National Employment Standards · 2026-27 tax
What a redundancy actually pays
The weeks you are owed, the notice on top, and what survives tax — including the cap that quietly shrinks as your salary rises, which is where most payouts get taxed harder than expected.
Entitlements and rates verified against the official sources — how we check.
In your hand, after tax
$37,440
From a package of $40,000, after $2,560 of tax on the parts that are taxed.
You keep $37,440Tax $2,560
How it’s made up
The whole-of-income cap has $110,000 left after your other income this year.
Enter your details above to see this.
Your unused annual and long service leave are not in this figure. They are paid out separately and taxed under their own schedule, so your final pay will be larger than the total above. General information only — not financial, tax or employment advice.
The table really does go down at ten years
Redundancy pay climbs with service until nine years, then falls. Sixteen weeks at nine years becomes twelve at ten, and stays there however long you stay after that. On the salary in the form that is $32,000 against $24,000 — the loyal year costs $8,000.
People assume this is a mistake, or their employer being difficult. It is neither. It is what the National Employment Standards say, and it has been that way since they began.
Weeks of pay at each length of service. The last band is the one people query.
| Completed years of service | Redundancy pay | On $104,000 a year |
|---|---|---|
| 1 to under 2 years | 4 weeks | $8,000 |
| 2 to under 3 years | 6 weeks | $12,000 |
| 3 to under 4 years | 7 weeks | $14,000 |
| 4 to under 5 years | 8 weeks | $16,000 |
| 5 to under 6 years | 10 weeks | $20,000 |
| 6 to under 7 years | 11 weeks | $22,000 |
| 7 to under 8 years | 13 weeks | $26,000 |
| 8 to under 9 years | 14 weeks | $28,000 |
| 9 to under 10 years | 16 weeks | $32,000 |
| 10 years or more | 12 weeks | $24,000 |
Source: Fair Work Ombudsman — Redundancy pay (Fair Work Act 2009 s119). Awards and agreements can provide more, never less.
Two entitlements, two different pay rates
Redundancy pay and notice are separate things, and they are not paid at the same rate. This catches anyone who earns more than their base rate.
| Redundancy pay | Notice paid in lieu | |
|---|---|---|
| Paid at | Base rate for ordinary hours | What you would have earned working it out |
| Includes penalties and overtime | No | Yes |
| Includes loadings and allowances | No | Yes |
| If you have under 12 months service | Nothing | Still payable |
| Tax-free limit applies | Yes | No |
The two are paid at different rates in the same final pay. Anyone who normally earns penalties or allowances is paid less per week for redundancy than for notice, and a calculator using one rate for both is wrong on at least one of them.
Who gets no redundancy pay at all
The exclusions are broader than most people expect, and the small business one is the biggest. A business with fewer than 15 staff owes nothing under the NES — but the count is not just the people you see each day. Count everyone employed at the time of the redundancy: the employees being made redundant, other full and part-time employees, casuals engaged on a regular and systematic basis, and all employees of associated entities including those based overseas.
- Less than 12 months of continuous service
- Employed for a specific period of time, project or season
- Terminated for serious misconduct
- A casual employee
- A trainee employed only for the length of the training arrangement
- An apprentice
Someone with under 12 months service usually gets no redundancy pay but may still be entitled to notice. The two entitlements are separate.
And the two lists are not the same list, which catches people out. Notice has its own exclusions — casuals, fixed-term and seasonal work, serious misconduct, and daily or weekly hire in a few named industries. The sharpest difference is apprentices: An apprentice gets NO redundancy pay under the NES but DOES get notice of termination, unless they were employed for a set period or fired for serious misconduct. The two lists are not interchangeable.
The small business exemption has a narrow exception running the other way. An employer that became a small business by downsizing may still owe redundancy pay, but only where all of these hold, and Fair Work notes further rules besides: the employer is bankrupt or in liquidation; the employee is not covered by an award or agreement containing an industry-specific redundancy scheme; the redundancies that led to the employer becoming a small business happened on or after 15 December 2023. We do not model it.
Some awards replace the NES scheme entirely, including the Black Coal Award, Building and Construction Award, Joinery Award and others. We do not model individual awards; if yours is on that list, it is the award that governs, not this page.
The cap that shrinks while you are not looking
Two caps govern how a termination payment is taxed, and which one applies depends on what the payment is — not on how big it is. This is the part that separates a real answer from weeks times salary.
