The three buckets
| Part of the payout | How it’s taxed |
|---|---|
| Genuine redundancy payment up to the tax-free limit | Tax-free |
| Above the limit (employment termination payment) | 32% under 60, 17% from 60, up to the $270,000 ETP cap; 47% above |
| Unused annual leave and leave loading | Up to 32% (genuine redundancy) |
| Final pay for days worked | Normal PAYG tax |
The tax-free limit for 2026-27
$13,598 + $6,801 × completed years of service. 5 years: $47,603. 10 years: $81,608. 15 years: $115,613. 20 years: $149,618.
Worked example: a $100,000 extra package
15 years’ service, $3,000 a week, age 55. NES redundancy 12 weeks ($36,000) + 5 weeks’ notice ($15,000) + $100,000 extra severance = $151,000 genuine redundancy payment.
| Amount | |
|---|---|
| Tax-free part | $115,613 |
| Taxable ETP | $35,387 |
| Tax on ETP at 32% | $11,324 |
| Annual leave 152 h | $12,000 |
| Tax on leave (32%) | $3,840 |
| Take-home | $147,836 |
At 61 instead of 55, the ETP rate drops to 17% and the take-home rises to about $153,144.
What makes a redundancy “genuine” for tax
- The job itself no longer exists (not just a dismissal for performance or a resignation).
- The payment is more than you would get if you had resigned.
- You are under 67 (age pension age) when your employment ends.
- Employer and employee are dealing at arm’s length.
Super contributions
You can contribute part of a redundancy payout to super, but the taxable part counts towards your caps — get advice before doing that with a large sum.
How the employer reports it
Your employer issues a separate ETP payment summary (or shows it in your income statement) with the taxable component and the tax withheld. The tax-free genuine redundancy amount is not shown as income and is not included in your tax return. The ETP is included in your return, but taxed at the capped rate, so it doesn’t push the rest of your income into a higher bracket.
Note that the ETP cap is reduced by any other ETPs you received in the same income year. And a payment for unused long service leave or annual leave is reported separately from the ETP. If you have several components, ask your employer for a breakdown before the final payment is made.
Key redundancy figures (checked 5 November 2026)
| Item | 2026-27 |
|---|---|
| Tax-free base amount | $13,598 |
| Plus per completed year | $6,801 |
| ETP cap | $270,000 |
| ETP tax (under 60 / 60+) | 32% / 17% |
| NES redundancy pay | 4–16 weeks; 12 weeks from 10 years |
| Small business exemption | Fewer than 15 employees |
FAQ
Is redundancy pay tax-free in Australia?
Up to $13,598 plus $6,801 for each completed year of service in 2026-27. The rest is taxed at 32% (17% from age 60).
How much tax on a $151,000 redundancy after 15 years?
With 15 years the tax-free part is $115,613; the remaining $35,387 is taxed at 32% = $11,324 if you are under 60.
Is unused annual leave taxed on redundancy?
Yes, at no more than 32% when it is paid because of a genuine redundancy.
Sources (checked 5 November 2026): Fair Work Act 2009 s 117 (notice) and s 119–121 (redundancy pay, small business exemption); Fair Work Ombudsman redundancy pay and notice pages; ATO “Key superannuation rates and thresholds — employment termination payments” (2026-27: $13,598 + $6,801, ETP cap $270,000; 2025-26: $13,100 + $6,552, $260,000); ATO “Genuine redundancy payments” and “Unused leave on termination”.