Tax and your redundancy payout

Redundancy payments are taxed differently to normal payments from your employer.

When you're made redundant you'll receive information about your redundancy payments from your employer. Your payment will consist of up to three components:

genuine redundancy payment (the tax free portion). Note if you're over pension age, you're not eligible for a genuine redundancy payment and your entire payout will be treated as an ETP.
an employment termination payment (ETP), and
other redundancy payments.

Genuine redundancy payment

If you’re receiving genuine redundancy some (or all) of your payment will be tax free and received as cash. You cannot roll this into your super.

Note if you're over pension age, you're not eligible for a genuine redundancy payment and your entire payout will be treated as an ETP.

Taxation of other employer redundancy payments for the 2023/2024 financial year

Tax-free limit is $11,985 plus $5,994 for each complete year of service with your employer. These amounts are indexed to Average Weekly Ordinary Times Earnings (AWOTE) each July.

Amounts in excess of the tax-free limit are treated as an ETP.

Employment Termination Payments (ETPs)

When you leave your employer, you may be entitled to an ETP. ETPs (including genuine redundancy payments over the tax-free limit) consist of a tax-free component and a taxable component. Amounts that may be included in an ETP are:

genuine redundancy payments over the tax-free limit
unused rostered days off and sick leave
payments in lieu, gratuities, compensation payments for loss of employment.

You can't roll your ETP payment into your super. You can make an after-tax (non-concessional) contribution if you wanted to take advantage of the 15% tax rate on investment earnings in your super. Contribution caps apply.

Taxation of the taxable component of an ETP

Age	Tax on taxable component
Under Preservation age†	First $235,000 taxed at 32%
Preservation age or older†	First $235,000 taxed at 17%
All ages†	Above $235,000 taxed at 47%

^† On the last day of the financial year in which the payment was made.

Other redundancy payments

On leaving your employer as a result of a termination or redundancy, you may also be eligible to receive a range of other cash payments.

genuine redundancy payments within the tax-free limit
unused annual and long service leave salary and wages owed to you.

Leave that's not considered an ETP as a result of a redundancy is taxed at concessional rates.

Taxation of genuine redundancy payments for the 2023/2024 financial year

Annual leave	100% of lump sum is taxed at 32%^† (maximum)
Long service leave accrued before 16 August 1978	5% included in assessable income taxed at your Marginal Tax Rate^†
Long service leave accrued after 15 August 1978	100% included as assessable income and taxed at 32%^† (maximum)

^† Includes Medicare Levy (if applicable)

How does the date of your redundancy change your tax?

Depending on individual situation, you may wish to consider deferring your redundancy date until after the end of the financial year, when your marginal rate of tax may be lower, or entitlements higher. Understandably, this may not always be possible, however you may be able to use your long service leave or accumulated leave to delay your departure date. You may want to discuss this with your HR department.

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