Redundancy Pay Calculator Australia — Entitlements & Tax

How Is Redundancy Pay Calculated in Australia?

Redundancy pay in Australia is calculated by multiplying your base weekly pay by the number of entitlement weeks set out in the National Employment Standards (NES). The base rate of pay is your ordinary hourly rate multiplied by your standard weekly hours, excluding overtime, bonuses, incentive payments, and allowances.

The formula is: Annual Base Salary / 52 x Entitlement Weeks = Gross Redundancy Pay. An employee earning $90,000 per year with 5 completed years of continuous service receives a base weekly rate of $1,730.77. The NES entitlement at 5 years is 10 weeks, producing a gross redundancy payment of $17,307.69.

The Australian tax calculator applies the ATO tax-free limit to genuine redundancy payments, then taxes the remaining amount as an "Employment Termination Payment" (ETP) at the concessional rate of 32% (including the Medicare levy). Use our Income Tax Calculator to estimate how your total assessable income, including the taxable ETP component, affects your marginal rate for the FY2025-26 financial year.

Worked Example: $90,000 Salary, 5 Years of Service

At this salary and service level, the entire gross payment falls within the ATO tax-free threshold, so the employee receives 100% of the gross amount.

What Is the Redundancy Pay Table by Years of Service?

The NES redundancy pay table specifies the minimum number of weeks an employer pays based on completed years of continuous service, ranging from 4 weeks at 1 year to a peak of 16 weeks at 9 years. Small businesses with fewer than 15 employees at the time of dismissal are exempt from the NES redundancy pay obligation. Enterprise agreements, awards, and employment contracts override the NES minimum where they provide a higher entitlement.

* The entitlement drops from 16 to 12 weeks at the 10-year mark because long service leave entitlements generally kick in to act as a financial buffer.

Who Uses This Redundancy Pay Calculator?

This Australian redundancy pay calculator serves employees, employers, HR professionals, accountants, and financial advisors who need to estimate termination entitlements under the NES.

• Employees facing redundancy who want to verify their employer's payout figure before signing a deed of release
• HR managers and payroll officers calculating severance obligations for workforce restructures, office closures, or role elimination
• Accountants and tax agents estimating the tax-free component versus the taxable ETP portion for client reporting
• Financial planners modelling a client's take-home pay and cash flow after termination
• Small business owners determining whether the 15-employee exemption applies to their redundancy obligation

Employees who receive a redundancy payout also need to calculate the income tax impact on their overall assessable income. Use the Take-Home Pay Calculator to estimate your salary after tax for any period of re-employment within the same financial year.

How Is Redundancy Pay Taxed in Australia?

Redundancy pay taxation depends entirely on whether the ATO classifies the payment as a "genuine redundancy" or a "non-genuine redundancy." A genuine redundancy receives a tax-free component; a non-genuine redundancy is taxed in full at your marginal rate within the standard income tax brackets.

Tax-Free Component for Genuine Redundancy

The ATO sets a tax-free limit each financial year comprising a base amount plus a per-year-of-service amount. For the 2024-25 income year, the base amount is $12,524 and the per-completed-year amount is $6,263. An employee with 8 completed years receives a tax-free limit of $12,524 + ($6,263 x 8) = $62,628. Any redundancy amount below this threshold incurs zero tax.

ETP Tax Rates on the Taxable Portion

Any amount above the tax-free limit is treated as an "Employment Termination Payment" (ETP). ETPs are subject to caps and concessional tax rates. For employees below preservation age, the concessional rate is 32% (including the 2% Medicare levy surcharge). For employees at or above preservation age, the first $235,000 (2024-25 ETP cap) is taxed at 17% (including Medicare). Amounts exceeding the ETP cap are taxed at the top marginal rate of 47%. Use the Bonus Tax Calculator to estimate withholding on other lump-sum payments received in the same income year.

What Other Entitlements Apply on Termination?

Redundancy pay is one of several entitlements an employer owes on termination. The total final payout typically includes 5 separate components, each taxed under different rules and calculated independently.

The Leave Calculator estimates the payout value of your accrued annual leave and long service leave balances. Employers must also continue superannuation contributions on ordinary time earnings during the notice period — use the Superannuation Calculator to check your employer's SG rate obligations for FY2025-26.

What Are the Most Common Redundancy Pay Mistakes?

Employees and employers make 5 recurring errors when calculating redundancy pay in Australia. Each mistake results in an incorrect payout, underpaid tax, or lost entitlements.

1. Using total salary instead of base rate of pay. Redundancy is calculated on the base rate only. Overtime loadings, allowances, bonuses, and incentive payments are excluded from the weekly pay figure.
2. Counting partial years of service. The NES counts only completed full years of continuous service. An employee with 4 years and 11 months receives the 4-year entitlement (8 weeks), not the 5-year entitlement (10 weeks).
3. Forgetting the small business exemption. Employers with fewer than 15 employees at the time of dismissal are not required to pay NES redundancy. The headcount includes all employees across the business, not just one location.
4. Conflating notice pay with redundancy pay. Notice pay (1-5 weeks) and redundancy pay are separate legal entitlements that stack. They are also taxed differently: notice pay is ordinary income at your marginal rate, while genuine redundancy pay receives a tax-free component.
5. Assuming the entire payout is tax-free. The tax-free component only applies to the amount up to the ATO limit. High-salary employees with short service periods frequently exceed the tax-free threshold, creating a taxable ETP component at 32% or higher.

Which Related Calculators Help After Redundancy?

A redundancy event triggers multiple financial calculations beyond the severance payout itself. These 5 Australian tax calculators cover the most common post-redundancy scenarios.

• Take-Home Pay Calculator — estimate your net salary after tax when you start a new job, factoring in the income already earned at your previous employer within the same financial year.
• Income Tax Calculator — calculate your total income tax liability for FY2025-26, including the taxable ETP component from your redundancy payment in your assessable income.
• Leave Calculator — determine the dollar value of accrued annual leave and long service leave that your employer owes on termination.
• Superannuation Calculator — verify whether your employer contributed the correct 12% SG rate on your ordinary time earnings through to your final day of employment.
• Tax Return Calculator — estimate your tax refund or liability at end of year if you were made redundant part-way through the 2025-26 financial year and had varying withholding amounts.

Frequently Asked Questions