Question 1

Is redundancy pay taxed in Australia?

Accepted Answer

Genuine redundancy payments receive concessional tax treatment in Australia. A portion of the payment is completely tax-free, calculated as a base amount plus an additional amount for each completed year of service. Any taxable portion above the tax-free limit is treated as an Employment Termination Payment (ETP) and taxed at concessional rates.

Question 2

What is the tax-free component of redundancy?

Accepted Answer

For the 2025-26 financial year, the tax-free component of a genuine redundancy payment is $12,524 base amount plus $6,261 for each completed year of service. For example, with 5 completed years of service, the tax-free amount would be $12,524 + ($6,261 x 5) = $43,829.

Question 3

What is an Employment Termination Payment (ETP)?

Accepted Answer

An Employment Termination Payment (ETP) is a payment made to an employee when their employment ends. The taxable portion of a genuine redundancy payment (above the tax-free limit) is treated as an ETP. ETPs are taxed at concessional rates — generally 15% (plus Medicare levy) up to a cap, and at the top marginal rate (45%) above the cap.

Question 4

How much redundancy pay will I actually take home?

Accepted Answer

Your take-home redundancy pay depends on your years of service, weekly pay rate, and other taxable income for the financial year. Use this calculator to estimate your gross redundancy, tax-free component, estimated tax, and net payout. Keep in mind that Medicare levy (2%) may also apply to the taxable portion.

Redundancy Pay Tax Calculator

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