A redundancy is genuine under the Fair Work Act when your job is no longer needed by anyone, your employer followed any consultation rule in your award or agreement, and redeploying you was not reasonable. The ATO applies a separate test for the tax-free part.
"Genuine" is really three legal tests with three different consequences. One decides whether you can bring an unfair dismissal claim, one decides whether you are owed redundancy pay, and one decides how much of the payment is tax-free. Passing one says nothing about the others. This guide runs all three side by side with the 2026-27 figures.
Key takeaways
- Fair Work Act s 389: genuine if the job is no longer required by anyone because of operational changes, any award or agreement consultation duty was met, and redeployment was not reasonable. Fail it and an unfair dismissal claim is possible.
- Redundancy pay under s 119 has its own, simpler test: the employer no longer needs the job done by anyone. Consultation and redeployment are not conditions.
- The ATO test in ITAA 1997 s 83-175 decides the tax-free part: $13,598 plus $6,801 per completed year in 2026-27. It has an age test, but no consultation or redeployment test.
- The age that removes the tax-free part is age-pension age on the day of dismissal (67 if born on or after 1 January 1957), not preservation age.
- A non-genuine redundancy claim must be lodged within 21 days. Compensation is capped at the lesser of 26 weeks' pay and $95,050 for dismissals from 1 July 2026.
Your 2026-27 numbers
| Figure | Amount | Set by |
|---|---|---|
| Tax-free part of a genuine redundancy payment | $13,598 + $6,801 per completed year | ATO, indexed each 1 July |
| ETP cap on the taxable part | $270,000 | ATO |
| Age that removes the tax-free part | Age-pension age on the day of dismissal (67 if born on or after 1 January 1957) | ITAA 1997 s 83-175(2)(a) |
| High income threshold for unfair dismissal claims | $190,100 | Fair Work Commission, from 1 July 2026 |
| Unfair dismissal compensation cap | $95,050, or 26 weeks' pay if lower | Fair Work Act s 392(5) |
| Fair Work Commission application fee | $92.70 | Fair Work Commission, 2026-27 |
| Deadline to apply | 21 days after the dismissal took effect | Fair Work Act s 394(2) |
The tax-free limit uses completed years only, so 7 years and 11 months counts as 7. Here it is by year of service, against the 2025-26 figures it replaced on 1 July 2026:
| Completed years | Tax-free limit, 2026-27 | Tax-free limit, 2025-26 | Increase |
|---|---|---|---|
| 1 year | $20,399 | $19,652 | $747 |
| 2 years | $27,200 | $26,204 | $996 |
| 3 years | $34,001 | $32,756 | $1,245 |
| 4 years | $40,802 | $39,308 | $1,494 |
| 5 years | $47,603 | $45,860 | $1,743 |
| 6 years | $54,404 | $52,412 | $1,992 |
| 7 years | $61,205 | $58,964 | $2,241 |
| 8 years | $68,006 | $65,516 | $2,490 |
| 9 years | $74,807 | $72,068 | $2,739 |
| 10 years | $81,608 | $78,620 | $2,988 |
| 11 years | $88,409 | $85,172 | $3,237 |
| 12 years | $95,210 | $91,724 | $3,486 |
| 13 years | $102,011 | $98,276 | $3,735 |
| 14 years | $108,812 | $104,828 | $3,984 |
| 15 years | $115,613 | $111,380 | $4,233 |
| 20 years | $149,618 | $144,140 | $5,478 |
| 25 years | $183,623 | $176,900 | $6,723 |
The redundancy calculator applies the s 119 scale and this tax-free limit to your weekly pay and years of service, and taxes any excess against the ETP cap.
