Redundancy Payments 2021

Redundancy payments are treated differently to regular termination payments. 

For genuine redundancy payments, there is a tax-free portion allowed, and any amount above this tax-free amount is treated as an Employment Termination Payment (ETP) which has separate tax treatment.

In October 2019, the age at which employees can access the concessional tax treatment for redundancy payments was changed from 65 to age-pension age.  
  • The tax-free limit for 2021 is $10,989 + $5,496 per each year of full service.
  • This is reported at lump sum D on the Single Touch Payroll income statement or PAYG payment summary.
  • For any amount of redundancy payment over the tax-free limit, it is treated as an Employment Termination Payment (ETP) and taxed according to ATO preservation age.
  • ETPs are concessionally taxed up to a cap and the maximum tax rate applies to amounts over the cap; check which of the ETP cap or whole-of-income cap applies to the redundancy payment.  
Visit the ATO Redundancy and early retirement and ATO Taxation of termination payments webpages for more details and for information on non-genuine redundancies and early retirement schemes.

Fair Work Ombudsman Notice and Redundancy Calculator
Check the Fair Work Ombudsman website for the redundancy process. There are many guidelines for working out the notice period, pay in lieu of notice, redundancy while the employee is stood down and coronavirus award variations.

Work out how much notice and redundancy pay is required with the FWO Notice and Redundancy Calculator. This calculator should only be used for award and National Employment Standards provisions. 

If an employee is covered by a registered agreement, that agreement governs the redundancy notice and payment provisions.

Results from the calculator can be saved and printed for the employer’s records.