How is the ETP portion of a redundancy taxed?

The ETP amount (up to the $245,000 ETP cap for 2024–25) is taxed at 32% if you're below preservation age, or 17% if you've reached preservation age (60). Any amount above the ETP cap is taxed at the top marginal rate of 47%.

§ — Tax

How much of your redundancy payout does the ATO actually take?

Genuine redundancy payments are tax-free up to a limit based on your years of service. Enter your payout below to see the tax-free portion, the ETP tax on the rest, and what actually lands in your account.

2024–25 tax year·Source: ATO·Read · 6 min

Your payout

Total redundancy payout

Completed years of service

Only whole years count towards the tax-free limit — the ATO ignores part years.

Preservation age

Below 60

60 or over

Preservation age is 60 for everyone born after 30 June 1964.

Your result · 2024–25

Net payout after tax

$101,644

$62,636 is tax-free genuine redundancy; $57,364 is taxed as an Employment Termination Payment (ETP).

Tax-free limit$62,636

Tax-free amount received$62,636

ETP taxed at 32%$18,356

Total tax payable$18,356

How a genuine redundancy payout is taxed

A genuine redundancy payment gets special tax treatment — part of it is completely tax-free, and the rest is taxed concessionally as an Employment Termination Payment (ETP).

The tax-free limit for 2024–25 is $12,524 plus $6,264 for every completed year of service. Only whole years count — 7 years and 11 months is treated as 7 years. Any part of the payout above this limit becomes an ETP.

The ETP component is taxed at a concessional rate up to the ETP cap of $245,000(2024–25). The rate depends on whether you've reached preservation age: 32% if you're below it, or 17% if you're at or above it. Preservation age is 60 for everyone born after 30 June 1964.

Any ETP amount above the $245,000 cap is taxed at the top marginal rate of 47% (45% plus the 2% Medicare levy) — the same rate that applies to excess payments regardless of age.

2024–25 key figures

Figure	Amount
Tax-free base	$12,524
Tax-free per year of service	$6,264
ETP cap	$245,000
ETP rate — below preservation age	32%
ETP rate — at/above preservation age	17%
Rate above ETP cap	47%

Source: ATO · 2024–25 · Preservation age is 60 for those born after 30 June 1964

§ Letters & replies

Redundancy tax, answered.

Common questions about how redundancy payouts and ETPs are taxed in Australia.

How much of my redundancy payout is tax-free?+ open

For 2024–25, the tax-free limit is $12,524 plus $6,264 for each completed year of service. Any payout above this limit is taxed as an Employment Termination Payment (ETP), not tax-free income.

How is the ETP portion taxed?+ open

Up to the $245,000 ETP cap, the rate is 32% if you're below preservation age, or 17% if you've reached it. Anything above the cap is taxed at the top marginal rate of 47%.

What is preservation age?+ open

Preservation age is the age you can access your super — 60 for everyone born after 30 June 1964. It also sets which ETP tax rate (32% or 17%) applies to your redundancy payout.

Does unused annual or long service leave get taxed the same way?+ open

No. Unused annual leave and long service leave paid out on termination are taxed separately at their own rates — they are not part of the genuine redundancy tax-free limit or the ETP component calculated here.

What counts as a genuine redundancy?+ open

Your job must be abolished and no longer required by the employer — not a resignation, retirement, or a dismissal for conduct or performance. If those conditions aren't met, the payment doesn't qualify for the tax-free limit and is fully taxed as an ETP.

Next: the bigger picture

§ — Income

How much of your redundancy payout does the ATO actually take?

How a genuine redundancy payout is taxed

Redundancy tax, answered.

Next: the bigger picture

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