Redundancy Tax Calculator

Classify the Final Payment

Redundancy tax depends on each payment’s classification. Separate genuine redundancy from taxable employment termination payments (ETPs) and unused leave before calculating withholding. This calculator accepts established gross amounts for payments received in 2026-27.

Confirm the reason for dismissal, termination date and payment date from payroll records. Record completed service, age at dismissal and age at the end of the payment’s financial year. Check the contract and any earlier termination payments.

For tax purposes, genuine redundancy requires a dismissed employee’s position to be genuinely redundant. The qualifying payment exceeds what the employee could reasonably expect on voluntary termination. Dismissal must precede pension age and any earlier compulsory retirement or service limit.

Check arm’s-length limits and any arrangement to employ the employee after dismissal. The Income Tax Assessment Act’s genuine redundancy conditions determine eligibility. Selecting a classification here records your conclusion; the calculator does not decide whether the dismissal meets those conditions.

The Redundancy Tax-Free Amount

For 2026-27, the genuine redundancy tax-free limit is $13,598 plus $6,801 for each completed year of covered service. A partial year adds nothing. The tax-free amount is the smaller of that limit and the qualifying payment.

Eight completed years produce a limit of $68,006. A qualifying $50,000 redundancy payment is entirely tax-free. At $78,000, the tax-free amount remains $68,006 and the $9,994 excess becomes a taxable ETP.

The same service formula applies to a qualifying approved early retirement scheme payment. Invalidity has a different tax-free-component calculation. Enter an already calculated invalidity component in ETP tax-free component and its taxable balance in Excluded taxable ETP.

The tax-free limit does not establish what the employer owes. Work out gross redundancy, notice and leave entitlements with the redundancy pay calculator, then classify those amounts for tax.

ETP and Other Lump Sums

Taxable life-benefit ETPs within the relevant cap attract 32% withholding below age 60 at year end, or 17% from age 60. Amounts above the cap attract 47%. These rates include Medicare levy.

The 2026-27 ETP cap is $270,000 before relevant earlier payments reduce it. Genuine redundancy excess and other excluded taxable ETPs use that cap. Here, excluded means excluded from the whole-of-income cap, not excluded from tax.

Other ETPs, such as a gratuity or separately classified notice payment, use the smaller of the remaining ETP cap and the whole-of-income cap. The latter starts at $180,000. Other taxable payments, including the entered unused leave, reduce it to a minimum of zero.

Enter other taxable payments without adding this page’s leave twice. Enter earlier taxable ETPs that reduce the applicable ETP cap under ETP cap already used. Earlier payments across years or employers require the relevant cap allocation before entry. Split redundancy payments with an earlier tax-free amount need a separate reconciliation.

The calculator processes excluded ETPs first, then applies the remaining cap to other ETPs. The ATO withholding schedules set the classifications and rates. A lump sum has no universal tax rate.

Other ETPs generally require payment within 12 months of termination. The calculator refuses delayed amounts needing a separate approval or delayed-payment calculation. Qualifying genuine redundancy and approved early retirement excess retain their exception.

Unused Annual Leave on Termination

Unused annual leave and associated leave loading remain outside ETPs. Genuine redundancy, invalidity and approved early retirement use 32% withholding on these leave payments. Normal termination separates accruals before and after the statutory 1993 boundary shown in the fields.

For normal termination, earlier annual leave uses 32%. Later annual leave uses the Schedule 7 marginal method. The same split applies to long service leave accrued from the statutory 1978 boundary. Pre-1978 long service leave requires separate treatment and is outside this calculator.

The marginal method divides later leave by 52 weekly, 26 fortnightly or 12 monthly periods and disregards cents in that allocation. It adds that allocation to normal gross pay. The difference between PAYG withholding on the combined pay and normal pay is multiplied by the period count.

For a normal-termination later-leave payment below $300, withholding is capped at the lesser of that method and 32%. This calculator uses resident PAYG Scale 2, with the tax-free threshold claimed and ordinary Medicare treatment. It excludes study-loan withholding from these termination lump sums.

Use the last full period’s normal gross pay, including taxable allowances, overtime and bonuses. For variable pay, use a year-to-date average only where Schedule 7 permits it. Regular wages and ordinary bonus withholding belong in the TFN withholding calculator.

Reconcile the Net Final Pay

The default fictional employee is made genuinely redundant at age 53 after eight completed years, reaching age 54 by year end. Their $78,000 redundancy payment contains $68,006 tax-free and a $9,994 taxable ETP. Withholding on that excess rounds to $3,198.

A separate $12,500 gratuity attracts $4,000 withholding. Other taxable payments are $82,500, with $13,000 unused leave entered separately. The remaining whole-of-income cap is $84,500, so the gratuity fits within it.

Unused annual leave of $8,400 and long service leave of $4,600 produce $4,160 withholding and $8,840 net leave. Gross components total $103,500. After $11,358 withholding, the estimated net final payment is $92,142.

The reconciliation separates tax-free redundancy, excluded taxable ETP and other taxable ETP rows. Each row shows gross, withheld and net amounts. Component withholding rounds to whole dollars before the totals are reconciled.

Final Pay Categories

A final payment can combine amounts with different rules. For a second fictional example, an employee below age 60 receives a $120,000 ordinary taxable ETP. Salary already paid is $50,000 and unused annual leave is $50,000.

The whole-of-income cap falls to $80,000. ETP withholding is $25,600 on that portion plus $18,800 on the remaining $40,000, totalling $44,400. Leave withholding is calculated separately from normal pay and the accrual categories.

ATO redundancy and final-pay tools calculate tax treatment and withholding. Employment-law entitlements come from the relevant employment arrangements and statutory rules. The Fair Work Ombudsman’s redundancy guidance explains that separate entitlement question.

This estimate covers resident life-benefit payments with a quoted TFN. Death benefits, foreign residents, working holiday makers and special withholding variations require their own schedules. It also excludes ordinary final wages and the employee’s eventual annual tax assessment.

Your entries stay in your browser. The calculator sends no entered amounts to Tax Genie or the ATO and saves none in browser storage. Reconcile these components with ordinary wages and the payroll report before issuing the final payslip.