Long Service Leave Tax Calculator.
A long service leave payout is not taxed at one rate. The ATO splits it by when you earned it, then taxes each slice differently. This works out the split, applies the correct rate to each part, and shows what actually lands in your account.
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Here's your entitlement
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| Component | Formula | Value |
|---|---|---|
| Gross LSL payout | 0 hrs × $35.00 | $0.00 |
| Reason for leaving | Sets the post-1993 treatment | resignation (marginal rates) |
| Income used for marginal rate | $35.00 × 38h × 52 | $69,160 |
| Income tax | FY2026-27 resident rates | $0 |
| Medicare levy | assessable × 2% | $0 |
| Total estimated tax | income tax + Medicare | $0.00 |
| Net to you | gross − tax | $0.00 |
Disclaimer: This tool does not constitute legal or financial advice. Results may be inaccurate due to changes in legislation or your circumstances. This tool does not constitute legal or financial advice. We do not recommend taking actions based solely on these results. The calculator makes assumptions and results may be inaccurate due to changes in legislation, modern awards, or your personal circumstances. You use this information at your own risk. We can't guarantee to be perfect, so do note you use the information at your own risk and we can't accept liability if things go wrong. For official guidance, visit Fair Work Ombudsman (fairwork.gov.au). Fair Work Ombudsman.
Why long service leave tax is not one rate
Long service leave is the only termination payment whose tax depends on when you did the work, not just why you left. Australia changed how leave payments are taxed on 16 August 1978 and again on 18 August 1993, and each change applied only to service performed after it. The older treatment was grandfathered rather than removed.
So your payout is apportioned by days of service across three windows, and each slice is taxed under the rules that applied when you earned it. Someone who started in 1990 has part of their payout taxed under the 1978 to 1993 rules and part under current rules, from a single payment.
The three service tranches
| When the service was performed | How that slice is taxed | Reported as |
|---|---|---|
| Before 16 Aug 1978 | 5% of the amount at marginal rates | Lump Sum B |
| 16 Aug 1978 to 17 Aug 1993 | Capped at 30% plus 2% Medicare | Lump Sum A |
| From 18 Aug 1993, resignation or retirement | Marginal rates plus 2% Medicare | Salary and wages |
| From 18 Aug 1993, genuine redundancy | Capped at 30% plus 2% Medicare | Lump Sum A |
ATO Schedule 7, published 17 June 2026, applying to payments made from 1 July 2026. “Genuine redundancy” also covers invalidity and early retirement scheme payments.
The 32% figure is a ceiling, not a flat rate
Nearly every long service leave tax estimate online applies a flat 32% to the whole payment. That is wrong twice over.
First, 32% is not a tax rate in its own right. It is 30% plus the 2% Medicare levy. The 30% comes from a tax offset that limits the rate payable on the concessional portion to a maximum of 30%.
Second, and this is what the flat-rate estimates miss, a maximum is not a fixed amount. If your marginal rate is below 30%, you pay your rate, not 30%.
Worked example. A worker on $40,000 receives a $10,000 long service leave payout on redundancy, all service after 1993. A flat 32% would say $3,200 in tax. The correct figure is about $2,450, because their marginal rate on that amount is 22.5%, not 30%. The cap never applies, because they were never above it. That is a $750 difference on a $10,000 payout.
The cap only does work for people whose marginal rate is above 30%, which means taxable income above $135,000. For them it is a genuine saving: a 37% or 45% marginal rate is pulled back to 30%.
The 5% rule for pre-1978 service
If any of your service predates 16 August 1978, only 5% of that portion is included in your assessable income at all. The other 95% is not assessable. On a long payout this is a large effect, and it is the single biggest source of error in third-party estimates.
In practice this applies to someone with roughly 48 or more years at the same employer, so it is rare. It is also exactly the person with the largest payout, which is why the calculator handles it rather than rounding it away.
Redundancy changes the answer
On an ordinary resignation or retirement, your post-17 August 1993 service is taxed at your marginal rate and included in salary and wages. On a genuine redundancy, that same service moves to the capped rate and is reported at Lump Sum A instead.
For a high earner this is the difference between 45% and 30% on the bulk of the payment. Invalidity and early retirement scheme payments get the same treatment. Invalidity has a strict test: two medical practitioners must certify that you are permanently unable to do the work you were doing. Employment simply ending because of illness does not meet it.
Is super paid on a long service leave payout?
No. The ATO excludes a lump sum paid for unused long service leave on termination from ordinary time earnings, so no super guarantee is payable. Long service leave you actually take while employed is ordinary time earnings and does attract super.
Withholding is not your final tax bill
Schedule 7 tells your employer how much to withhold when they pay you. That is not the same as the tax you ultimately owe. The withholding method is keyed to your last full pay period and pay cycle, so it is an approximation that gets reconciled when you lodge your return.
What this calculator does.It estimates the tax payable on the payout, using the tranche rules from ATO Schedule 7 and the FY2026-27 resident rates. It does not attempt to reproduce your employer’s PAYG figure, because the marginal-rate path in Schedule 7 is a seven-step calculation that depends on payroll details this page cannot see. Expect your payslip to differ, and expect the difference to wash out at tax time.
Common mistakes
- Applying a flat 32% to everything. It is a 30% ceiling plus Medicare, and it only binds above the 30% bracket.
- Ignoring the service dates. Anyone who started before 18 August 1993 has more than one tranche.
- Assuming redundancy treatment applies to any termination. It needs a genuine redundancy, invalidity or an early retirement scheme.
- Confusing withholding with tax payable. The payslip figure and the return figure are different numbers.
- Expecting super on the payout. It is not ordinary time earnings.
- Using annual leave rules. Annual leave has two tranches and no 5% rule. See how annual leave payouts are taxed for that.
Related calculators
- Long service leave calculator for the entitlement and payout itself, by state.
- Pro-rata long service leave and long service leave after 10 years.
- Annual leave payout calculator, which is taxed on a different table.
- Final pay calculator for everything owed on your last day.
- Redundancy calculator and how redundancy pay is taxed.
- Portable long service leave for construction, cleaning and security scheme members.
Long service leave tax questions.
The questions people ask when a payout is about to land.
How is long service leave taxed in Australia?
Is long service leave taxed at 32%?
Why does the date I started work change the tax?
Is long service leave taxed differently if I am made redundant?
What is Lump Sum A and Lump Sum B on my income statement?
Is superannuation paid on a long service leave payout?
Will the tax my employer withholds match this estimate?
Can I reduce the tax on my long service leave payout?
Where these figures come from.
Tranche rules and reporting labels are taken from ATO Schedule 7, the tax table for unused leave payments on termination, published 17 June 2026 and applying to payments made from 1 July 2026. The three long service leave windows, the 5% rule for pre-16 August 1978 service, and the Lump Sum A and Lump Sum B labels all come directly from that table.
Marginal rates are the FY2026-27 resident rates. The 16% rate on income from $18,201 to $45,000 fell to 15% from 1 July 2026, with all other thresholds unchanged. 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, which is a separate seven-step calculation in Schedule 7 that depends on payroll details this page cannot see. It is general information, not tax advice.