ETP Tax Calculator.
An employment termination payment is not taxed at one rate, and half of what your employer pays you on the way out is not an ETP at all. This works out the tax-free limit, applies the right cap, and keeps your unused leave on its own line where it belongs.
Your termination payment
Here's your entitlement
See full calculation
| Component | Formula | Value |
|---|---|---|
| Tax-free limit, 8 completed years | $68,006 at Not assessable and not exempt | $0 |
| ETP taxable component, within the cap | $11,994 at 30% plus 2% Medicare, ceiling 30% | $3,838 |
| Unused annual leave (not an ETP) | $6,000 at Capped at 30% plus 2% Medicare | $1,920 |
| Total tax | $86,000 gross, blended rate 6.7% | $5,758 |
Disclaimer: This is an estimate of tax payable, not legal or financial advice, and it is not the PAYG figure your employer will withhold. It assumes you are an Australian resident for the full year, that you have given your employer a TFN, and that the whole payment falls in FY2026-27. It does not model the Medicare levy reduction for low incomes, study and training loan repayments, or the Medicare levy surcharge. Check your own position with a registered tax agent or the ATO.
Your leave payout is not an ETP
Start here, because getting this wrong throws out every number that follows. When a job ends you are usually paid several different things at once, and the tax law treats them as separate payments taxed under separate rules. An employment termination payment is only one of them.
Section 82-135 of the Income Tax Assessment Act 1997 is a list of payments that are not employment termination payments. Paragraph (c) is unused annual leave. Paragraph (d) is unused long service leave. Both are excluded by name, so no amount of arithmetic makes them part of the ETP.
| Paid on termination, but not an ETP | Where it says so | Taxed instead under |
|---|---|---|
| Unused annual leave, including loading paid with it | ITAA 1997 s 82-135(c) | ATO Schedule 7. Marginal rates on a resignation, capped at 30% plus Medicare on a redundancy |
| Unused long service leave | ITAA 1997 s 82-135(d) | ATO Schedule 7, split across three service tranches by when it was earned |
| The tax-free part of a genuine redundancy payment | ITAA 1997 s 82-135(e) | Not assessable and not exempt, so not taxed at all |
| A superannuation benefit, a pension or an annuity | ITAA 1997 s 82-135(a), (b) | Taxed under the superannuation rules instead |
| Salary, wages and bonuses owed for work already done | Not a payment in consequence of termination | Ordinary marginal rates as part of your normal pay |
ITAA 1997 s 82-135. Withholding treatment from ATO Schedule 7, published 17 June 2026 and applying to payments made from 1 July 2026.
The twist that catches people. Leave is not part of the ETP, but it is still taxable income, and the whole-of-income cap is reduced by your taxable income for the year. So a large leave payout can shrink the concessional cap on a golden handshake without ever being part of it. That is why the calculator asks for your leave amounts and then keeps them on their own rows.
The concessional rate turns on age 60, not 55
Most pages on this topic, including several accounting firm explainers still online, ask whether you are over 55. That was correct once. It is not correct for FY2026-27.
Section 82-10(3) sets the concessional rate by reference to your preservation age, not to a fixed number. Preservation age climbed on a sliding scale from 55 to 60 depending on date of birth, and that transition has now finished. Anyone born after 30 June 1964 has a preservation age of 60. Anyone born before that date turns at least 62 during FY2026-27, so they cleared their preservation age years ago.
So for FY2026-27 there is one question. Are you 60 or over on 30 June 2027? If yes, the rate inside the cap is capped at 15% plus the 2% Medicare levy. If no, it is capped at 30% plus 2%. Note the date: s 82-10(3)(a) tests your age on the last day of the income year in which you receive the payment, not on the day you are paid. Someone who turns 60 in May 2027 gets the lower ceiling on a payment received the previous August.
The two caps, and which one applies to you
The concessional rate only runs up to a cap. Above it, the rate is the top marginal rate of 45% plus the 2% Medicare levy, which is where the 47% figure comes from. There are two caps and the difference between them is worth tens of thousands of dollars.
- The ETP cap, $270,000 for FY2026-27. Indexed to average weekly ordinary time earnings in $5,000 increments, so it moves most years. It was $260,000 in FY2025-26.
