ETP Tax Calculator
Rules checked October 2026 · No signup — nothing you enter leaves your browser.
Work out the PAYG withholding on an employment termination payment (ETP) for 2026-27 — including the genuine redundancy tax-free limit, the $270,000 ETP cap, and the $180,000 whole-of-income cap for non-excluded payments. An ETP is a lump sum paid in consequence of termination of employment. This is a PAYG withholding estimate for 2026-27, not the final tax on your return. Death benefit ETPs use different rates — this tool does not calculate them.
What counts as an ETP — and what does not
This tool calculates life benefit ETPs only. An ETP may include:
- payment in lieu of notice;
- a gratuity or "golden handshake";
- an invalidity payment for permanent disability;
- compensation for loss of job or wrongful dismissal;
- the part of a genuine redundancy or early retirement scheme payment that exceeds the tax-free limit;
- unused sick leave and unused rostered days off;
- the market value of property transferred (less consideration).
These are not taxed as an ETP: unused annual leave or long service leave (Lump Sum A/B, taxed separately — see the Final Pay Calculator); the tax-free part of a genuine redundancy or early retirement scheme payment (Lump Sum D — not assessable at all); superannuation benefits (a payment from a super fund is not an ETP); and foreign termination payments. If you pick leave or a super benefit in the calculator, you get an explainer and no tax number.
Tax-free component vs taxable component
An ETP has a tax-free component and a taxable component. Tax is withheld only from the taxable component. The ETP tax-free component consists only of the invalidity segment and the pre-July 83 segment; it is not assessable and does not need to be reported. Enter it exactly as shown on your payment summary — this calculator does not work it out. The genuine redundancy tax-free limit is a different thing: that amount is never an ETP at all, so the two are never added together.
The two caps, and which one applies to you
For 2026-27 (payments from 1 July 2026) the ETP cap is $270,000 (indexed annually). The whole-of-income cap is $180,000 (not indexed), reduced by your other taxable income in the same income year. The ETP cap is reduced by earlier ETPs for the same termination and in the same income year. Which cap applies depends on whether the payment is excluded or non-excluded:
| Excluded (code R) | Non-excluded (code O) | |
|---|---|---|
| Examples | Genuine redundancy or early retirement scheme excess, invalidity, compensation for personal injury, unfair dismissal, harassment or discrimination | Golden handshake, non-genuine redundancy, severance, gratuity, payment in lieu of notice, unused sick leave, unused RDOs, any other ETP |
| Concessional rate applies up to | The ETP cap only | The smaller of the ETP cap and the whole-of-income cap |
| Above that cap | 47% | 47% |
Ordering: where one termination produces both an excluded and a non-excluded part, the excluded part is dealt with first against the ETP cap. The non-excluded part is then tested against the smaller of the remaining ETP cap and the whole-of-income cap. This calculator assumes "other taxable income" excludes the current ETP.
Withholding rates (including the 2% Medicare levy): 32% up to the cap if you are under preservation age; 17% up to the cap if you are at or over preservation age; 47% above the cap at any age.
Genuine redundancy: the tax-free limit
Tax-free limit (2026-27) = $13,598 + $6,801 × completed years of service. Only completed years count; part years do not. The tax-free portion is not part of the ETP and is not assessable. Only the excess over the limit is an ETP.
| Completed years | Tax-free limit |
|---|---|
| 1 | $20,399 |
| 3 | $34,001 |
| 5 | $47,603 |
| 8 | $68,006 |
| 10 | $81,608 |
A genuine redundancy means the employer decided the job no longer exists and dismissed the employee because of it. It is not genuine if the dismissal is because the employee reached normal retirement age, the employee is Age Pension age or older on the day of dismissal (67 for anyone born on or after 1 January 1957), the employee leaves voluntarily, the contract simply ends, or the dismissal is for disciplinary or inefficiency reasons. You choose which applies — this calculator does not decide it. If your payment is not a genuine redundancy, no tax-free limit applies at all. If you volunteered, confirm with your employer or the ATO whether your payment counts as genuine. If any other special circumstance may apply, check with the ATO.
The Redundancy Calculator works out the redundancy payment; this tool taxes the ETP part of it.
Preservation age — the 30 June trap
The withholding rate depends on whether you have reached your preservation age by the end of the income year in which the payment is made — that is, on 30 June — not your age on the payment date.
| Date of birth | Preservation age |
|---|---|
| Before 1 July 1960 | 55 |
| 1 July 1960 – 30 June 1961 | 56 |
| 1 July 1961 – 30 June 1962 | 57 |
| 1 July 1962 – 30 June 1963 | 58 |
| 1 July 1963 – 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
Worked example: you are 59 when the payment is made, but you turn 60 before the next 30 June. You have reached your preservation age by the end of the income year, so you are in the 17% band, not the 32% band.
The 12-month rule
To receive concessional treatment, an ETP must generally be paid within 12 months of termination. A payment made outside 12 months is a delayed termination payment and is assessable at marginal rates, not at 32%, 17% or 47%, so this calculator shows a warning instead of a tax number. The exception: the 12-month rule does not apply to the taxable component of genuine redundancy payments and early retirement scheme payments.
What this calculator does NOT do
- Unused leave: taxed separately — use the Final Pay Calculator.
- Death benefits: Death benefit ETPs use different rates — this tool does not calculate them.
