Redundancy payout Australia 2026: what you're actually owed

Quick answer (TL;DR)

Under the National Employment Standards, redundancy pay scales from 4 weeks at 1 year of service to 16 weeks at 9 to 10 years, then drops back to 12 weeks past 10 years. For dismissals from 1 July 2026, the ATO tax-free threshold for 2026-27 is A$13,598 plus A$6,801 for every completed year of service (ATO). Anything above that is taxed as an Employment Termination Payment, capped at A$270,000. Centrelink will hold JobSeeker until your payout has "run out" on paper, which is often longer than people expect. For 2025-26 the threshold was A$13,100 plus A$6,552 a year, with a A$260,000 cap.

If you are reading this with an offer letter open, the three numbers that matter are your weeks of redundancy pay, your tax-free cap, and your Income Maintenance Period at Centrelink. The rest is detail.

The Fair Work scale, with the awkward 10-year step

Section 119 of the Fair Work Act 2009 sets the floor for redundancy pay. Awards and enterprise agreements can lift it; they cannot cut it. The scale runs:

1 to less than 2 years of service: 4 weeks of redundancy pay
2 to less than 3 years: 6 weeks
3 to less than 4 years: 7 weeks
4 to less than 5 years: 8 weeks
5 to less than 6 years: 10 weeks
6 to less than 7 years: 11 weeks
7 to less than 8 years: 13 weeks
8 to less than 9 years: 14 weeks
9 to less than 10 years: 16 weeks
10 or more years: 12 weeks

That last row trips people up. Past 10 years, the entitlement drops to 12 weeks. The reason is long service leave: state and territory schemes pay out a separate lump sum at 10 years of service (7 years in Victoria) and the Fair Work Act assumes that compensates the loss.

So a 12-year worker in Sydney gets 12 weeks of redundancy plus their NSW long service leave. A 12-year worker in Melbourne gets 12 weeks plus their Victorian long service leave. The two numbers travel together. If your offer letter shows only the 12 weeks and you have not heard "plus your long service leave entitlement", ask.

A few categories sit outside the scale entirely. Casuals, fixed-term contractors at the natural end of their contract, apprentices, trainees, and anyone with less than 12 months continuous service do not qualify for redundancy pay under the NES. Employers with fewer than 15 staff are also exempt, except under industry awards that override the exemption.

Notice and final pay are separate

Section 117 sets the minimum notice period, paid in addition to redundancy. The scale runs from 1 week (under a year of service) to 4 weeks (over 5 years), with one extra week if you are over 45 and have served at least 2 years. Your employer can ask you to work the notice out or pay it in lieu. Either way, it sits beside your redundancy pay, not inside it.

Your final pay should also include unused annual leave, leave loading where the award provides it, and unused long service leave at the state rate.

What the ATO actually taxes

For a redundancy to be "genuine" in the ATO's eyes, three things have to be true. The role no longer exists. You are under the age pension age (currently 67). The decision was made at arm's length. Where those tests pass, a chunk of your payout is tax-free.

For the 2026-27 income year (dismissals from 1 July 2026 to 30 June 2027), the tax-free amount is:

A$13,598 + (A$6,801 x completed years of service)

Source: ATO, Employment termination payments, Table 20, last updated 17 April 2026. For dismissals in the 2025-26 year the figures were A$13,100 base and A$6,552 a year.

A completed year means exactly that. Seven years and eleven months counts as seven, not eight. Partial years are not pro-rated.

Anything above the tax-free amount is treated as an Employment Termination Payment. The ETP cap for life-benefit payments is A$270,000 in 2026-27 (it was A$260,000 in 2025-26). Inside the cap, the taxable portion attracts a concessional rate: 17 per cent if you are at or over preservation age, 32 per cent if you are under it (the Medicare levy is included in both rates). Above the cap, the top rate of tax, 47 per cent, applies.

Two adjacent payments need watching. Pay in lieu of notice is taxed as an ETP, not as ordinary salary. Unused annual leave and long service leave are taxed at concessional rates under separate rules. None of these attract super contributions, which catches people out at tax time.

Worked example: 8 years, A$95,000 salary, made redundant October 2026

A real example does more work than the rules. Take a customer service manager on a base salary of A$95,000 in Sydney, made redundant after 8 completed years in October 2026.

NES redundancy pay: 14 weeks at the ordinary weekly rate. A$95,000 / 52 = A$1,827 a week. Redundancy = A$25,578.
Notice (s117): 4 weeks plus 1 extra week because she's over 45 with more than 2 years of service. Paid in lieu = A$9,135.
Long service leave: 8.67 weeks at A$1,827 = A$15,840 (NSW threshold is 10 years, so she would not qualify unless her termination is treated as for-cause-by-employer under section 4(2) of the NSW Long Service Leave Act; check this carefully with Fair Work, because employer-initiated redundancy after 5 years of NSW service can trigger pro-rata access).
Unused annual leave: 4 weeks accrued, A$7,308.

Gross before tax: A$42,021 (excluding the disputed long service leave portion). With it, A$57,861.

The tax-free amount on the redundancy itself is A$13,598 + (A$6,801 x 8) = A$68,006. The whole A$25,578 redundancy slot fits inside the tax-free cap, with A$42,428 of headroom. So the redundancy comes through untaxed.