- The whole-of-income cap, $180,000. Reduced dollar for dollar by your other taxable income for the year. This figure is written out in full in s 82-10(4)(c) with no indexation provision attached, which is why it has not moved since it was introduced.
That second point compounds quietly. In 2013-14 the whole-of-income cap equalled the ETP cap. In FY2026-27 it is two thirds of it. Wages index, the cap does not, so it bites a little harder every year.
| Payment | Cap that applies | Authority |
|---|---|---|
| Genuine redundancy above the tax-free limit | ETP cap only | ITAA 1997 s 82-10(6)(a) |
| Early retirement scheme payment | ETP cap only | ITAA 1997 s 82-10(6)(b) |
| Invalidity payment for permanent disability | ETP cap only | ITAA 1997 s 82-10(6)(c) |
| Compensation for personal injury, unfair dismissal, harassment or discrimination | ETP cap only | ITAA 1997 s 82-10(6)(d) |
| Golden handshake, gratuity, severance, pay in lieu of notice | Lesser of the ETP cap and the whole-of-income cap | ITAA 1997 s 82-10(4)(c) |
| Unused sick leave or unused rostered days off | Lesser of the ETP cap and the whole-of-income cap | ATO Schedule 11, ETP caps table |
ITAA 1997 s 82-10(4) and (6), and the ETP caps table in ATO Schedule 11 (QC107129, published 17 June 2026).
A settlement deserves its own note, because people assume any lump sum in a deed is a golden handshake. It is not, if it is genuinely compensation. A payment made in connection with a genuine dispute and principally compensating you for personal injury, unfair dismissal, harassment or discrimination sits under s 82-10(6)(d) and gets ETP-cap-only treatment. It does not need a court proceeding, but you and your employer should keep evidence that a genuine dispute existed.
The genuine redundancy tax-free limit
If your role was genuinely redundant, part of the payment is not taxed at all. For FY2026-27 the limit is $13,598 + $6,801 per completed year for FY2026-27. That amount is not assessable income and not exempt income under s 83-170(2), so it is not taxed, it does not count towards either cap, and it does not appear in the taxable income that reduces the whole-of-income cap. Only the excess above the limit is an ETP.
Worked example. Eight completed years of service gives a tax-free limit of $13,598 plus 8 times $6,801, which is $68,006. On an $80,000 redundancy payment, that leaves $11,994 as the ETP taxable component. Nine months more service would not help: s 83-170(3) counts whole years only.
Two conditions catch people out. First, s 83-175(1) defines a genuine redundancy payment as only the amount that exceeds what you would reasonably have received had you resigned voluntarily. It is not the whole redundancy cheque. Second, s 83-175(2)(a) requires that you were dismissed before you reached pension age. Past that day there is no tax-free limit at all, however genuine the redundancy was.
If the payment you are looking at is a genuine redundancy, the redundancy calculator is the better tool. It works out the section 119 weeks you are owed and applies this tax-free limit to them in one place. Use this page for the payments that are not genuine redundancies, where no tax-free limit exists and the whole-of-income cap can apply.
32% and 17% are ceilings, not flat rates
The two numbers everyone quotes are 32% and 17%, and both are misunderstood in the same way. Section 82-10(3) does not set a rate. It gives you a tax offset that ensures the rate of income tax does not exceed 15% at preservation age or 30% below it. Add the 2% Medicare levy and you get the 17% and 32% printed in ATO Schedule 11.
A ceiling only does work if you were above it. Someone whose marginal rate on the amount is 16% pays 16%, and the offset delivers nothing. The same mechanism applies to unused leave under ss 83-15 and 83-85, which is why the long service leave tax calculator treats 32% the same way.
The reason you will still see a flat 32% on your payslip is that Schedule 11 is a withholding table. Your employer applies the flat percentage at the time of payment. Your actual liability is worked out on your return, and the difference is refunded or billed then.
Two places the ATO contradicts itself
Both are real, both were found by reading the ATO's own pages against each other, and this page states them rather than quietly picking a side.
