How redundancy pay actually works in Australia
Redundancy pay in Australia comes from two parts of the legal framework, layered on top of each other. The National Employment Standards (NES) set the statutory minimum: scaled severance pay based on completed years of continuous service, capped at 16 weeks for 9+ years. The Modern Award or enterprise agreement covering your role may set entitlements that exceed the NES floor — and contractual terms in your individual employment agreement may exceed both.
For genuine redundancy, the tax treatment is also structurally different from a normal termination. The genuine redundancy tax-free limit for 2025–26 is $13,100 plus $6,552 per completed year of service. Severance up to that amount is tax-free. Anything above it falls into the Employment Termination Payment (ETP) regime: 32% concessional tax under preservation age, 17% from age 60 onwards. Both the tax-free limit and the ETP rates are indexed annually by the ATO.
Leave entitlements are separate. Accrued annual leave and long service leave paid out at termination are taxed at marginal rates with a flat 32% concessional rate option in many cases. Fair Work's redundancy page covers the entitlement framework; the ATO leaving-your-job guide covers the tax side.
Why "genuine redundancy" matters more than most people realise
The favourable tax treatment described above only applies if the termination meets the ATO's definition of genuine redundancy. A genuine redundancy is one where: the employee was dismissed because the position itself was no longer required (not the person); the dismissal happened before the employee reached the age-pension age; the employer and employee aren't related parties; and there was no arrangement to re-employ the person after termination.
Where one of those tests fails — for example, you've reached pension age, or there's a clear arrangement to re-engage you as a contractor — the entire termination payment falls under the standard ETP regime without the tax-free threshold. The dollar difference can be tens of thousands of dollars for someone with long service. It's a question of substance over form; the ATO will look at the underlying facts, not just how the parties characterise the deal.
The age-pension-age cutoff is the most common surprise. Currently 67 for those born after 1 January 1957, it means employees terminated after their 67th birthday don't get the genuine redundancy tax concession even if the role was genuinely redundant.
Reading your result
The headline figure is your estimated net redundancy payout after tax. The breakdown shows: NES severance (or higher award/contractual entitlement if entered), genuine redundancy tax-free portion, taxable ETP portion, leave payouts, and tax withheld on each component.
The calculator assumes the redundancy is genuine as defined above. If your situation might not meet that test, the tax outcome will be materially worse — speak to a registered tax agent or financial counsellor before accepting a deal.
The "completed years of service" input rounds down. Eleven years and three months counts as eleven completed years for both the NES severance scale and the tax-free threshold. Some awards or contracts use a different rounding rule; check the specific instrument that applies to your role.
What this calculator can't do
This calc covers a baseline genuine-redundancy scenario for an employee resident in Australia. It does not capture:
- Award or contractual entitlements above the NES. Many awards specify higher severance scales (for example, four weeks per year for senior roles instead of the NES weeks-per-year ladder). Enter your actual entitled severance in the input field; the calculator uses what you provide and falls back to the NES default.
- Pay in lieu of notice. If your employer pays out a notice period instead of having you work it, the payment is taxed at standard marginal rates, not the ETP regime. It's a separate payment from severance.
- Unused rostered days off or accrued penalty rates. These flow through standard payroll treatment, not the redundancy framework.
- Voluntary redundancy programs with bonus elements. Some employers offer a redundancy "package" that includes a bonus on top of statutory entitlements. The bonus component may not qualify for the genuine redundancy tax-free treatment if it's structured as an incentive to leave rather than compensation for loss of position.
- State payroll tax interactions. Severance is usually exempt from payroll tax, but state rules differ and large payouts may have flow-on implications for the employer's payroll tax bill.
Common questions
Is my redundancy payout taxable?
Partially. The genuine-redundancy tax-free portion ($13,100 + $6,552 per completed year for 2025–26) is fully tax-free. Severance above that threshold is taxed under the ETP regime at the concessional rate (32% under 60, 17% over 60) up to the ETP cap, which is $245,000 for 2025–26. Severance above the ETP cap is taxed at marginal rates. Annual leave and long service leave payouts are separate and taxed differently.
Should I roll my redundancy payout into super?
The tax-free portion can't be contributed to super as a non-concessional contribution and then claimed as concessional — there's no such mechanism. However, the cash you receive can be used to make personal after-tax (non-concessional) contributions up to the standard cap ($120,000 per year, or $360,000 under the bring-forward rule). For some people in transition to retirement, this is sensible; for others, the cash is needed for income while finding new work. The right answer depends on your age, debt levels, and time to retirement.
Will my redundancy payout affect Centrelink benefits?
Yes, in two ways. First, the lump sum is treated as an "income maintenance period" — Services Australia divides it by your usual weekly pay to calculate how many weeks of JobSeeker (or other payments) you can't claim. Second, the residual cash counts as an asset for ongoing means-testing if it remains in your account. The calculator can't model this; Services Australia's payment estimator or a financial counsellor can walk through the specifics.
Where to next
For a deeper explainer on Fair Work redundancy entitlements, the redundancy tax-free formula, and what to do in the days after receiving notice, read the redundancy pay Australia guide. To model what happens to your take-home if you find a new role at a different income level, the pay and tax calculator covers it. And for those at or near retirement age, the retirement income calculator models the longer-term picture combining super, Age Pension and other assets.