General Tax Information
The following information is of a general nature only and is current only as at October 2026. Taxation is complex and taxation laws change regularly – including retrospectively. In addition, taxation laws impact individuals differently according to their own individual circumstances.
What tax is applied to my claim?
The tax you pay depends on why you left your employer and your age when you are paid.
| Reason for separation | Claim limit | Tax applicable | Irrevocable election required |
|---|---|---|---|
| Genuine Redundancy | You may claim your full account balance or partial payment. Note: Minimum partial payment is the tax-free component. |
There is no tax applicable to the payment up to the tax-free threshold. Any amount above the tax-free threshold is taxed at ETP concession rates:
Any amount above the ETP cap is generally taxed at 47% (max withholding rate). |
No |
| Retirement over age 67 (without redundancy) |
You may claim your full or partial payment. | ETP concession rates of 17% applies up to the adjusted whole-of-income cap and 47% (max withholding rate) for amounts above. | No |
| Dismissal Termination | You may claim your full or partial payment. | ETP concession rates up to the adjusted whole-of-income cap:
Any amount exceeding the whole-of-income cap* will be taxed at 47% (max withholding rate). |
No |
| Fixed Term Contract End | You may claim your full or partial payment. | ETP concession rates up to the adjusted whole-of-income cap:
Any amount exceeding the whole-of-income cap* will be taxed at 47% (max withholding rate). |
No |
| Promotion ‘off the tools’ from the same employer | You may claim your full or partial payment. | PAYG withholding tax at ordinary rates applies, as your employment has not legally terminated. | No |
| Voluntary Termination or resignation |
You must claim full account balance. | ETP concession rates up to the adjusted whole-of-income cap:
Any amount exceeding the adjusted whole-of-income cap* will be taxed at 47% (Max withholding rate). |
Yes |
| ‘Off the tools’ to a different employer | You must claim full account balance. | ETP concession rates up to the adjusted whole-of-income cap:
Any amount exceeding the adjusted whole-of-income cap* will be taxed at 47% (Max withholding rate). |
Yes |
Note: The adjusted whole-of-income cap is the whole-of-income cap reduced by other taxable income.
When do the new tax rules start?
The new tax rules apply from 19 October 2026. If your employment ended before 19 October 2026, the previous tax treatment applies. If your employment ended on or after 19 October 2026, the new tax treatment applies, subject to the eligibility requirements of your claim.
What is the tax-free threshold?
A genuine redundancy payment is tax-free up to a limit based on the number of whole years of service you completed with your employer.
For the 2026/27 financial year the limit is $13,598, plus $6,801 for each complete year of service*.
| Years of service | Calculation | Tax-free limit |
|---|---|---|
| Initial year | $13,598 | $13,598 |
| Initial + 1 year | $13,598 + (1 × $6,801) | $20,399 |
| Initial + 2 years | $13,598 + (2 × $6,801) | $27,200 |
| Initial + 3 years | $13,598 + (3 × $6,801) | $34,001 |
| Initial + 4 years | $13,598 + (4 × $6,801) | $40,802 |
And so on for each additional complete year.
Worked examples
Example 1: a genuine redundancy claim within the tax-free threshold
Jim has $10,000 in his account, is under pension age 67, and has worked with his current contributing employer for two and a half years. He is made redundant and makes a claim.
His tax-free threshold is $13,598 + (2 × $6,801) = $27,200. Because his balance of $10,000 is under that threshold, no tax is withheld and Jim is paid the full $10,000.
Example 2: a voluntary termination where part of the payment receives concessional ETP rates
John has $150,000 in his account and is under 60. He resigns, makes a valid irrevocable ETP election before his termination date, and claims his full balance.
Tax is withheld at the ETP concession rate of 32%, so $150,000 × 32% = $48,000 tax, and John is paid $102,000.
As this is a voluntary termination, John may also be subject to the whole-of-income cap. If he receives other income in the same tax year, a higher rate of tax may be payable to the extent the payment takes him over $180,000.
Additional tax information
Concessional tax rates of 32% (or 17% if you have reached age 60) only apply up to the ETP Cap ($270,000 for the financial year 2026/27) of all Eligible Termination Payments (ETP). Beyond this cap we are required to withhold 47% tax.
Disclaimer: 1. Applicable to Genuine Redundancy, invalidity and death. ETPs paid in connection with other termination events may also be subject to the whole-of-income cap discussed separately.
We are legally required to withhold 32% tax from all severance claims made beyond 12 months of your retirement/termination date. This 12-month rule does not apply to genuine redundancy claims.
A death benefit employment termination payment is received from a person’s employer after their death and may have a tax-free and taxable component. The tax treatment depends on whether the recipient is a dependant and whether the payment exceeds the ETP cap.
If the beneficiary is a dependant, any amount up to the ETP cap will be tax-free. Tax is withheld at 47% (including Medicare levy of 2%) on the amount of the taxable component above the ETP cap.
If the beneficiary is a non-dependant, then tax is withheld at 32% on the amount of the taxable income up to the ETP cap. Any amount above the ETP cap is withheld at 47% (including Medicare levy of 2%).
In the event of death or permanent disability, please contact the Fund before submitting a claim form.
Any termination payment that is NOT resulting from a genuine redundancy, the invalidity component of a benefit or a death benefit, may be subject to additional tax when you lodge your personal tax return if your taxable income, including the payment, exceeds $180,000. Please consult your financial advisor if you believe this may apply to you.
Disclaimer 2: Please refer to The whole-of-income cap and your tax | Australian Taxation Office
An ETP election is a once-off choice to have a benefit paid under the Employment Termination Payment (ETP) rules, rather than remaining in the Genuine Redundancy Account arrangement.
If you wish to make an ETP election, you must submit the required irrevocable ETP election / claim form before the date of your termination of employment takes effect and provide any supporting information requested by the fund or your employer.
If a valid ETP election is made, your benefit may be taxed under the ETP rules, including applicable ETP caps and concessional tax rates.
See the ATO’s Schedule 11: Tax table for employment termination payments and The whole-of-income cap and your tax.
The information provided here is general information and is not taxation, regulatory, accounting or legal advice. Nor is it investment or financial product advice. It is not a recommendation and has been prepared without taking into account your tax circumstances, investment objectives, financial situation or needs. You should consider consulting a qualified tax adviser before making a decision based on this information.
*Figures are based on financial year 2026/27 and are subject to change from the ATO.