Made redundant? What you're actually owed
A redundancy payout has several moving parts — pay, notice, leave and tax — and they don't all work the same way. Here's how to know what should land in your account.
Being made redundant is stressful enough without trying to decode a final payslip. The good news: your entitlements follow fairly clear rules. The trap: the payout is taxed in pieces, so two people with the same headline figure can walk away with very different amounts.
1. Redundancy pay
Under the National Employment Standards, redundancy pay is based on your years of continuous service — on a sliding scale from 4 weeks at one year up to 16 weeks at nine-to-ten years. One quirk surprises people: at ten or more years it drops back to 12 weeks, on the logic that long service leave fills the gap. Your award, enterprise agreement or contract can be more generous, and the higher figure wins. Small businesses (fewer than 15 employees) are generally exempt from NES redundancy pay, though an award may still require it.
2. Notice, leave and wages
On top of redundancy pay you're usually owed notice (or payment in lieu), any unused annual leave (and leave loading if it applies), possibly long service leave, and any outstanding wages. These are separate entitlements — don't let them be quietly folded into the redundancy figure.
3. The tax-free shelter
If your redundancy is genuine — your role is abolished, not just you being let go — a chunk of the redundancy payment is completely tax-free. For 2025-26 that's a base amount of $13,100 plus $6,552 for each completed year of service. For many people with modest payouts, the entire redundancy payment falls under this limit and is tax-free. Anything above it becomes an Employment Termination Payment (ETP), taxed at a concessional rate up to a cap, and unused leave is taxed at its own concessional rate.
Before you sign anything
- Get written confirmation it's a genuine redundancy — it decides whether the tax-free shelter applies.
- Check your award or agreement for redundancy terms better than the legal minimum.
- Mind the timing — if you're close to ticking over another year of service, a slightly later finish date can lift your tax-free limit.
- Remember it counts as income for the year, which can affect HELP/HECS repayments and may create a waiting period before Centrelink support.
Work out your net payout
See your redundancy split into the tax-free part, the ETP and unused leave — and the figure that actually lands in your hand.
Redundancy tax is genuinely intricate, and the figures here are indexed each year, so treat this as a guide rather than the final word. Confirm current rules with the ATO and Fair Work, and consider a short chat with a registered tax agent or employment-law adviser — it can be worth far more than it costs at a moment like this.