- Super roll-over: an ETP cannot be rolled over to superannuation.
- Final tax on assessment: the result is a PAYG withholding estimate only, assuming an Australian resident who has provided a tax file number and pays the standard Medicare levy. Other offsets, HELP/STSL and the Medicare levy surcharge are not included.
Worked examples
- Genuine redundancy $120,000, 10 completed years, under preservation age. Tax-free limit $81,608 (13,598 + 10 × 6,801); taxable $38,392; tax $12,285 (38,392 × 32% = $12,285.44, rounded); net $107,715.
- Golden handshake $120,000, other taxable income $100,000, under preservation age. Whole-of-income cap = 180,000 − 100,000 = $80,000, which is smaller than the $270,000 ETP cap. Tax = 80,000 × 32% ($25,600) + 40,000 × 47% ($18,800) = $44,400; net $75,600.
- Split payment: $397 excluded + $17,678 non-excluded, other income $140,000, under preservation age. Excluded part first: tax $127. Remaining ETP cap $269,603; whole-of-income cap $40,000, so the applicable cap is $40,000. Non-excluded tax $5,657. Total tax $5,784; gross $18,075; net $12,291.
Frequently asked questions
What is an employment termination payment (ETP)?
An ETP is a lump sum paid in consequence of termination of employment. It can include payment in lieu of notice, a gratuity or golden handshake, an invalidity payment, compensation for loss of job or wrongful dismissal, the part of a genuine redundancy or early retirement scheme payment above the tax-free limit, unused sick leave, unused rostered days off, and the market value of property transferred (less consideration). A payment from a super fund is not an ETP.
What is the ETP cap for 2026-27?
The ETP cap is $270,000 for payments from 1 July 2026 and is indexed annually. It is reduced by earlier ETPs for the same termination and in the same income year, so the remaining cap is $270,000 minus those earlier ETPs (never below $0).
What is the whole-of-income cap, and when does it apply?
The whole-of-income cap is $180,000 and is not indexed. It is reduced by your other taxable income in the same income year, so it equals $180,000 minus that income (never below $0). It applies only to non-excluded payments (code O), where the concessional rate applies up to the smaller of the ETP cap and the whole-of-income cap. It does not apply to excluded payments (code R).
What is the difference between an excluded and a non-excluded ETP?
Excluded payments (code R) are the excess of a genuine redundancy or early retirement scheme payment over the tax-free limit, invalidity payments, and compensation for personal injury, unfair dismissal, harassment or discrimination. Only the ETP cap applies to them. Non-excluded payments (code O) are everything else, such as a golden handshake, a non-genuine redundancy payment, severance, a gratuity, payment in lieu of notice, unused sick leave and unused rostered days off. The smaller of the ETP cap and the whole-of-income cap applies to them. Where both arise from one termination, the excluded part is dealt with first.
How much of a genuine redundancy payment is tax-free in 2026-27?
The tax-free limit is $13,598 plus $6,801 for each completed year of service. Part years do not count. For example, 5 completed years gives $47,603, 8 years gives $68,006 and 10 years gives $81,608. Only the excess over the limit is an ETP. If the payment is not a genuine redundancy, no tax-free limit applies at all.
How is my preservation age worked out, and why does 30 June matter?
Preservation age depends on your date of birth: 55 if born before 1 July 1960, 56 if born 1 July 1960 to 30 June 1961, 57 if born 1 July 1961 to 30 June 1962, 58 if born 1 July 1962 to 30 June 1963, 59 if born 1 July 1963 to 30 June 1964, and 60 if born after 30 June 1964. The withholding rate depends on whether you have reached your preservation age by the end of the income year (30 June) in which the payment is made, not your age on the payment date. Someone aged 59 when paid who turns 60 before 30 June is in the 17% band, not the 32% band.
Is unused annual leave or long service leave an ETP?
No. Unused annual leave and long service leave are taxed separately (Lump Sum A/B) and are not taxed as an ETP. Use the Final Pay Calculator for your full final pay.
Can I roll my ETP over into super?
No. An ETP cannot be rolled over to superannuation. You may still make a personal contribution from the money afterwards, subject to contribution caps, but this calculator does not work that out.
What happens if my ETP is paid more than 12 months after I leave?
To receive concessional treatment, an ETP must generally be paid within 12 months of termination. A payment made later is a delayed termination payment and is assessable at marginal rates, not at 32%, 17% or 47%. The 12-month rule does not apply to the taxable component of genuine redundancy payments and early retirement scheme payments.
Is the figure on this page the final tax I will pay?
No. It is a PAYG withholding estimate for 2026-27 based on the inputs you enter, assuming you are an Australian resident who has provided a tax file number and pays the standard Medicare levy. Your final tax is settled when you lodge your return and can differ because of other income, offsets, HELP/STSL and Medicare levy variations.
Sources
Australian Taxation Office only:
General information only, based on Australian Taxation Office guidance for 2026-27 — not tax advice. This calculator estimates PAYG withholding on the inputs you enter, assuming you are an Australian resident who has provided a tax file number and pays the standard Medicare levy. Your final tax is settled when you lodge your return and can differ because of other income, offsets, HELP/STSL, and Medicare levy variations. If your payment summary shows an ETP code, a tax-free component, or a death benefit, check it against the ATO guidance or a registered tax agent before relying on this estimate.