Redundancy Tax Calculator
See how much of a genuine redundancy payment is tax-free, how the rest is taxed, and what you actually keep — for the 2025-26 financial year, using current ATO figures.
Total gross severance / golden handshake / pay in lieu of notice. Exclude unused annual and long service leave (taxed separately).
Whole years worked for this employer. Part years don't count toward the tax-free limit.
At or above preservation age (60) the taxable part is taxed at 17% rather than 32% (up to the cap).
Enter your redundancy payment and years of service to estimate the tax and what you keep.
How is a redundancy payment taxed?
A genuine redundancy payment gets special tax treatment. A portion is completely tax-free based on your years of service, and only the amount above that is taxed — and even then, at a concessional rate rather than your full marginal rate.
The tax-free limit for 2025-26 is $13,100 plus $6,552 for each complete year of service. Anything above the limit is the taxable component of an employment termination payment (ETP).
How the taxable part is taxed
The taxable (ETP) amount is concessionally taxed up to the ETP cap of $260,000:
- 32% if you are below preservation age (60), or
- 17% if you have reached preservation age.
- Any amount above the $260,000 cap is taxed at 47%.
All of these rates include the 2% Medicare levy.
Worked examples
Below preservation age, 10 years' service
Jordan (age 45) is made redundant after 10 complete years and receives $150,000. The tax-free limit is $13,100 + $6,552 × 10 = $78,620. The remaining $71,380 is taxed at 32% = $22,841.60, so Jordan keeps $127,158.40.
Same payment, at preservation age
If Jordan were 62 instead, the taxable $71,380 is taxed at 17% = $12,134.60, so they keep $137,865.40 — the same payment, taxed more lightly because they've reached preservation age.
Small payment, fully tax-free
Priya is made redundant after 5 complete years and receives $30,000. Her tax-free limit is $13,100 + $6,552 × 5 = $45,860. Because $30,000 is under the limit, the whole payment is tax-free.
What this calculator doesn’t include
This covers the genuine redundancy payment itself. Unused annual leave and long service leave paid on termination are taxed separately (at a maximum of 32%), and your ordinary salary and wages up to your last day are taxed as normal income. It also assumes a genuine redundancy — a non-genuine redundancy or a golden handshake outside a genuine redundancy is taxed as an ordinary ETP, which uses the lower of the ETP cap and the $180,000 whole-of-income cap.
Frequently asked questions
- How much of a redundancy payment is tax-free?
- For a genuine redundancy in 2025-26, the tax-free limit is $13,100 plus $6,552 for each complete year of service with that employer. For example, 10 complete years gives a tax-free limit of $78,620. These amounts are indexed each 1 July.
- How is the taxable part of a redundancy payment taxed?
- Any amount above the tax-free limit is the taxable component of an employment termination payment (ETP). It is taxed at 32% if you are below preservation age, or 17% if you have reached it, up to the ETP cap of $260,000. Anything above the cap is taxed at 47%. All of these rates include the 2% Medicare levy.
- What is a genuine redundancy?
- A genuine redundancy is when your position is abolished — your employer decides the job itself no longer needs to be done — and you are under age-pension age. Leaving voluntarily, dismissal for misconduct, reaching normal retirement age, or contract expiry are not genuine redundancies and are taxed as an ordinary ETP (with different caps).
- What is preservation age?
- Preservation age is the age you can generally access your super. From 1 July 2024 it is 60 for everyone. Reaching it lowers the concessional tax rate on the taxable part of a redundancy from 32% to 17% (up to the cap).
- Does this include unused annual and long service leave?
- No. Unused annual leave and long service leave paid on redundancy are taxed separately — at a maximum rate of 32% (30% plus the 2% Medicare levy) — and are not part of the genuine redundancy tax-free limit or the ETP. This calculator covers the genuine redundancy payment itself.
- Is this my redundancy pay entitlement?
- No. This estimates the tax on a redundancy payment. How many weeks of redundancy pay you are entitled to is a separate question set by the National Employment Standards, your award or your contract. Enter the payment amount you expect to receive to see how it is taxed.
- Is this calculator official ATO advice?
- No. FigureTax is independent and provides general information and estimates only, not financial or tax advice. Confirm figures with the ATO or a registered tax agent before acting.
Related: Division 293 tax calculator — the extra 15% super tax for high-income earners.
General information only. This calculator gives an estimate based on standard ATO rules for the 2025-26 year and may not reflect your circumstances. It is not financial or tax advice. Confirm with the ATO or a registered tax agent before acting.