Voluntary redundancy is a redundancy your employer offers and you accept. If your employer still makes the final decision, it is taxed like any genuine redundancy: $13,598 plus $6,801 per completed year is tax-free in 2026-27.
"Voluntary" describes how you were picked, not what the law calls the termination. The same exit can be an involuntary dismissal for tax, a redundancy for your NES pay, and possibly not a dismissal at all for an unfair dismissal claim. This guide takes each test in turn, sets an offer against the NES minimum, and shows how the ATO takes off whatever you would have been paid for simply resigning.
Key takeaways
- A voluntary redundancy is offered by your employer and accepted by you. The job still has to be one the business no longer needs done by anyone.
- For tax, it is a genuine redundancy if your employer kept the final say on who goes. Asking staff for expressions of interest first does not change that.
- Resigning and taking a payment is not a redundancy. The whole payment is an ETP, with no tax-free part.
- Only the amount above what you would have received on resignation can be tax-free: up to $13,598 plus $6,801 per completed year in 2026-27, and none of it at age-pension age.
- Asking to go can make an unfair dismissal claim harder, because the Fair Work Commission's test for a dismissal asks whether you agreed to the termination.
Voluntary vs involuntary redundancy
The Fair Work Ombudsman defines voluntary redundancy as one "offered by an employer and ... voluntarily accepted by an employee". The redundancy itself works as usual: the business must no longer need your job done by anyone. What differs is the selection. Instead of naming who goes, the employer asks for volunteers and then decides which of them to accept.
The ATO calls a dismissal an "involuntary termination", meaning it is the employer's decision that the employment ends. So when the employer still chooses, a voluntary redundancy is an involuntary termination in the ATO's terms. "Involuntary redundancy" in everyday use just means you were selected without putting your hand up. For tax, both are dismissals, provided the employer made the call.
Three exits look alike from the outside but end up with three different tax results:
| Arrangement | Who makes the final decision | A dismissal for tax? | Tax-free part? |
|---|---|---|---|
| Voluntary redundancy: your employer asks for volunteers, then chooses | Your employer | Yes | Yes, if the other genuine redundancy conditions are met |
| Early retirement scheme offered to a broad group of staff | You, by accepting the scheme | Not the test: the scheme has its own rules | Yes, the same limit, but only if the ATO approved the scheme before it started |
| You resign and your employer pays you an incentive | You | No | No: the whole payment is an ETP |
Fair Work Ombudsman, glossary: voluntary redundancy (content last updated 5 October 2026): "When redundancy is offered by an employer and is voluntarily accepted by an employee." Fair Work Ombudsman, Redundancy (content last updated 28 August 2026): "Redundancy is when a business no longer needs an employee's job to be done by anyone."
ATO, Redundancy and early retirement (QC81807, last updated 24 July 2025): "Dismissal is the involuntary termination of an employee. It's the employer's decision that the employment will end, rather than the employee's decision to leave." ATO, Genuine redundancy payments (last updated 5 June 2026): a payment is not a genuine redundancy payment if "you're leaving voluntarily". TR 2009/2, paragraph 3: the ruling "does not deal with early retirement scheme payments, the treatment of which is provided for in section 83-180." Retrieved 5 to 7 October 2026.
What you get: the NES floor and the package
Volunteering does not lower the legal minimum on its face. Section 119 of the Fair Work Act gives NES redundancy pay where employment ends "at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone". Both limbs point at the employer: it ends the employment, and it no longer needs the job. Where your own job is abolished and your employer decides to accept you and terminate, both limbs read as met on the words of the section. That is a reading of s 119, not a ruled point: no Fair Work Commission or court decision on an accepted voluntary redundancy under s 119 was reviewed for this guide.
