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.
→Tax-free amount: $13,100 + $6,552 per year of service
→Excess taxed at marginal rate or ETP cap rate
→No age restriction for tax-free component
Normal termination (not genuine)
→No tax-free component
→Entire ETP taxed at marginal rate or cap rate
→Preservation age affects cap rate (32% vs 47%)
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.
Genuine redundancy tax-free formula
Tax-free = $13,100 + ($6,552 × completed years of service)
These are the 2025-26 indexed amounts. Only completed full years count.
Tax-free amount by years of service
Years of Service
Tax-Free Amount
1 year
$19,652
5 years
$45,860
10 years
$78,620
15 years
$111,380
20 years
$144,140
25 years
$176,900
30 years
$209,660
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.
Component
Below preservation age
At/above preservation age
Tax-free (genuine redundancy)
0%
0%
Within ETP cap
32%
17%
Above ETP cap
47%
47%
Preservation age table
Your preservation age determines which ETP tax rate applies. It depends on your date of birth:
Date of birth
Preservation age
Before 1 July 1960
55
1 July 1960 – 30 June 1961
56
1 July 1961 – 30 June 1962
57
1 July 1962 – 30 June 1963
58
1 July 1963 – 30 June 1964
59
From 1 July 1964
60
Worked example: genuine redundancy
Scenario
Sarah, age 52 (born 15 March 1974, preservation age 60), receives a $150,000 genuine redundancy payment after 12 completed years of service. Her other taxable income this year is $40,000.
Tax-saving tip: If you're close to your preservation age, delaying the ETP (if possible) until preservation age could reduce the within-cap rate from 32% to 17% — a significant saving.
What's included / not included
Included
→Genuine redundancy tax-free component
→ETP rates based on preservation age
→ETP cap & whole-of-income cap analysis
→Death benefit ETP (dependants/non-dependants)
→Preservation age from date of birth
→Net payment & effective tax rate
Not included
→Unused annual / long service leave (separate rules)
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 (ETP).
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.
How is a genuine redundancy payment taxed in Australia?
A genuine redundancy payment has a tax-free component based on your years of service. For 2025-26, the tax-free amount is $12,524 plus $6,262 for each complete year of service. Any amount above this is taxed as an Employment Termination Payment (ETP) with concessional rates up to the $245,000 cap. See ATO individual rates and ETP caps.
What is the difference between a genuine redundancy and an ETP?
A genuine redundancy occurs when your position is abolished — the employer no longer needs anyone to do your job. The tax-free component only applies to genuine redundancies. If you are fired, resign, or take a voluntary separation that does not meet the genuine redundancy criteria, the entire payment is treated as an ETP with no tax-free portion.
Does my redundancy payout affect my HELP/HECS repayment?
Yes. Your redundancy payout is included in your repayment income for HELP purposes. A large payout could push you above the HELP repayment threshold ($54,435 for 2025-26), triggering a compulsory repayment. Use our HELP calculator to check the impact.
Can I salary sacrifice my redundancy payout into super?
You cannot salary sacrifice a redundancy payment, as it is a termination payment, not salary. However, you can make a personal contribution to super after receiving the payment and potentially claim a tax deduction. Be aware of the concessional contributions cap ($30,000 for 2025-26).
Is unused annual leave taxed differently from redundancy?
Yes. Unused annual leave is taxed separately from the redundancy payment. If your redundancy is genuine, unused annual leave is taxed at a maximum rate of 32% (plus Medicare levy). Unused long service leave accrued after 16 August 1978 is taxed at a maximum rate of 32% as well.
Tax Accuracy & Sources
Reviewed: March 2026 · Tax year: 2025-26
Estimates tax on genuine redundancy payments and ETPs using 2025-26 ATO caps and rates. It does not cover unused leave, multiple ETPs in one year, invalidity segments, or pre-July 1983 service components.