The three tests side by side
| Question | Unfair dismissal (s 389) | Redundancy pay (s 119) | Tax-free part (s 83-175) |
|---|---|---|---|
| Is the job gone? | No longer required to be performed by anyone, because of changes in operational requirements | Employer no longer requires the job done by anyone, except ordinary and customary turnover of labour | The position is genuinely redundant |
| Consultation | Any award or agreement consultation duty must be met | Not a condition | Not a condition |
| Redeployment | Not genuine if redeployment in the business or an associated entity was reasonable | Not a condition | Not a condition |
| Age | No test | No test | Dismissed before age-pension age, or before a fixed retirement age or service limit |
| Other conditions | None | None | No arrangement to re-employ you; a non arm's length payment is capped at the arm's length amount |
| Small business (under 15 employees) | Still applies | No redundancy pay (s 121(1)(b)) | No size test |
| If the test fails | Unfair dismissal claim possible, within 21 days | No NES redundancy pay | No tax-free part; the whole payment is an ETP |
The tests can split. A redundancy with no consultation can fail s 389 and still be fully tax-free under s 83-175. A carefully consulted redundancy of a 67-year-old passes s 389 and s 119 but gets no tax-free part. Your s 119 pay is owed whichever way the other two go.
"(1) A person's dismissal was a case of genuine redundancy if: (a) the person's employer no longer required the person's job to be performed by anyone because of changes in the operational requirements of the employer's enterprise; and (b) the employer has complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy. (2) A person's dismissal was not a case of genuine redundancy if it would have been reasonable in all the circumstances for the person to be redeployed within: (a) the employer's enterprise; or (b) the enterprise of an associated entity of the employer."
Source: Fair Work Act 2009, Compilation No. 73, 7 July 2026; ss 119(1), 121(1) from the same compilation. Retrieved 5 October 2026.
When the Fair Work Commission says a redundancy is genuine
If your employer proves the three limbs of s 389, the Commission has no jurisdiction to hear an unfair dismissal claim at all. The onus is on the employer to show the redundancy came from changes in operational requirements.
The job, not the duties
The Commission asks whether your job survived the restructure, not whether your duties survived in some form. Tasks spread across the remaining staff can still be a genuine redundancy. Typical operational reasons are a machine that now does the work, a downturn in trade, a restructure that redistributes the tasks, a site or business closure, the end of a project, and outsourcing. "Anyone" means anyone employed by the business, so handing the work to independent contractors can still be genuine.
Consultation under your award or agreement
Only a consultation duty in a modern award or enterprise agreement that applies to you counts. If there was one and your employer did not meet it, there cannot be a genuine redundancy. Consultation has to be meaningful and has to happen before an irreversible decision to terminate. How the employer chose who would go is not part of the genuine redundancy test.
Redeployment, including contractor work
The Commission looks at whether there was a job or other work you could do, the qualifications it needs, your skills and experience, and its location and pay, across the business and any associated entity. A lower-level role counts: an employer should not presume you would refuse it. Making you compete with other applicants in an open recruitment for a vacancy can also make a dismissal not genuine. Since the High Court's August 2025 decision in Helensburgh Coal Pty Ltd v Bartley, the Commission can also consider whether the employer could have changed how it used its workforce, such as work given to contractors, when deciding whether redeploying you was reasonable.
"The test is whether the previous job has survived the restructure or downsizing, rather than a question as to whether the duties have survived in some form." (Job no longer required.) "If an employer was obliged to consult and fails to do so, there cannot be a genuine redundancy." (Consultation obligations, updated 9 December 2024.) "If an employer has other positions available, even at a lower level, that the redundant employee has the skills to perform, the employer should not presume that the employee will refuse the position." (Redeployment, updated 11 December 2024.) What is a genuine redundancy? Retrieved 5 October 2026.
Signs a redundancy is not genuine
- The job is still being done. It is re-advertised, or one new hire takes it over under a different title.
- No consultation before the decision. Your award or agreement required it, and you were told after the decision was already final.
- A role you could do was available. It was not offered because it paid less, or you were made to apply for it against outside candidates.
- Work you could do stayed in the business. An associated entity had a role within your skills, or contractors were doing work you could have done.
Non-genuine redundancy: claims, deadlines and compensation
Who can claim
You need the minimum employment period: 6 months, or 1 year if your employer is a small business, measured to the earlier of when you were given notice and the dismissal itself. You also need to be covered by a modern award or enterprise agreement, or earn less than the high income threshold. That threshold is $190,100 for dismissals from 1 July 2026, and was $183,100 for dismissals up to 30 June 2026.