The NES scale is a floor. Redundancy pay can also come from an award or an enterprise agreement, and a voluntary package is usually set by the employer's own scheme. Compare the offer with the floor rather than assuming the two match. The table sets the NES floor against the 2026-27 tax-free limit, with the limit converted into weeks of pay at two wage levels.
| Completed years | NES floor (weeks) | NES floor at $1,500/wk | Tax-free limit, 2026-27 | Limit in weeks at $1,500 | Limit in weeks at $2,500 |
|---|---|---|---|---|---|
| 1 | 4 | $6,000 | $20,399 | 13.6 | 8.2 |
| 2 | 6 | $9,000 | $27,200 | 18.1 | 10.9 |
| 3 | 7 | $10,500 | $34,001 | 22.7 | 13.6 |
| 4 | 8 | $12,000 | $40,802 | 27.2 | 16.3 |
| 5 | 10 | $15,000 | $47,603 | 31.7 | 19.0 |
| 6 | 11 | $16,500 | $54,404 | 36.3 | 21.8 |
| 7 | 13 | $19,500 | $61,205 | 40.8 | 24.5 |
| 8 | 14 | $21,000 | $68,006 | 45.3 | 27.2 |
| 9 | 16 | $24,000 | $74,807 | 49.9 | 29.9 |
| 10 | 12 | $18,000 | $81,608 | 54.4 | 32.6 |
| 15 | 12 | $18,000 | $115,613 | 77.1 | 46.2 |
| 20 | 12 | $18,000 | $149,618 | 99.7 | 59.8 |
The NES column counts continuous service, which leaves out any period you worked as a casual. The tax column counts completed years of employment. Even at 9 years, where the NES floor peaks, the tax-free limit covers far more than the floor, so a generous offer can still be fully tax-free.
The redundancy calculator gives your NES redundancy pay from your weekly pay and service, and applies the 2026-27 tax-free limit to the total.
Notice, or pay in lieu, still applies
Your employer must still give written notice of the termination day, or pay in lieu at the full rate for the hours you would have worked. The minimum is 1 week for up to 1 year of service, 2 weeks for more than 1 and up to 3 years, 3 weeks for more than 3 and up to 5 years, and 4 weeks beyond that, plus 1 week if you are over 45 with at least 2 years of continuous service. For tax, the ATO accepts pay in lieu of notice as part of a genuine redundancy payment where you would not have received it had you resigned. The notice rules in full are in notice of termination. Pay in lieu of notice also attracts super, while the redundancy pay itself does not: see is super payable on redundancy?
When there is no NES redundancy pay
- Your employer has fewer than 15 employees: see redundancy pay and small business.
- You have less than 1 year of continuous service.
- All your service was casual, because casual periods do not count towards the scale.
- You are not covered by the national workplace relations system.
A voluntary package can still pay something in these cases. It just has no NES floor underneath it.
Is a voluntary redundancy a genuine redundancy for tax?
Yes, as long as your employer keeps the final decision. The ATO's ruling on genuine redundancy payments, TR 2009/2, deals with volunteers directly, and its two worked examples show where the line falls.
Your employer must keep the final say
TR 2009/2 says a dismissal "requires a decision to terminate employment at the employer's initiative without the consent of the employee". It then accepts that a dismissal can still happen where you said you would like to go, provided the final decision stays solely with the employer, and gives expressions of interest sought in a structured process as the example. Negotiating or nominating an earlier finish date after notice does not change the answer. The ATO's employer guidance says the same in one line: a redundancy is still genuine if the employer seeks expressions of interest before deciding who to dismiss.
Paragraph 18: "Dismissal is a particular mode of employment termination. It requires a decision to terminate employment at the employer's initiative without the consent of the employee." Paragraph 20: "A dismissal can still occur even where an employee has indicated that they would be interested in having their employment terminated, provided that the final decision to terminate employment remains solely with the employer." Paragraph 21: "This will be the case even where an employee, following notification, negotiates with the employer or nominates to end their employment at an earlier time." Paragraph 253: "The termination of employment is a dismissal here because the employer initiates the process and has the final say in whose employment is to be terminated."
ATO, Redundancy and early retirement (last updated 24 July 2025): "A redundancy is still considered genuine if the employer seeks expressions of interest from their employees before they decide which employee to dismiss."
Two ATO examples
- Example 17: volunteers, some of them refused. The employer lets most volunteers go but keeps some key staff who also put their hands up. Those let go are still dismissed, because they "have no ultimate control over who the employer chooses for termination".
- Example 18: volunteers mixed with poor performers. The employer uses performance to choose from volunteers and non-volunteers alike. The payments are still genuine redundancy payments, but the package paid to the one employee who stays on as a commission salesperson is not, because he is not dismissed.
The resignation amount comes off first
A genuine redundancy payment is only the part above what you could reasonably have expected if you had resigned on the same day. TR 2009/2 calls the deducted part the voluntary termination element, and taxes it as an employment termination payment if you receive it within 12 months of the termination. If your contract or a workplace policy pays something on resignation, that amount comes off before the tax-free limit is applied.
