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 | What you can claim | Tax applied | Irrevocable ETP election required |
|---|---|---|---|
| Genuine redundancy | Full account balance or a partial payment. The minimum partial payment is the tax-free component. | No tax up to the tax-free threshold. Above the threshold, ETP concession rates apply: 32% if under 60, or 17% if 60 or over. If you are 67 or over, the 17% rate applies but you are not entitled to the tax-free threshold. Any amount above the ETP cap is generally taxed at 47%. | No |
| Retirement after pension age (67), without redundancy | Full account balance or a partial payment. | 17% up to the adjusted whole-of-income cap, then 47% on amounts above it. | No |
| Dismissal termination | Full account balance or a partial payment. | ETP concession rates up to the adjusted whole-of-income cap: 32% if under 60, or 17% if 60 or over. Amounts above the cap are taxed at 47%. | No |
| Fixed term contract end | Full account balance or a partial payment. | ETP concession rates up to the adjusted whole-of-income cap: 32% if under 60, or 17% if 60 or over. Amounts above the cap are taxed at 47%. | No |
| Promotion ‘off the tools’ with the same employer | Full account balance or a partial payment. | PAYG withholding tax applies, because your employment has not legally terminated. | No |
| Voluntary termination or resignation | You must claim your full account balance. | ETP concession rates up to the adjusted whole-of-income cap: 32% if under 60, or 17% if 60 or over. Amounts above the cap are taxed at 47%. | Yes |
| ‘Off the tools’ with a different employer | You must claim your full account balance. | ETP concession rates up to the adjusted whole-of-income cap: 32% if under 60, or 17% if 60 or over. Amounts above the cap are taxed at 47%. | Yes |
47% is the maximum withholding rate. The adjusted whole-of-income cap is the whole-of-income cap reduced by your 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
Jim 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 Jim is paid $102,000.
As this is a voluntary termination, Jim 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.
Need help?
Additional tax information
An ETP election is a once-off choice to have your benefit paid under the Employment Termination Payment rules, rather than remaining in the Genuine Redundancy Account arrangement. To make one, you must submit the required irrevocable ETP election or claim form before your termination of employment takes effect, and provide any supporting information requested by the fund or your employer. If a valid election is made, your benefit may be taxed under the ETP rules, including the applicable ETP caps and concessional tax rates.
Concessional rates of 32%, or 17% if you have reached age 60, only apply up to the ETP cap of $270,000 for the 2026/27 financial year, across all Employment Termination Payments. Beyond that cap we are required to withhold 47% tax. The ETP cap applies to genuine redundancy, invalidity and death payments. Payments connected with other termination events may instead be subject to the whole-of-income cap.
Any termination payment that is not a genuine redundancy, an invalidity component or a death benefit may attract additional tax when you lodge your personal tax return, if your taxable income including the payment exceeds $180,000. Please speak with your financial adviser if you think this may apply to you.
We are legally required to withhold 47% tax from all severance claims made more than 12 months after your retirement or 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 a 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 is tax-free, and tax is withheld at 47% (including the 2% Medicare levy) on the taxable component above the cap. If the beneficiary is a non-dependant, tax is withheld at 32% on the taxable amount up to the ETP cap, and at 47% (including the 2% Medicare levy) on any amount above it. In the event of death or permanent disability, please contact the fund before submitting a claim form.
Your severance payment may affect other Commonwealth Government benefits, such as the family tax benefit, childcare benefit and private health insurance rebate. You should consult your financial adviser, the Australian Taxation Office or Centrelink for advice on how your personal circumstances may be affected.
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.