Redundancy Tax Calculator Australia 2025-26

Calculate tax on redundancy payments and Employment Termination Payments (ETPs). See your tax-free component, how much falls within the ETP cap, and your net redundancy payout after tax. If you searched for a redundancy tax calculator, tax on redundancy payout, or an ETP calculator, this page is built for that answer.

Need the rule explanation before the numbers? Read genuine redundancy vs ETP first, then use this calculator to test the tax-free amount and the taxable excess.

Based on 2025-26 ATO redundancy and ETP caps. Assumes Australian resident for tax purposes.

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How redundancy payments are taxed in Australia

When you receive a redundancy payment, it may have two parts: a tax-free component (for genuine redundancies) and a taxable component that is treated as an Employment Termination Payment (ETP). The tax-free portion is only available when the redundancy is "genuine" - meaning the employer no longer needs anyone to do the job.

Any amount above the tax-free limit is generally treated as the taxable component of an excluded life benefit ETP. That means the concessional treatment is measured against the ETP cap. Other non-excluded life benefit ETPs, such as some golden handshake or contract-end payments, may also be affected by the whole-of-income cap.

Genuine redundancy tax-free formula

ETP cap and tax rates

The taxable component of a genuine redundancy payment is treated as an excluded life benefit ETP. For 2025-26, the main cap is the ETP cap of $260,000. The whole-of-income cap of $180,000 is more relevant to non-excluded life benefit ETPs, not the genuine redundancy excess itself.

• Genuine redundancy excess usually uses the $260,000 ETP cap
• Other life benefit ETPs may use the lesser of the $260,000 ETP cap and $180,000 minus your other taxable income

Preservation age table

Your preservation age determines which ETP tax rate applies. It depends on your date of birth:

Worked example: genuine redundancy

Tax-saving tip: If you are close to your preservation age, delaying the receipt of your ETP (if possible) until you reach preservation age could reduce the within-cap rate from 32% to 17% - a significant saving.

What does this calculator include?

• Genuine redundancy tax-free component calculation
• ETP tax rates based on preservation age
• ETP cap and whole-of-income cap analysis
• Death benefit ETP tax for dependants and non-dependants
• Preservation age determination from date of birth
• Net payment and effective tax rate

Why is tax on a redundancy payout different from normal salary tax?

Redundancy tax rules are separate from ordinary salary withholding. A genuine redundancy payment can contain a tax-free component, and the taxable component is then taxed under the ETP rules instead of the standard marginal tax table. That is why a redundancy payout can look very different from a normal payslip or annual bonus.

Redundancy payout vs salary vs bonus

A redundancy payout is not taxed the same way as ordinary salary or a one-off bonus. Salary uses the normal resident tax tables. A bonus still ends up in the normal annual-income system, even if the payslip withholding looks high. A genuine redundancy payment is different again because part of it can be tax-free and the excess moves into the ETP rules.

• Ordinary salary: taxed under the resident marginal tax brackets plus Medicare levy.
• Bonus: still taxed as ordinary income, but the pay-run withholding can look inflated.
• Genuine redundancy: may include a tax-free amount first, with any excess taxed as an ETP instead of standard salary income.

What to check before you trust the payout number

• Whether the termination actually qualifies as a genuine redundancy.
• How many completed years of service count toward the tax-free formula.
• Whether the taxable excess is an excluded or non-excluded ETP.
• Your preservation age, because it changes the within-cap tax rate.
• Your other taxable income, especially if part of the payment is not treated as an excluded ETP.
• Whether unused leave, long service leave, or ordinary wages have been separated from the redundancy component.

What does this calculator not include?

• Unused annual leave and long service leave (taxed under separate rules)
• Tax offsets such as the low income tax offset
• Multiple ETPs received in the same year
• Invalidity segment of an ETP
• Pre-July 1983 service component
• Non-resident tax rates
• Early retirement scheme payments (separate rules apply)

This is a simplified estimate. Your actual tax outcome may differ based on your individual circumstances. Consult a registered tax agent for advice specific to your situation.

FAQ

What is a genuine redundancy payment?

A genuine redundancy payment is made to an employee whose position has been made genuinely redundant. It includes a tax-free component calculated as $13,100 plus $6,552 for each completed year of service (2025-26 rates). To qualify, the dismissal must be because the employer no longer requires the job to be done by anyone, not because of poor performance.

How much of my redundancy is tax-free?

For 2025-26, the tax-free amount is $13,100 plus $6,552 for each completed year of service. For example, with 10 completed years: $13,100 + ($6,552 x 10) = $78,620 tax-free. Any amount above this limit is taxed as an Employment Termination Payment.

What is the ETP cap?

The ETP cap for 2025-26 is $260,000. For excluded payments such as the taxable part of a genuine redundancy payment, that cap is generally used on its own. For non-excluded life benefit ETPs, the effective cap may instead be the lesser of $260,000 or $180,000 minus your other taxable income. Amounts above the applicable cap are taxed at 47%.

What is preservation age and how does it affect ETP tax?

Preservation age is the age at which you can access your superannuation. It ranges from 55 to 60 depending on your date of birth. If you are at or above your preservation age when receiving an ETP, the within-cap amount is taxed at 17%. If below preservation age, it is taxed at 32%.

How are death benefit ETPs taxed?

Death benefit ETPs paid to a dependant (spouse, child under 18, or person in a financial dependency relationship) are tax-free. If paid to a non-dependant (such as an adult child), the amount within the cap is taxed at 17% and the amount above the cap at 47%.

What is the whole-of-income cap?

The whole-of-income cap of $180,000 mainly limits concessional treatment for non-excluded life benefit ETPs. If your payment is a genuine redundancy excess, it is generally treated as an excluded ETP and uses the ETP cap instead. For a non-excluded payment, if your other taxable income is $100,000, the whole-of-income limit would reduce the effective cap to $80,000.

Does this calculator include Medicare levy on ETPs?

ETP tax rates are flat withholding rates that already account for the overall tax treatment. The 32% and 17% rates are specific ETP rates set by the ATO, not marginal income tax rates. Medicare levy is not separately applied on top of ETP-specific rates.

Are these calculations updated for 2025-26?

Yes. This calculator uses the 2025-26 ATO genuine redundancy tax-free limits ($13,100 base + $6,552 per year), the $260,000 ETP cap, and the $180,000 whole-of-income cap. These figures are indexed annually by the ATO.

What happens next?

Frequently asked questions

Last reviewed: March 2026 Uses 2025-26 ATO rates.