Age-pension age still removes the tax-free part
Volunteering does not get around the age test. If you have reached age-pension age on the day of dismissal, which is 67 for anyone born on or after 1 January 1957, the ATO does not treat the payment as a genuine redundancy payment and none of it is tax-free. Your NES redundancy pay is unaffected, because s 119 has no age test.
Anything above the tax-free limit is taxed as an ETP, against an ETP cap of $270,000 for 2026-27. The rates are set out in how redundancy pay is taxed, and the separate Fair Work test for whether a redundancy is genuine is in genuine redundancy.
Early retirement schemes are different
An early retirement scheme can look like a voluntary redundancy round, but it runs on separate rules. The ATO describes it as a plan offering staff incentives to retire early or resign while the employer rationalises or reorganises. Its payments get the same tax-free limit, but only when all three conditions are met:
- The ATO approved the scheme as a class ruling before it started.
- It is open to broad groups of employees, such as all employees.
- It is part of a plan to reorganise the business's operations.
If your employer describes its offer as a scheme, ask whether it holds an ATO class ruling before you rely on the tax-free limit. Public sector schemes, such as those in the Australian Public Service, run under their own rules, which this guide does not cover.
Can you still claim unfair dismissal?
An unfair dismissal claim needs a dismissal first. Section 386(1)(a) of the Fair Work Act defines one as employment "terminated on the employer's initiative". Whether an accepted voluntary redundancy meets that phrase is an open question, and the two bodies that use similar words read it differently:
| Reading | The test | Where it comes from | What it means for a volunteer |
|---|---|---|---|
| The employer's process and final say | The employer started the process and decided whose employment ended | ATO, TR 2009/2 paragraph 253 (a tax ruling) | You are still dismissed |
| Not agreed to by the employee | A termination brought about by the employer "and which is not agreed to by the employee" | Fair Work Commission, Unfair Dismissals Benchbook | Asking for and accepting the package can make it harder to show you were dismissed |
So the tax position and the unfair dismissal position can pull in opposite directions on the same facts. No Commission or court decision applying either test to an accepted voluntary redundancy was reviewed for this guide, so treat both as readings, not settled law, and get advice before you sign if you think you may want to challenge the redundancy later.
Two limits apply whichever reading wins. If the redundancy is genuine under s 389, there is no unfair dismissal remedy at all. And any claim must be lodged within 21 days after the dismissal took effect. A redundancy is not genuine under s 389 if your employer skipped a consultation your award or agreement required, as set out in redundancy consultation.
Fair Work Act 2009 s 386(1): "A person has been dismissed if: (a) the person's employment with his or her employer has been terminated on the employer's initiative; or (b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer." Fair Work Commission, Terminated at the employer's initiative (Unfair Dismissals Benchbook, last updated 15 February 2022): "The expression 'termination at the initiative of the employer' is a reference to a termination that is brought about by an employer and which is not agreed to by the employee."
Fair Work Act s 389(1) (genuine redundancy) and s 394(2): "The application must be made: (a) within 21 days after the dismissal took effect". Fair Work Ombudsman, Redundancy (28 August 2026): "If the redundancy is genuine, the employee can't get an unfair dismissal remedy." Retrieved 7 October 2026.
How to ask for voluntary redundancy
You can ask, but there is no right to a voluntary redundancy. Redundancy pay depends on your employer no longer needing your job, and the ATO's own Example 17 has an employer turning down volunteers it wants to keep.
- Ask in writing, ideally while an expressions of interest round is open.
- Work out the numbers first: the NES floor for your service, the offer, your tax-free limit, and anything you would be paid on resignation, which comes off the tax-free part.
- Add the payouts you get anyway. Unused annual leave and long service leave are paid on top and taxed separately from the redundancy payment. If you get leave loading when you take annual leave, it is added to the payout: see leave loading on termination.
- Check your age against age-pension age, which removes the tax-free part entirely.
- Leave the decision with your employer. Its final say is what keeps the payment a genuine redundancy for tax.