One: a single payment with an excluded and a non-excluded part. The ATO narrative says the taxable component of the excluded part counts as taxable income when the whole-of-income cap is worked out for the non-excluded part. The worked example on the same ATO page says the opposite, because both parts were received at the same time. Reading s 82-10(7) settles it: the Act deems the non-excluded part to be a second payment made immediately after the first, and narrows the disregard in s 82-10(5) so that only the non-excluded component is disregarded. On that reading the ATO narrative is right and its own example is wrong. That is a reading of the statute, not an ATO correction, so this calculator does not model a mixed payment at all. Run it once for each part and treat the boundary case as uncertain.
Two: a redundancy at or past pension age. The ATO's narrative page treats a non-genuine redundancy that would have been genuine but for the employee's age as an ETP-cap-only payment. The current Schedule 11 cap table lists non-genuine redundancy payments under the whole-of-income cap without that carve-out. Section 82-10(6)(a) is explicit and supports the narrative page, so that is the option this calculator offers. Your payroll system may not agree, and there is no tax-free limit either way.
Withholding is not your final tax bill
Schedule 11 tells your employer what to withhold on the day. It is worked out on your taxable income before you were terminated. If you find another job in the same income year, that extra income further reduces the whole-of-income cap on a golden handshake, and you can end up owing more at tax time than was taken out. Tax losses do not help either: they are ignored in working out the cap.
One more timing rule. A payment generally has to reach you within 12 months of termination to be an ETP. Later than that it is a delayed termination payment, reported as gross payments rather than as an ETP. The exception is a genuine redundancy: the excess above the tax-free amount stays an ETP however late it is paid.
Common mistakes
- Adding leave into the ETP. Unused annual leave and unused long service leave are excluded by name in s 82-135. They have their own schedule and their own reporting labels.
- Asking whether you are over 55. The preservation-age transition finished. For FY2026-27 the line is 60 at the end of the income year.
- Applying a flat 32%. It is a 30% ceiling plus Medicare, and only binds if your marginal rate is above 30%.
- Assuming the whole redundancy cheque is a genuine redundancy payment. Only the excess over what a voluntary resignation would have paid qualifies.
- Counting part years of service. Section 83-170(3) counts whole years.
- Ignoring income earned after you leave. It shrinks the whole-of-income cap for the whole year, not just for the part before termination.
Related calculators
- Redundancy calculator for the section 119 weeks you are owed and the tax-free limit applied to them, if the payment is a genuine redundancy.
- Final pay calculator for everything owed on your last day, added together.
- Long service leave tax calculator for the three-tranche split on unused LSL, which is not an ETP.
- Annual leave payout calculator for the value of an unused annual leave balance.
- Notice period calculator for the s.117 notice that often makes up the pay-in-lieu part of an ETP.
Employment termination payment tax questions.
The questions people ask when a termination payment is about to land.
How is an employment termination payment taxed in Australia?
Is unused annual leave part of an ETP?
Is the ETP concessional rate based on age 55 or age 60?
What is the genuine redundancy tax-free limit for FY2026-27?
Is the ETP taxed at a flat 32%?
What is the difference between the ETP cap and the whole-of-income cap?
Does a redundancy still get concessional treatment past pension age?
Will my employer withhold exactly this amount?
Where these figures come from.
The ETP cap of $270,000, the whole-of-income cap of $180,000 and the genuine redundancy tax-free limit of $13,598 + $6,801 per completed year for FY2026-27 all come from ATO Schedule 11, the tax table for employment termination payments, published 17 June 2026 and applying to payments made from 1 July 2026. Each was cross-checked against the ATO key superannuation rates and thresholds page of 17 April 2026, and the two agree.
The rules themselves are taken from the Act rather than from ATO summaries, because on two points the ATO summaries disagree with each other. The rate ceilings and the caps are in Income Tax Assessment Act 1997 s 82-10, the exclusion of unused annual and long service leave is in s 82-135, the tax-free limit is in s 83-170 and the genuine redundancy test is in s 83-175. Unused leave withholding is from ATO Schedule 7, also applying from 1 July 2026.
Marginal rates are the FY2026-27 resident rates, re-verified against the ATO resident tax rates page on 9 September 2026. The Medicare levy is applied at 2% without the low-income thresholds or exemptions, so a low earner may pay less than shown. This page estimates tax payable rather than reproducing PAYG withholding, and it is general information, not tax advice.