What is the tax free amount for genuine redundancy in Australia 2026?
The tax-free amount for a genuine redundancy payment in Australia consists of a base amount plus a service amount per year of service. While specific 2026 figures are subject to annual indexation, the calculation method remains consistent.
Was this helpful?
10 readers found this helpful
10 readers found this helpful
How it works in practice
Understanding Genuine Redundancy Tax-Free Amounts
A genuine redundancy payment in Australia qualifies for a tax-free component up to a certain limit. This tax-free amount is calculated as a base amount plus an additional amount for each complete year of service you have with your employer. The purpose of this concession is to provide some financial relief to individuals who lose their jobs through no fault of their own.
How the Tax-Free Amount is Determined
The specific base amount and the service amount per year are indexed annually by the Australian Taxation Office (ATO). Therefore, while the formula for calculation remains consistent, the exact dollar figures for 2026 are not yet legislated and will be announced closer to the relevant financial year. Any portion of a genuine redundancy payment that exceeds this tax-free threshold is taxed as an Employment Termination Payment (ETP) at concessional rates up to a cap, with amounts above the ETP cap taxed at your marginal tax rate.
Importance of "Genuine" Redundancy
It is crucial that the redundancy is considered "genuine" by the ATO. This means your job must have been abolished, you must have been dismissed because your position is no longer needed, and you were not simply transferred to another role within the company. Non-genuine redundancies do not receive the same tax concessions.
Important exceptions
The redundancy must be genuinely due to the employer no longer requiring the job to be performed. This excludes situations where the employee resigns, is dismissed for performance/conduct, or is merely transferred to a different role. The employee must not have reached their retirement age on the day of dismissal, and the payment must not have been for a period after the employee would have retired.
What you should do now
-
Confirm your redundancy is genuine according to ATO guidelines and employer documentation.
-
Obtain a payment summary from your employer detailing the components of your redundancy payment.
-
Consult the ATO website or a tax professional for the indexed tax-free base and service amounts applicable to your 2026 tax year.
-
Calculate the tax-free component of your genuine redundancy payment using the current ATO thresholds.
-
Include your genuine redundancy payment correctly in your annual tax return, ensuring the tax-free and taxable components are separately declared.
Expert Notes
No expert notes have been added to this question yet.
People also asked
Explore highly relevant questions and get instant verified short answers.