Worked examples
Hana has 9 years and 3 months of continuous service at $1,500 a week with an employer of 200. She volunteers and is accepted. The offer is 3 weeks per completed year: 27 weeks, $40,500. The NES floor is 16 weeks x $1,500 = $24,000, so the offer is $16,500 above it. Her tax-free limit for 9 completed years is $13,598 + (9 x $6,801) = $74,807. Her contract pays nothing extra on resignation, so all $40,500 is tax-free.
Dan has 12 completed years. His contract would pay him $20,000 if he resigned, and the voluntary package is $90,000 plus unused leave. The genuine redundancy payment is $90,000 - $20,000 = $70,000. His limit is $13,598 + (12 x $6,801) = $95,210, so $70,000 is tax-free. The $20,000 voluntary termination element is taxed as an ETP, because he receives it within 12 months. His unused leave is taxed separately.
Leah was born on 10 March 1959, so she turned 67 on 10 March 2026. She has 14 completed years at $1,700 a week and is accepted for voluntary redundancy, finishing on Friday 20 November 2026. Her NES floor is the same as anyone else's with her service, 12 weeks x $1,700 = $20,400, because s 119 has no age test. But she is at age-pension age on the day of dismissal, so none of her package is tax-free. Had she been under 67 on that day, her limit would have been $108,812. The whole payment is taxed as an ETP.
Marco's employer announces a restructure, but his own job is not abolished. He decides to resign, and the employer pays him a $15,000 "thank you". He chose to leave and his job is still needed, so this is not a dismissal: there is no s 119 redundancy pay, and the $15,000 is taxed as an ETP from the first dollar.
The tax-free figures use the ATO's 2026-27 limit of $13,598 plus $6,801 per completed year. Wages and offers are illustrative.
Centrelink after a redundancy payment
A redundancy payment can delay Centrelink payments. Services Australia says a waiting period called the income maintenance period "may apply if you or your partner have stopped work and got leave or redundancy payments"; check the income maintenance period rules before you claim.
Common questions
What is voluntary redundancy?
A redundancy your employer offers and you accept. The job must still be one the business no longer needs done by anyone; volunteering only changes how the person leaving is chosen.
How much will I get if I take voluntary redundancy?
At least the NES scale if you have 1 year of continuous service and your employer has 15 or more staff: from 4 weeks of base pay at 1 year to 16 weeks at 9 years, then 12 weeks from 10 years. Packages set by an award, agreement or the employer's scheme can pay more. The table above sets the floor against the tax-free limit.
Is voluntary redundancy taxed differently from forced redundancy?
No, provided your employer made the final decision. Both get the same 2026-27 tax-free limit of $13,598 plus $6,801 per completed year, after any amount you would have been paid on resignation is deducted.
Is voluntary redundancy a genuine redundancy?
For tax, yes when your employer chooses who goes from the volunteers. The ATO treats the employer's final say as what makes it a dismissal. If you decided alone to leave, it is a resignation instead.
Can I ask for voluntary redundancy?
Yes, but there is no right to one. Redundancy pay depends on your employer no longer needing your job, and an employer can refuse volunteers it wants to keep.
Can I claim unfair dismissal after taking voluntary redundancy?
Possibly not. The Fair Work Commission reads a termination at the employer's initiative as one you did not agree to, so having asked for and accepted a package can make it harder to show you were dismissed. No tribunal decision on the point was reviewed for this guide.
If I take voluntary redundancy, can I claim Centrelink?
You can apply, but an income maintenance period may apply after leave or redundancy payments, which delays when payments start. Services Australia has the details.
Is taking voluntary redundancy a good idea?
That depends on your circumstances, and this guide does not give advice. Before deciding, compare the offer with the NES floor, work out your tax-free limit and any resignation amount that comes off it, add your unused annual and long service leave, confirm your notice or pay in lieu, and check whether you have reached age-pension age.
What is a good reason for voluntary redundancy?
The reason has to be the business's, not yours: the employer no longer needs the job done by anyone, for example after a restructure, new technology, a downturn or a closure. Wanting to leave is a reason to volunteer, but it is not what makes the job redundant.
Do I get notice if I take voluntary redundancy?
Yes. Your employer must give written notice or pay in lieu at your full rate, and pay in lieu that you would not have received on resignation can form part of the tax-free amount.
What is an early retirement scheme?
An ATO-approved plan offering incentives to retire or resign, open to broad groups of staff during a reorganisation. Its payments share the genuine redundancy tax-free limit, but only if the ATO issued a class ruling before the scheme started.
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.