Redundancy

What is Redundancy?

A genuine redundancy payment is a payment made to you as an employee if you're dismissed because the job you were doing has been abolished. This means your employer has decided that your job no longer exists, and your employment is to be terminated.

How does it work?

Your genuine redundancy payment is:

• tax-free up to a limit based on your years of service. Your employer will notify you of this tax-free limit (flat dollar amount) on your income statement or PAYG payment summary.
• concessionally taxed as an employment termination payment (ETP) above your tax-free limit.
• taxed at your usual marginal tax rate for any amount above certain caps.

The tax-free amount is not part of your ETP (Eligible termination payment). It's reported as a lump sum in your employee income statement or PAYG payment summary – individual non-business.

Any amount over the tax-free limit is part of your ETP.

What is included?

Depending on your employment conditions, a genuine redundancy payment may include:

• Payment in lieu of notice.
• Severance payment of a number of weeks' pay for each year of service.
• A gratuity or 'golden handshake'.

What is not included?

It is not a redundancy when you:

• Are dismissed because you’ve reached normal retirement age.
• Are Age Pension age or older on the day of dismissal.
• Leave voluntarily.
• Have your contract terminated.
• Are dismissed for disciplinary or inefficiency reasons.

A payment for a non-genuine redundancy is taxed as part of your ETP. This means it will generally be taxed at a lower rate than your normal income, provided the payment doesn't exceed certain caps.

The following payments are not included in a genuine redundancy payment:

• Salary, wages or allowances owing to you for work done or leave already taken for work completed.
• Lump sum payments of unused annual leave or leave loading paid on termination of employment
• Lump sum payments of unused long service leave paid on termination of employment under a formal arrangement
• Payments made in lieu of superannuation benefits.

This information is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA.

Care has been taken to provide up to date and accurate information relating to the subject area however BR Advice Pty Ltd (ABN 30 612 056 523, AFSL 488655), Blue Rock Private Wealth Pty Ltd (ABN 95 166 927 055, AFSL 452733), and their representatives make no representation as to its accuracy or completeness.

Published: July 2025.

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