Is redundancy pay taxed in Australia?

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.

What is the tax-free component of redundancy?

For the 2026-27 financial year, the tax-free component of a genuine redundancy payment is $13,598 base amount plus $6,801 for each completed year of service. For example, with 5 completed years of service, the tax-free amount would be $13,598 + ($6,801 x 5) = $47,603.

What is an Employment Termination Payment (ETP)?

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. Up to the ETP cap ($270,000 for 2026-27), it is taxed at 32% including the 2% Medicare levy if you are under 60 at the end of the income year, or 17% including Medicare levy if you are 60 or older (preservation age is now 60 for everyone). Amounts above the cap are taxed at the top marginal rate plus Medicare levy (47%).

How much redundancy pay will I actually take home?

Your take-home redundancy pay depends on your years of service, weekly pay rate and age. Your other income for the year does not reduce the $270,000 ETP cap on the taxable part of a genuine redundancy, and the tax-free amount only applies if your job ends before Age Pension age (67). 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 Tax Calculator — How Much Tax on Your Payout?

Years of continuous service*

years

Base weekly pay (excluding overtime)*

$

Your ordinary weekly pay before tax, not including overtime, bonuses, or incentive payments.

Is this a small business (fewer than 15 employees)?

No

Business has 15 or more employees

Yes

Business has fewer than 15 employees — exempt from NES redundancy pay

Will you be 60 or older on 30 June (the end of this financial year)?

No, under 60

ETP taxed at 32% (including Medicare levy)

Yes, 60 or older

ETP taxed at 17% (including Medicare levy)

Your age sets the tax rate on the taxable part of a redundancy payment. The ATO taxes it at 17% (including the 2% Medicare levy) if you've reached preservation age — now 60 for everyone — by the end of the financial year, or 32% if you're under 60.

Will you be 67 (Age Pension age) or older on the day your job ends?

No, under 67

Genuine redundancy tax-free amount applies

Yes, 67 or older

No tax-free amount — the whole payment is taxed as an ETP

The ATO only treats a redundancy as genuine — with a tax-free amount — if you are dismissed before Age Pension age, which is 67.

Getting more than redundancy pay? Pay in lieu of notice, a settlement, unused leave and unpaid wages are each taxed differently — split the whole package with the ETP Tax Calculator. Unused long service leave on a genuine redundancy is taxed at a flat 32%: see the Long Service Leave Payout Calculator.

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Redundancy Pay Tax Calculator

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