Tax
How Is a Redundancy Payout Taxed in Australia?
Short answer
For 2026-27, a genuine redundancy payment is tax-free up to $13,598 plus $6,801 for each completed year of service. Anything above that is an employment termination payment taxed at concessional rates up to the $270,000 cap. Unused annual and long service leave are paid separately with their own withholding.
The tax-free amount
If your job genuinely ceases to exist, the first part of your redundancy payment is tax-free: $13,598 plus $6,801 per completed year of service for 2026-27. Ten completed years means $81,608 tax-free. This amount does not even appear in your taxable income.
Above the tax-free amount: ETP rules
The excess is an employment termination payment. Below the ETP cap ($270,000 for 2026-27) it is taxed concessionally - broadly 32% including Medicare levy if you are under preservation age, 17% if over - with amounts above the cap at the top rate.
Leave payouts are separate
Unused annual leave and long service leave are paid out on top and taxed under their own rules - in a genuine redundancy they attract concessional withholding (generally 32%) rather than your full marginal rate stacking in one pay.
Not a genuine redundancy?
Resignation, ordinary dismissal or reaching pension age changes the treatment - no tax-free amount applies and normal ETP or salary rules take over. The distinction is about whether the position disappeared.
Frequently asked questions
How much redundancy is tax-free?+
For 2026-27: $13,598 plus $6,801 for each completed year of service, provided it is a genuine redundancy (the role ceased to exist).
Is unused annual leave taxed in a redundancy?+
It is paid out and taxed separately with concessional withholding (generally 32% in a genuine redundancy), not added to your final wage at marginal rates.
Does redundancy pay count for HELP repayment?+
The taxable parts (ETP and leave payouts) count toward repayment income; the tax-free redundancy amount does not.
Sources & methodology
- ATO - Personal income tax: new tax cuts (15% rate from 1 July 2026)
- Income Tax Rates Act 1986 (legislation.gov.au)
- ATO - Study and training loan repayment thresholds and rates
- ATO - Super guarantee
- ATO - Contribution caps
- ATO - Payday Super and the annual maximum contribution base
- ATO - Medicare levy
- ATO - Medicare levy surcharge income thresholds and rates
- Fair Work Ombudsman - Pay slips
- How we calculate these estimates
Last updated 13 August 2026. Figures use the 2026-27 financial year.
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