21 days and the $92.70 fee
An unfair dismissal application must be made within 21 days after the dismissal took effect, or within a further period the Commission allows. A general protections claim has the same 21 days. The 2026-27 application fee is $92.70, and you can ask for it to be waived if you are in serious financial hardship.
Reinstatement first, then capped compensation
The first remedy is reinstatement: your old job back, or another one on terms no less favourable. Compensation is ordered only if reinstatement is inappropriate. It is capped at the lesser of your pay for the 26 weeks before the dismissal and half the high income threshold, which is $95,050 for a dismissal on or after 1 July 2026 and $91,550 for one between 1 July 2025 and 30 June 2026. It cannot include anything for shock, distress or humiliation.
How a non-genuine payment is taxed
If the redundancy does not meet the ATO test, there is no tax-free part and the payment is taxed as an employment termination payment from the first dollar. The ETP tax calculator handles that case.
Fair Work Act 2009 ss 382, 383 (minimum employment period), 385, 390(3), 391(1), 392(4) to (6), 394(2), 366(1) (Compilation No. 73, 7 July 2026). Fair Work Commission: High income threshold ("The high income threshold is currently $190,100"), Compensation cap and Fees and costs ("The fee for 2026-27 is $92.70"), all updated 1 July 2026. ATO, Genuine redundancy payments: "You pay tax on a non-genuine redundancy as part of your ETP." Retrieved 5 October 2026.
The ATO test for the tax-free amount
Section 83-175 of the Income Tax Assessment Act 1997 decides whether any of the payment is tax-free. Consultation and redeployment play no part. Four things do.
Pension age on the day of dismissal
You must be dismissed before age-pension age, or before an earlier age or period of service at which your employment would have ended anyway. The ATO also treats a dismissal because you reached normal retirement age as non-genuine. Since 1 July 2019 the cut-off has been age-pension age rather than 65:
| Date of birth | Age-pension age |
|---|---|
| Before 1 July 1952 | 65 years |
| 1 July 1952 to 31 December 1953 | 65 years and 6 months |
| 1 January 1954 to 30 June 1955 | 66 years |
| 1 July 1955 to 31 December 1956 | 66 years and 6 months |
| On or after 1 January 1957 | 67 years |
Do not confuse this with preservation age, which is 60 for payments in 2026-27. Preservation age never removes the tax-free part. It only lowers the maximum tax rate on the taxable part above the limit, as how redundancy pay is taxed explains.
Arm's length and re-employment arrangements
If the dismissal was not at arm's length, the payment counts only up to what an arm's length dismissal would have paid. It does not stop the payment from qualifying. Separately, there must have been no arrangement, at the time of the dismissal, for you to be employed again afterwards by the employer or through another person.
Only the part above a resignation payout counts
A genuine redundancy payment is only the amount above what you would have received had you resigned on the same day. Unused annual leave, leave loading, long service leave and payments in lieu of super are excluded and taxed separately. A payment in lieu of notice can form part of a genuine redundancy payment. Asking staff for expressions of interest before choosing who goes does not stop a redundancy being genuine.
The 2026-27 limit in one line
Up to $13,598 plus $6,801 for each completed year of service is tax-free; the rest is an employment termination payment. The table of past years and how the excess is taxed are in how redundancy pay is taxed.
"(1) A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employee's position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the dismissal." (2)(b): "if the dismissal was not at arm's length, the payment does not exceed the amount that could reasonably be expected to be made if the dismissal were at arm's length". (2)(c): "there was no arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the dismissal." Compilation No. 267, 27 August 2026. Age-pension age table and expressions of interest: ATO, Redundancy and early retirement (updated 24 July 2025). Exclusions and non-genuine cases: ATO, Genuine redundancy payments (updated 5 June 2026). Retrieved 5 October 2026.
