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.

What Is Genuine vs Non-Genuine Redundancy?

A "Genuine Redundancy" is a termination where the employer no longer requires the job to be performed by anyone and has complied with all consultation obligations in the applicable modern award or enterprise agreement. The distinction between genuine and non-genuine redundancy determines whether the tax-free component applies to the severance payment.

The ATO independently assesses whether a redundancy qualifies as genuine at tax time. An employer labelling a termination "redundancy" on the separation certificate does not guarantee genuine status. The employee must also be under age 65 at the time of dismissal to access the tax-free component. Employees over preservation age who receive a non-genuine redundancy have the entire payment taxed as an Employment Termination Payment at marginal or concessional ETP rates.

Step-by-Step: What Happens When You Are Made Redundant?

The redundancy process follows a legally mandated sequence under the Fair Work Act 2009 and applicable modern awards. Employers who skip steps expose themselves to unfair dismissal claims, penalties, and orders for compensation.

1. Consultation notice: The employer notifies affected employees and any union representatives that redundancies are being considered. The applicable award or enterprise agreement specifies minimum consultation periods, typically 7–14 days.
2. Redeployment assessment: The employer assesses whether the employee can be redeployed to a suitable alternative position within the business or any associated entity. Failure to undertake this step converts a genuine redundancy into a non-genuine one.
3. Written notice of termination: The employer provides formal written notice. The minimum notice period is 1 week for employees with less than 1 year of service, 2 weeks for 1–3 years, 3 weeks for 3–5 years, and 4 weeks for 5+ years. Employees over 45 with at least 2 years of service receive an additional week.
4. Final pay calculation: The employer calculates all entitlements: redundancy pay (NES weeks), notice pay (or payment in lieu), accrued annual leave, accrued long service leave, and any outstanding wages or loadings.
5. Payment and separation certificate: Final payments must be made on or before the employee's last working day, or no later than 7 days after termination. The employer issues a separation certificate and PAYG payment summary reflecting the tax-free component (if genuine) and any ETP amounts.
6. Centrelink waiting period: The employee may apply for JobSeeker Payment, but redundancy pay and leave payouts generate an "Income Maintenance Period" that delays eligibility by the number of weeks covered by the payout. Check our Centrelink Income Test guide for threshold details.

What Are Employment Termination Payments (ETPs)?

An Employment Termination Payment is any lump sum paid to an employee because their employment ends, excluding the genuine redundancy tax-free component, accrued leave, and superannuation. ETPs include golden handshakes, gratuities, non-genuine redundancy payments, and any genuine redundancy amount that exceeds the ATO's tax-free limit.

The ATO classifies ETPs into two types. A "Life Benefit ETP" is paid directly to the employee while alive. A "Death Benefit ETP" is paid to a dependant or the estate of a deceased employee. The tax treatment differs significantly between the two, and within life benefit ETPs, the rate varies based on whether the employee has reached preservation age.

The ETP cap for FY2025-26 is $245,000. Any ETP amount exceeding this cap is taxed at the top marginal rate of 47% (including Medicare levy). The whole-of-income cap also applies — if your total taxable income plus ETP exceeds $180,000, the portion above that threshold is taxed at 47%. Understanding these thresholds is critical for executives and long-tenured employees with large separation packages.

Are Small Businesses Exempt from Redundancy Pay?

Small businesses with fewer than 15 employees at the time of termination are fully exempt from paying NES redundancy pay. This exemption is absolute — the employer pays zero weeks of severance regardless of how long the employee worked there.

The 15-employee threshold counts all employees including casual employees engaged on a regular and systematic basis. It includes employees across all locations, branches, and associated entities. Part-time employees count as one full headcount, not a fraction. The headcount is assessed at the exact time the termination notice is given, not at the start of employment or any earlier date.

Even when the small business exemption applies, the employer still owes notice pay, accrued annual leave, accrued long service leave, and outstanding wages. Only the redundancy pay (severance weeks) component is exempt. Employees of small businesses who believe the headcount was artificially reduced to trigger the exemption can challenge the decision through the Fair Work Commission.

Some enterprise agreements and employment contracts override the small business exemption by including redundancy clauses that apply regardless of employer size. Always check the specific terms of your agreement.

How Does Long Service Leave on Redundancy Vary by State?

Long service leave entitlements on redundancy are governed by state and territory legislation, not the NES. Each jurisdiction sets different qualifying periods, accrual rates, and pro-rata access rules for employees terminated by redundancy.

In NSW, employees terminated by redundancy after 5 years of continuous service receive a pro-rata long service leave payout, the most accessible threshold in Australia. South Australia and the Northern Territory provide the most generous full entitlement at 13 weeks after 10 years. Victoria, Queensland, Western Australia, and Tasmania share the standard 8.67 weeks after 10 years with pro-rata access after 7 years on redundancy.

Long service leave payouts on redundancy are taxed differently depending on when the leave was accrued. Leave accrued before 16 August 1978 is entirely tax-free. Leave accrued between 16 August 1978 and 17 August 1993 is taxed at a flat 32%. Leave accrued after 17 August 1993 is taxed at the employee's marginal rate.

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