Redundancy pay tax calculator 2026-27
A genuine redundancy payment is tax-free up to $13,598 plus $6,801 for each complete year of service. The rest is an employment termination payment (ETP), taxed at a capped rate. This shows how much you keep, including unused leave.
- 2026-27 tax year
- Rates verified against the ATO on
- Sources · How we calculate · How we check
This applies only to a genuine redundancy. Your job must have been abolished (not just you replaced), the dismissal must be your employer's decision, you must be under Age Pension age, and the payment must be more than you would have got for resigning. Your employer's payment summary says whether it qualified. ATO: genuine redundancy payments
Estimated in hand after tax withheld, 2026‑27
$58,209
$54,404 is tax-free (the limit for 6 complete years of service is $54,404). The other $5,596 is an employment termination payment, with tax withheld at 32%.
| Redundancy pay | $60,000 |
| Tax-free amount | $54,404 |
| Employment termination payment (taxed at 32%) | $5,596 |
| Tax withheld from the ETP | −$1,791 |
| In hand | $58,209 |
Assumes the payment is a genuine redundancy payment and you are an Australian resident. Figures are the 2026-27 withholding rates, which include the 2% Medicare levy; your tax return settles the final amount.
Tax-free limit by years of service, 2026-27
| Complete years | Tax-free limit |
|---|---|
| 1 | $20,399 |
| 3 | $34,001 |
| 5 | $47,603 |
| 10 | $81,608 |
| 15 | $115,613 |
| 20 | $149,618 |
| 25 | $183,623 |
The limit is $13,598 plus $6,801 per complete year, for payments made from 1 July 2026 to 30 June 2027. Both amounts are indexed each 1 July.
Examples
Genuine redundancy, no unused leave, 2026-27.
| Payment | Years | Tax-free | In hand, under 60 |
|---|---|---|---|
| $30,000 | 3 | $30,000 | $30,000 |
| $60,000 | 6 | $54,404 | $58,209 |
| $100,000 | 10 | $81,608 | $94,115 |
| $150,000 | 15 | $115,613 | $138,996 |
| $250,000 | 20 | $149,618 | $217,878 |
| $400,000 | 8 | $68,006 | $284,463 |
On $100,000 after 10 years, $81,608 is tax-free and $18,392 is taxed at 32%, leaving $94,115. The $400,000 row goes over the $270,000 ETP cap, so the part above it is taxed at 47%.
How we calculate
- Tax-free amount: the lesser of your redundancy pay and $13,598 plus $6,801 for each complete year of service (2026-27 limits).
- The rest is a genuine redundancy ETP. Up to the $270,000 ETP cap, tax is withheld at 32% if you are under 60 on 30 June 2027 and 17% if you are 60 or over by then (preservation age is tested at the end of the income year you are paid in). Above the cap it is 47%. For a genuine redundancy only the ETP cap applies, not the $180,000 whole-of-income cap (ATO Schedule 11).
- Unused annual leave, leave loading and long service leave (accrued after 15 August 1978) paid because of a genuine redundancy are taxed at 32%. They are not part of the tax-free amount.
- All rates are the ATO's 2026-27 withholding rates and include the 2% Medicare levy. Your tax return works out the final tax. The ETP part within the cap is usually close to what was withheld, but unused leave is taxed at your marginal rate in your return, so the final tax on it can differ.
- Not modelled: non-genuine redundancy, golden handshakes, payment in lieu of notice, unused sick leave and rostered days off, and other ETPs (no tax-free amount; the smaller of the two caps applies), long service leave accrued before 16 August 1978, pre-July 1983 service, invalidity and death benefits, payments made more than 12 months after you leave, foreign residents, and Centrelink effects.
Questions
Is my whole redundancy payment tax-free?
Only up to $13,598 plus $6,801 per complete year of service. With 10 years that is $81,608. Anything above it is taxed as an employment termination payment.
Does a redundancy payment push me into a higher tax bracket?
The tax-free amount is not taxed at all, and the ETP part is taxed at its own capped rate (32% under 60, 17% at 60 or over, including Medicare) up to the $270,000 cap, rather than at your marginal rate. Any amount above the cap is taxed at the top rate, and some of these amounts may still count towards income tests. Your normal wages for the year are still taxed at your usual rates.
How is unused annual leave taxed in a redundancy?
At 32% (30% plus Medicare) when you leave because of a genuine redundancy, whenever it was accrued. It does not use up any of your tax-free limit.
What if it is not a genuine redundancy?
There is no tax-free amount, and the cap is the smaller of the $270,000 ETP cap and the $180,000 whole-of-income cap, reduced by your other taxable income for the year. This calculator does not cover that case.
Can I put my redundancy payment into super?
An ETP can't be rolled over into super, but you may be able to make a personal contribution, subject to the contribution caps. That depends on your circumstances; check with your super fund or a licensed adviser.