How much of your payout is tax-free?
A genuine redundancy is partly tax-free, and the rest is taxed gently as an ETP — not like normal salary. See your after-tax payout using current ATO figures. This is the part Fair Work's calculator doesn't show.
Your redundancy
How redundancy pay is taxed in Australia
A genuine redundancy gets special treatment: part is completely tax-free, and the rest is taxed concessionally as an ETP — well below your normal marginal rate.
When your job is made redundant, your payout is not taxed like ordinary salary. The ATO splits a genuine redundancy payment into two parts. The first is a tax-free amount based on how long you worked there — you pay nothing on it. The second part, anything above that limit, becomes an employment termination payment (ETP) and is taxed at low, capped rates. This is exactly the bit that Fair Work's redundancy calculator leaves out: it tells you how many weeks you're owed, but not what you keep after tax.
The tax-free amount — 2025–26
The tax-free limit is a base amount plus an amount for every completed year of service:
| Part of the formula | 2025–26 amount |
|---|---|
| Base amount | $13,100 |
| Per completed year of service | $6,552 |
| Example: 10 years of service | $13,100 + ($6,552 × 10) = $78,620 tax-free |
Only completed years count — seven years and eleven months is seven years. The longer you've been there, the more of your payout is shielded, sometimes well into six figures for long-serving staff.
$13,100 + $6,552/yr
The tax-free slice for 2025–26: a $13,100 base plus $6,552 for each completed year of service. You pay no tax on this part at all.
$260,000 ETP cap
The excess is taxed concessionally up to a $260,000 ETP cap for 2025–26 (rising to $270,000 in 2026–27). Above the cap, the top rate applies.
17% or 32%
Within the cap, the ETP is taxed at 17% if you're 60 or older, or 32% if you're younger — both already include the 2% Medicare levy.
How much redundancy pay are you entitled to?
Separate from tax, the amount itself is set by the National Employment Standards (NES) — a scale of weeks based on your years of service.
The Fair Work Ombudsman sets the minimum redundancy entitlements under the NES. Your employer must pay redundancy pay when your job no longer exists, on top of any notice of termination (or pay in lieu of that notice period). An enterprise agreement or other registered agreement can set more generous terms, but never less. Find your minimum below, then enter the dollar figure above to calculate the tax. To find out how much notice and redundancy pay you're owed exactly, Fair Work's notice and redundancy calculator works out the amount; this page focuses on the tax treatment.
| Period of continuous service | Redundancy pay |
|---|---|
| 1 – 2 years | 4 weeks |
| 2 – 3 years | 6 weeks |
| 3 – 4 years | 7 weeks |
| 4 – 5 years | 8 weeks |
| 5 – 6 years | 10 weeks |
| 6 – 7 years | 11 weeks |
| 7 – 8 years | 13 weeks |
| 8 – 9 years | 14 weeks |
| 9 – 10 years | 16 weeks |
| 10+ years | 12 weeks |
Multiply your weeks by your weekly ordinary pay — your base rate, not counting overtime or allowance loadings — to estimate the gross redundancy figure. This calculator then shows how much of it is tax-free and how the rest is taxed.
The rest is an ETP — how it's taxed
Whatever sits above the tax-free amount is a genuine-redundancy ETP, and your employer withholds tax on it under PAYG. It is still taxed far more kindly than normal income — these concessional tax rates sit well below your marginal tax rate. Up to the ETP cap of $260,000 (2025–26), the rate is:
- 17% if you are at or above your preservation age — now 60 for everyone born after 30 June 1964.
- 32% if you are under 60.
Both rates include the 2% Medicare levy. Any part of the ETP above the $260,000 cap is taxed at the top marginal rate of 47%. Because the cap is so high, most redundancies are taxed entirely at the 17% or 32% concessional rate — only very large payouts reach the top rate.
What's not included in the tax-free amount
A redundancy payout often arrives bundled with other amounts that are taxed under their own rules and are not part of the tax-free figure or the ETP:
- Unused annual leave and unused long service leave — paid out separately and taxed under their own leave rules.
- Salary, wages and bonuses owed up to your last day — taxed as normal income.
- Payment in lieu of notice that forms part of an ETP may be treated differently.
This calculator covers the genuine-redundancy payment itself. Two edge cases to flag: if you also receive non-genuine termination payments (such as a golden handshake), or your other income for the year is very high, a separate whole-of-income cap of $180,000 can reduce the concessional treatment on those other amounts. And to qualify for any tax-free part at all, the redundancy must be genuine. A genuine redundancy occurs when your job is abolished after a real period of employment — one of the conditions of a genuine redundancy, along with being under age-pension age and the payment being made within 12 months of termination. Meet them and the payment is tax-free up to a limit based on your service with your employer, with the excess taxed at a lower rate than normal income tax. A separate invalidity segment can also be tax-free if you stop work due to permanent disability. When in doubt, confirm with a registered tax agent.
Related calculators
More ways to check what you actually keep.
Frequently asked questions
How much of my redundancy is tax-free in 2025–26?
A genuine redundancy is tax-free up to $13,100 plus $6,552 for each completed year of service in 2025–26. With 10 completed years, for example, the first $78,620 is completely tax-free. The limits are indexed by the ATO each 1 July.
Is redundancy pay taxed in Australia?
Partly. If your redundancy is genuine, an amount based on your years of service is completely tax-free. Anything above that limit is treated as an ETP and taxed at concessional rates that are lower than your normal marginal rate, up to the ETP cap.
How is the taxable part taxed?
The excess over the tax-free limit is a genuine-redundancy ETP. Up to the $260,000 cap (2025–26) it's taxed at 17% if you're 60 or older, or 32% if you're younger — both include the 2% Medicare levy. Anything above the cap is taxed at the top rate of 47%.
Does Fair Work's redundancy calculator include tax?
No. Fair Work tells you how many weeks of pay you're owed under the National Employment Standards, but not how it's taxed. This calculator works out the tax-free portion and the ETP tax on the rest, so you can see the after-tax figure.
What counts as a genuine redundancy?
A genuine redundancy is where your employer decides your job no longer needs doing by anyone and your employment ends, and you're under age-pension age. Dismissals for misconduct, the end of a fixed-term contract, or reaching retirement age don't qualify for the tax-free amount.
Is unused annual leave part of the tax-free amount?
No. Unused annual leave and long service leave are paid out separately and taxed under their own rules — they're not part of the genuine-redundancy tax-free amount or the ETP. This calculator covers the redundancy payment itself.
How much redundancy pay am I entitled to?
Under the National Employment Standards, redundancy pay runs from 4 weeks (1–2 years of service) up to 16 weeks (9–10 years), then drops to 12 weeks at 10+ years. An enterprise agreement may set more. Payments that meet the conditions of a genuine redundancy are tax-free up to a limit on top of the weeks you're owed.
What is the ETP cap for 2025–26?
The ETP cap for life benefit termination payments is $260,000 for 2025–26, rising to $270,000 in 2026–27. Up to this cap you pay tax at a lower rate — 17% or 32% — and the cap applies only to the taxable part, not the tax-free amount. Above the cap, the top 47% rate applies.
How is unused long service leave taxed on a redundancy?
Unused long service leave is not part of the tax-free amount of a genuine redundancy. It's added to your assessable income and taxed under separate leave rules, usually with a capped rate for the redundancy-related portion.