Worked examples
Mei, 52, has 7 years and 8 months of service with an employer of 40 staff. The warehouse she works in closes and her role goes on Friday 16 October 2026. Her base rate is $1,600 a week. Section 119 gives 13 weeks for 7 to under 8 years: 13 x $1,600 = $20,800. Her tax-free limit uses 7 completed years: $13,598 + ($6,801 x 7) = $61,205. The whole $20,800 is tax-free. If she thought the closure was a cover for something else, she would have 21 days after the dismissal took effect to apply to the Commission.
Raj has 12 completed years, and his enterprise agreement pays 4 weeks per year of service at $2,400 a week: 4 x 12 x $2,400 = $115,200. His tax-free limit is $13,598 + ($6,801 x 12) = $95,210. The excess of $19,990 is an employment termination payment, well inside the $270,000 ETP cap.
Graham was born on 1 March 1959, so he reached age-pension age of 67 on 1 March 2026. He works for an employer of 60 staff, and his role is abolished on Friday 13 November 2026. Because he is at pension age on the day of dismissal, his payment gets no tax-free part. His s 119 redundancy pay is still owed in full, because s 119 has no age test. Anne, born on 20 December 1959, is dismissed the same day. She is 66, so the tax-free limit applies to her.
Omar earns $120,000 a year, is covered by an award, and is made "redundant" on Thursday 20 August 2026. A month later his job is re-advertised. Twenty-six weeks of his pay is about $60,000, which is lower than the $95,050 cap, so $60,000 is the most the Commission could award if reinstatement were inappropriate. A colleague on $210,000 under an enterprise agreement would hit the $95,050 cap instead, since 26 weeks is about $105,000. A $210,000 earner with no award or agreement is above the $190,100 high income threshold and cannot claim at all.
Genuine redundancy: questions
How do I know if my redundancy is genuine?
Ask three questions. Is your job gone, rather than just renamed or refilled? Did your employer follow any consultation clause in your award or agreement before deciding? Was there another role in the business or an associated entity you could reasonably have done? A "no" to either of the first two, or a "yes" to the third, points to a redundancy that is not genuine.
What happens if a redundancy is not genuine?
You may be able to bring an unfair dismissal claim, which must be lodged within 21 days. The Commission orders reinstatement first, and compensation only if reinstatement is inappropriate, capped at $95,050 for dismissals from 1 July 2026.
What compensation can I get for an unfair redundancy?
At most the lesser of 26 weeks' pay and $95,050 (for a dismissal on or after 1 July 2026). Nothing is included for shock, distress or humiliation.
How is a non-genuine redundancy taxed?
As an employment termination payment with no tax-free part.
How much tax do you pay on a genuine redundancy?
None on the first $13,598 plus $6,801 per completed year of service in 2026-27. Anything above that is an employment termination payment, and unused leave is taxed separately.
What is a genuine reason for redundancy?
A change in operational requirements that means the job is no longer needed: a downturn in trade, new technology that does the work, a restructure that removes the role, a closure, the end of a project, or outsourcing.
Can my employer give my job to a contractor and still call it genuine?
Outsourcing can be a genuine redundancy, because the job is no longer done by anyone the business employs. But the Commission can ask whether you could reasonably have been redeployed, and that can include whether the employer could have used you instead of contractors.
If I volunteered for redundancy, is it still genuine?
For tax, yes: the ATO says asking for expressions of interest before choosing who goes does not stop a redundancy being genuine. Resigning of your own accord is different, and is not a redundancy.
I am 67. Do I still get the tax-free amount?
Not if you have reached age-pension age on the day of dismissal. For anyone born on or after 1 January 1957 that is 67. Your s 119 redundancy pay is still owed.
What is a typical redundancy payout in Australia?
The NES minimum runs from 4 weeks' base pay after 1 year to 16 weeks at 9 years, then drops to 12 weeks from 10 years. Awards, agreements and contracts often pay more. Work yours out with the redundancy calculator, or see redundancy pay and small business if your employer has fewer than 15 staff.
Author & reviewer
Sarah has spent over a decade advising Australian SMBs on Fair Work, NES compliance, and payroll. Based in Sydney, she has worked across hospitality, retail and professional services.