2025–26 ATO rates
Redundancy Tax Calculator
See your tax-free amount, ETP tax, and exact take-home for any redundancy package. Notice pay and unused leave breakdown included.
Your situation
Annual salary
Redundancy payment (genuine component)
The genuine redundancy portion only — not notice pay
Notice pay + unused leave
Taxed as ordinary income, not as ETP
Completed years of service
Full years only — the ATO ignores partial years
Your redundancy breakdown
Tax-free amount
$40,000
ATO limit: $43,864
Tax on ETP
$0
ETP component
Net redundancy
$40,000
after ETP tax
Effective rate
0.0%
on redundancy
Total take-home (redundancy + salary)
$113,812
Full breakdown
How redundancy tax works
Tax-free amount
$12,524 base + $6,268 × completed years of service. For 5 years that's $43,864.
ETP component
Everything above the tax-free limit is an Employment Termination Payment, taxed at 32% (within the $245,000 cap) or 47% above it.
Notice & leave
Notice pay and unused annual leave are taxed as ordinary income — they stack on top of your salary for the year.
Timing matters
If your redundancy is paid late in the financial year, your total income for that year is lower — which reduces the marginal rate on ETP.
Uses 2025–26 ATO rates. Assumes you are under preservation age (60). Rates and thresholds are updated annually.
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See my full plan →How redundancy tax works in Australia
When you are made redundant, the ATO splits your payment into separate components — each taxed differently. The genuine redundancy payment gets a tax-free limit ($12,524 + $6,268 per year of service in 2025–26). Everything above that limit becomes an Employment Termination Payment (ETP), taxed at 32% within a $245,000 cap.
Notice pay and unused annual leave are not part of the ETP — they are taxed as ordinary income and stacked on top of whatever salary you earned that year. If your redundancy is paid partway through the year, your total taxable income is lower, which can reduce the effective rate on the ETP component.
The tax-free threshold is updated annually by the ATO. The figures used here are the 2025–26 rates. Always verify with the ATO or a registered tax agent for your specific situation, particularly if you are over 60 (where different ETP rates may apply).
Frequently asked questions
How much of my redundancy is tax-free?
For genuine redundancies in 2025–26, the tax-free amount is $12,524 plus $6,268 for each completed year of service. For 5 years of service that's $43,864 tax-free. Any amount above this limit is treated as an Employment Termination Payment (ETP) and taxed separately.
What rate is an ETP taxed at?
ETP amounts within the $245,000 cap are taxed at 32% (30% tax + 2% Medicare levy). Amounts above the cap are taxed at 47%. These rates apply if you are under preservation age (60). For people over 60, the within-cap rate reduces to 17%.
Is my notice pay and unused leave taxed differently?
Yes. Notice pay and unused annual leave are taxed as ordinary income — they are added to your salary and taxed at your marginal rate, not at the ETP rate. Only the genuine redundancy component gets the tax-free limit and concessional ETP treatment.
What counts as a 'genuine redundancy'?
A genuine redundancy occurs when your position is eliminated — not when you are replaced. The dismissal must be because the job no longer exists. You must also be under 67. If the ATO determines it isn't a genuine redundancy, the entire payment is taxed at your marginal rate with no tax-free concession.
Can I roll my redundancy payment into super to reduce tax?
The ETP (taxable component) cannot be directly rolled into super. However, if you receive cash, you could make a personal after-tax super contribution within your non-concessional cap ($110,000/yr or $330,000 over three years via bring-forward). This doesn't reduce ETP tax directly, but can boost your super and reduce future tax on investment returns.