The notice payment (A$9,135) sits outside the genuine redundancy slot and is taxed as an ETP. The unused annual leave (A$7,308) is taxed separately; the calculator estimates it at a flat 32 per cent.

This is the kind of arithmetic that calculators run automatically. Run it once yourself before you sign anything, even with the calculator at hand. Numbers anchored in your own salary and tenure stick better than numbers in a generic form.

The Centrelink wait people don't see coming

The third number on your offer letter is the one that hits hardest. If you assume JobSeeker starts the week you finish, the math will let you down.

Two waiting periods stack. The first is the Liquid Assets Waiting Period (LAWP), which applies when your liquid assets cross a threshold. The current threshold is A$5,500 for a single person with no dependants, or A$11,000 for a partnered person or a single person with dependants. Above the threshold, the wait runs up to 13 weeks at A$11,500+ single or A$23,000+ partnered.

The second, and bigger, is the Income Maintenance Period (IMP). Centrelink treats a lump-sum redundancy as paid weekly across the period it covers. A 14-week redundancy payout is treated as 14 weeks of income, even if you have already spent it. Annual leave and long service leave stack on top.

Working through the example above:

14 weeks redundancy + 4 weeks annual leave + about 8 weeks long service leave (if it accrues) = 26 weeks before JobSeeker pays anything, plus the LAWP if liquid assets are high enough to attract one.

Half a year. That is the timeline people are actually managing when they accept a payout, not the timeline they think they are managing.

The fix is to apply as soon as you finish. The IMP starts when you contact Centrelink, not when you get the money. If you wait three months to apply, you have lost three months of the clock. Services Australia's Financial Information Service is free and worth a call before you take the offer.

When the offer isn't fair (or isn't a redundancy at all)

The Fair Work Commission gets two recurring versions of this story.

The fake redundancy. Your role is being "made redundant" but the work is still being done. Someone else is doing it, or you are being asked to reapply for a slightly retitled version of the same job. Under section 389, that is not a genuine redundancy and can ground an unfair dismissal claim.

The shortcut consultation. Most modern awards require the employer to notify you as soon as practicable, share information about the change, and consider redeployment. Failure to consult does not invalidate the redundancy, but it can ground a separate Fair Work application and influence the package on offer.

If either looks familiar, the threshold question for an unfair dismissal claim is whether your earnings are under the high income threshold, which from 1 July 2025 is A$183,100 for employees not covered by an award or enterprise agreement. The maximum compensation is capped at A$91,550 or 26 weeks of your wage, whichever is lower. Talk to a community legal centre or your union before the 21-day filing window closes.

What about ANZ, CBA, Atlassian and WiseTech?

A lot of the 2026 cuts have been voluntary redundancy programs at companies running hard restructures. The NES scale is the floor; voluntary programs almost always pay above it. Banking voluntary rounds in 2025 and 2026 have typically run 2 to 4 weeks per year of service, plus outplacement, plus retraining funding in some cases. Public service voluntary redundancies opening at PM&C, DCCEEW, Home Affairs, CSIRO and others come with their own scale under the APS Enterprise Agreements.

Voluntary does not mean fair. It means the offer is on the table to take or leave. The same arithmetic applies. Compare the package to your role's NES floor, factor the tax-free cap, model the Centrelink wait, and ask what your re-entry timeline looks like in your specific role and city.

FAQ

How is a "completed year of service" defined?

Twelve full months between your start date and the day you finish. Eleven months and three weeks does not count. The ATO uses this same definition for the tax-free cap.

Is the redundancy pay calculated on base salary or total package?

On your "ordinary time earnings" weekly rate. This usually means base salary plus regular allowances, divided by 52. It excludes overtime, super contributions, and one-off bonuses. Your award may define this differently; check the relevant award.

Do I get super on my redundancy payment?

No. Redundancy pay, pay in lieu of notice, and termination leave payments do not attract super contributions. Only ordinary earnings do.

Can I salary-sacrifice the taxable portion into super to reduce tax?

Not the redundancy itself, which is taxed under ETP rules. Some workers split their final unused leave or annual bonus into super to reduce marginal tax in that financial year, but this needs financial advice tailored to your situation.

What if my employer goes broke before paying me?

The federal Fair Entitlements Guarantee scheme covers unpaid entitlements when employers become insolvent. It pays up to 13 weeks of unpaid wages, all annual leave, all long service leave, up to 5 weeks of notice, and up to 4 weeks of redundancy pay per year of service. Apply through the Department of Employment and Workplace Relations.

Can my employer make me take annual leave during the notice period?

Generally no, unless your award or contract explicitly allows it. Most awards require mutual agreement. If your employer is pressuring you to burn leave during notice instead of cashing it out, that is worth a Fair Work Information Service call on 13 13 94.

Sources

All numbers in this article were verified against primary sources between 2026-06-01 and 2026-06-17.

Your next step

If you are reading this with an offer letter in hand, the 3-minute free career change check maps your origin role to two or three adjacent destination roles in Australia, with realistic salary bands and time-to-hire windows. It is free. It is not a course. It does not collect anything beyond an email.

This article is general information about Australian redundancy entitlements and tax. It is not legal or financial advice. For your specific situation, contact the Fair Work Information Service on 13 13 94, the ATO on 13 28 65, or a licensed financial adviser. If redundancy is affecting your wellbeing, Lifeline (13 11 14) and Beyond Blue (1300 22 4636) are free, around the clock.

Last updated: 18 June 2026.