply to them. The exception is payment in lieu of notice: it substitutes for wages you would have earned in ordinary hours, so it is OTE and your employer must pay super on it. Super is also payable on your normal wages up to your last day, including any notice period you actually work. If you want to keep building retirement savings from the payout, you can contribute some of it to super yourself, but get advice on contribution caps first.

Question 5

What about unused annual leave and long service leave?

Accepted Answer

Unused annual leave (including leave loading) and unused long service leave are paid out on top of your redundancy payment, but they're taxed differently — they never use up your tax-free limit. On a genuine redundancy, the ATO's withholding schedule applies a flat 32% to these leave payments. That's withholding, not your final tax: when you lodge your return the leave is taxed at concessional rates, so part of it often comes back as a refund. Add your leave balances in the calculator's optional section to see them included.

Question 6

What is an ETP (employment termination payment)?

Accepted Answer

An ETP is a lump sum your employer pays because your job is ending — in a redundancy, it's the part of your payment that exceeds the tax-free limit. Instead of your normal tax brackets, an ETP is taxed at special flat rates: 32% if you're under preservation age (60), 17% at or over it, up to the $260,000 ETP cap for 2025-26. Anything above the cap is taxed at 47%. For most redundancies the payment sits well under the cap, so only the two concessional rates matter.

Question 7

Do I get redundancy pay with less than 12 months of service?

Accepted Answer

Under the NES, no — redundancy pay starts at 12 months of continuous service, so the minimum severance for shorter service is zero weeks. You're still entitled to your notice period though (at least 1 week of notice, worked or paid out, for under a year of service) plus a payout of any unused annual leave. Some awards, enterprise agreements, and contracts are more generous than the NES, so it's worth checking yours before assuming you get nothing.

Question 8

What if I work for a small business?

Accepted Answer

Small business employers — those with fewer than 15 employees — are generally exempt from NES redundancy pay, so the legal minimum severance is usually zero no matter how long you've served. You're still owed your notice period and unused leave, and some awards or agreements do require small businesses to pay redundancy, so check yours. If your small-business employer pays a voluntary severance anyway, the same genuine redundancy tax-free limit applies to it.

Question 9

Is voluntary redundancy taxed the same as forced redundancy?

Accepted Answer

Usually, yes. What matters for tax is whether the redundancy is "genuine" — the position itself is abolished — not whether you put your hand up for it. A voluntary redundancy where your role genuinely disappears qualifies for the same tax-free limit ($13,100 plus $6,552 per completed year in 2025-26) and the same concessional ETP rates on the excess. A payment for simply resigning or taking early retirement without the role being abolished doesn't get the tax-free limit, though an approved early retirement scheme can.

Question 10

What happens if I'm over Age Pension age?

Accepted Answer

Once you're at or over Age Pension age (currently 67) on the day employment ends, the ATO no longer treats the payment as a genuine redundancy — the tax-free limit disappears entirely. The whole payment becomes an ETP, taxed at 17% up to the smaller of the $260,000 ETP cap and the $180,000 whole-of-income cap (which is reduced by your other taxable income for the year), and 47% above that. Unused leave is also taxed at your marginal rate rather than the flat redundancy rate.

Continuous Service	Redundancy Pay
Less than 1 year	Nil
At least 1, less than 2 years	4 weeks
At least 2, less than 3 years	6 weeks
At least 3, less than 4 years	7 weeks
At least 4, less than 5 years	8 weeks
At least 5, less than 6 years	10 weeks
At least 6, less than 7 years	11 weeks
At least 7, less than 8 years	13 weeks
At least 8, less than 9 years	14 weeks
At least 9, less than 10 years	16 weeks
10 years or more	12 weeks

Redundancy Payout Calculator: Entitlements & Tax