Genuine redundancy pay above the tax-free limit is an excluded payment. It gets the ETP cap of $270,000, which is generous and, unlike the other cap, is not reduced by the rest of your income. Payment in lieu of notice, a golden handshake, unused sick leave and anything ex gratia are non-excluded, and they get whichever is smaller: the ETP cap, or the whole-of-income cap.
One thing this calculator does not model. The ETP cap is a single annual amount, and the ATO reduces it by any earlier employment termination payment in the same income year — and by any earlier payment for the same termination. This page gives the excluded and non-excluded parts the full cap each, which is right for one termination paid once, and too generous if you have already received an ETP this year. It matters only if your payments together approach $270,000. We do not ask for earlier payments, so rather than guess at them we are telling you.
The whole-of-income cap starts at $180,000, is not indexed, and is reduced by every other dollar of taxable income you earn that year. Earn $150,000 before being made redundant and only $30,000 of it is left. Earn more than $180,000 and there is none, so the whole non-excluded component is taxed at 47% instead of 32%.
| Payment | Cap that applies |
|---|---|
| Genuine redundancy and early retirement scheme payments above the tax-free limit | ETP cap only — $270,000 |
| Non-genuine redundancy that would have been genuine but for retirement or pension age | ETP cap only — $270,000 |
| Invalidity payments outside the tax-free component | ETP cap only — $270,000 |
| Golden handshakes and gratuities | The smaller of the two caps |
| Non-genuine redundancy payments | The smaller of the two caps |
| Payments in lieu of notice | The smaller of the two caps |
| Payments for unused sick leave or unused rostered days off | The smaller of the two caps |
In the majority of cases the whole-of-income cap is the lower of the two, so it is the one that applies to non-excluded payments.
One practical consequence: when in the financial year you are let go can matter as much as how much you are paid. The same package in a fresh income year meets a cap that nothing has eaten into yet.
What is not in the figure above
Unused annual and long service leave paid on termination are NOT part of a genuine redundancy payment and are not an ETP. They are taxed under their own schedule, which is not modelled here.
- Salary, wages or allowances owing for work already done
- Unused annual leave and leave loading paid on termination
- Unused long service leave paid on termination
- Payments in lieu of superannuation benefits
Your accrued annual leave is usually the largest of those, and if leave loading would have applied to it, the payout has to include the loading too. That is worth checking against your final payslip line by line.
It is taxed differently because you were made redundant. On a GENUINE REDUNDANCY the withholding is a flat 32% on unused annual leave and leave loading whenever they accrued, and 32% on long service leave accrued after 17 August 1993. That is simpler than the normal-termination case, where post-1993 leave is taxed at marginal rates instead.
So the leave payout on a redundancy is usually simpler to check than one on a resignation: a flat rate, not a marginal-rate calculation folded into a pay period. Two more things from the same schedule. Nothing is withheld for a study loan from it — the STSL line explains why that still leaves a bill at assessment. And if you have not given your employer a tax file number, the rate is 47%.
Not modelled, and the reason is the accrual dates. Splitting a balance across the pre-1978, 1978-1993 and post-1993 bands needs records almost nobody has to hand, and getting it wrong would misstate the payout. The flat 32% for a genuine redundancy is stated on the page because it needs no such split. Source: ATO — Schedule 7: Tax table for unused leave payments on termination of employment (QC107125), published 17 June 2026.
Frequently asked questions
Why does redundancy pay go down after ten years?
My employer says I get nothing. Can that be right?
Is redundancy pay tax free?
Why was my payout taxed more than I expected?
Does my unused annual leave get paid out too?
Does it matter that I am over 45?
Where these rules come from
- Fair Work Ombudsman — Redundancy pay — Fair Work Act 2009 s119.
- Fair Work Ombudsman — Who doesn't get redundancy pay.
- Fair Work Ombudsman — Dismissal (notice of termination) — Fair Work Act 2009 s117.
- ATO — Employment termination payments (caps and tax-free limits) — page updated 2026-04-17.
- ATO — Applying the ETP caps — page updated 2025-07-24.
- ATO — Schedule 11, tax table for employment termination payments — page updated 2026-06-17.
Both regulators' published worked examples are pinned by automated tests, so the weeks table and the tax-free limit cannot drift without the build failing. What is not modelled is stated on the page rather than hidden: individual awards, the tax on unused leave, and the Fair Work Commission's power to reduce redundancy pay where an employer finds other acceptable employment. The methodology page sets out the full list.