Redundancy Tax Calculator
Work out the tax-free portion of a genuine redundancy payout for 2026-27, the tax on the ETP above it, and what actually lands in your account.
- The 2026-27 tax-free limit is $13,598 plus $6,801 for each complete year of service. Ten years of service shields $81,608.
- Only the amount above your tax-free limit is an employment termination payment (ETP), taxed at concessional rates up to the $270,000 cap.
| Component | Rate | Amount |
|---|---|---|
| Tax-free redundancy portion | 0% | $68,006 |
| ETP within cap | 32% | $6,994 |
| Total tax withheld | $2,238 | |
| Estimated in your pocket | $72,762 |
2026-27 figures for a genuine redundancy with a tax file number provided. ETP rates include the Medicare levy. Non-genuine payments face the extra $180,000 whole-of-income cap instead.
The tax-free limit for 2026-27
A genuine redundancy payment is tax-free up to $13,598 plus $6,801 for each complete year of service. Eight years of service shields $68,006: on a $75,000 payout, that leaves only $6,994 taxable, and at the 32% rate the tax comes to $2,238. Part years do not count, so 9 years and 11 months still calculates as 9 years. This tool is part of our full set of tax calculators for every kind of pay event.
"Genuine" is the ATO's word for a dismissal that happens because the position itself is abolished, not because of performance or resignation. Eligibility conditions apply, including age rules, and the ATO redundancy page linked in Sources sets them out. Both the base and per-year amounts are indexed each income year, so the limit above is specific to 2026-27.
ETP tax rates 2026-27
Everything above the tax-free limit is an employment termination payment (ETP), withheld at concessional rates that already include the 2% Medicare levy.
| ETP component | Your age | Withholding rate |
|---|---|---|
| Up to the $270,000 ETP cap | Under preservation age (60) | 32% |
| Up to the $270,000 ETP cap | Preservation age or over | 17% |
| Above the ETP cap | All ages | 47% |
Preservation age is 60 for everyone born after 30 June 1964, measured at the end of the income year the payment lands in. The concessional rates are the reason a redundancy usually beats taking the same money as salary: compare them against the 2026-27 tax brackets, where a big lump on top of a full year of wages would face 37% or 45% marginal rates.
Non-genuine payments, such as a golden handshake or payment in lieu of notice, get no tax-free limit and face a second test: the $180,000 whole-of-income cap, which shrinks dollar for dollar with the other taxable payments you received that year. The smaller of the two caps applies.
Unused leave in your final pay
Unused annual leave and long service leave are not part of the redundancy payment or the ETP. Paid out because of a genuine redundancy, they are withheld at a flat 32% under Schedule 7. The optional field in the calculator applies that rate. For resignations the treatment differs, and the detail is in our guide to annual leave payout tax.
Final pays often carry other lump sums too. Back pay and bonuses in the same final payslip are withheld under the schedule 5 tax table rather than the ETP rules. If a bonus is the main event in your payout, size it separately with the bonus tax calculator.
Frequently asked questions
How much of my redundancy is tax-free in 2026-27?
What is the ETP tax rate for 2026-27?
What is the ETP cap?
What makes a redundancy genuine for tax purposes?
How is unused annual leave taxed on redundancy?
Do the ETP rates include the Medicare levy?
Does my redundancy get added to my salary for tax brackets?
Sources
Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.