Redundancy payments and planning ahead
It’s important to know how much money you have, and how much you’ll need until you find a new job or move on to your next steps. This includes understanding your redundancy payment and managing your household expenses.
Your redundancy payment
Upon redundancy, you will receive some payments from your employer, each with different tax treatments. These include:
- A tax-free genuine redundancy payment
- An employment termination payment (ETP)
- Payments for any accrued annual and long service leave
Tax-free genuine redundancy payment
Any payments that meet the conditions of a genuine redundancy are tax free up to a limit depending on your years of service with your employer.
The maximum amount of a genuine redundancy payment you can receive tax free in the 2023-24 financial year is $11,985 plus $5,994 for each completed year of service. These thresholds may be increased on 1 July each year.
Employment Termination Payment
The amount of the payment that exceeds the tax-free portion is treated for tax purposes as an employment termination payment (ETP). ETPs include payments for unused sick leave and rostered days off, in lieu of notice, and a ‘golden handshake’ or other incentive payment. The amount of tax payable depends on if you’ve reached preservation age.
Preservation age is the age you can access your super and varies depending on your date of birth.
Tax payable on ETPs in 2023-24 (Genuine Redundancy)
| Component | Tax payable |
| If under preservation age | First $235,000 taxed at 30% and excess at 45% |
| If preservation age or over | First $235,000 taxed at 15% and excess at 45% |
The above tax rates do not include the Medicare levy
Payments for any accrued annual and long service leave
Upon redundancy, you may also be eligible to receive a range of other payments that must be taken as cash (ie can’t be rolled into super before tax has been applied). Termination payments that form part of a genuine redundancy and their tax treatment in the 2023-24 financial year are shown here:
| Payment | Tax treatment in the event of a genuine redundancy | When tax is paid |
| Accured annual leave | 100% taxed at a maximum rate of 30% | Deducted by your employer |
| Accured long service leave (pre 16/8/1978 | 5% taxed at your marginal rate | Deducted by your employer |
| Accured long service leave (post 15/8/1978) | 100% taxed at a maximum rate of 30% | Deducted by your employer |
The above tax rates do not include the Medicare levy
If you have questions about your redundancy payment, please speak to your employer.
Planning your money
While it may be tempting to use your redundancy payment to pay down debts or buy an expensive item, it’s worth considering “parking” your redundancy payment in your bank account or home loan offset account. This way you can readily access the funds until you have a clearer picture of the future. Once you get a new source of income, you can then reassess what to do with any leftover money.
Another important step is to prepare a budget. This will help you plan for your new financial situation and work out how long your redundancy payment will last. Use the Moneysmart Budget planner.
If you’re concerned about meeting mortgage or loan payments, contact your bank or lender to discuss options, for example putting payments on hold for a period of time. It is worthwhile doing this as soon as possible.
Centrelink benefits
If you have received a redundancy payment, you will be subject to an Income Maintenance Period ie a waiting period before you’re eligible to receive Centrelink assistance. For more information and to find out if you’re eligible for Centrelink payments go to the Centrelink Payment and Service Finder.
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If you have any other questions, please call our Member Services Team on 1300 360 988, or email us.