Termination pay tax calculator 2026-27: unused leave and ETP
Work out the tax withheld when you leave a job: unused annual leave, leave loading and long service leave (ATO Schedule 7), and employment termination payments such as payment in lieu of notice, a golden handshake or redundancy over the tax-free limit (ATO Schedule 11). It covers resignation and retirement (marginal rates), genuine redundancy (32%), the $270,000 ETP cap and the $180,000 whole-of-income cap for 2026-27. It matches the ATO's worked examples.
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CalculatorSplit long service leaveRatesWorked examplesFAQ
Split long service leave by period
If your service started before 18 August 1993, the ATO splits unused long service leave into three periods. Enter your dates to apportion it (for employees who haven't taken any long service leave). If you've taken some, your employer has to adjust the days in each period.
How termination payments are taxed (2026-27)
| Payment | Normal termination | Genuine redundancy, invalidity, early retirement |
|---|---|---|
| Annual leave and loading after 17 Aug 1993 | Marginal rates | 32% |
| Annual leave and loading before 18 Aug 1993 | 32% | 32% |
| Long service leave after 17 Aug 1993 | Marginal rates | 32% |
| Long service leave 16 Aug 1978 to 17 Aug 1993 | 32% | 32% |
| Long service leave before 16 Aug 1978 | 5% at marginal rates | 5% at marginal rates |
ETPs: 32% up to the cap (17% if you're 60 or older at 30 June), and 47% above it. Foreign residents get rates without the 2% Medicare levy. Genuine redundancy is tax-free up to $13,598 + $6,801 per completed year of service. Only the excess is an ETP, and it uses the ETP cap ($270,000). Payments in lieu of notice, golden handshakes, unused sick leave and RDOs use the smaller of the ETP cap and the whole-of-income cap: $180,000 less your other taxable payments this year.
Worked examples (ATO)
- Norman (retirement, Schedule 7): long service leave $780 pre-1978, $6,420 for 1978–1993 and $14,820 post-1993, weekly pay $1,155. 32% of $6,420 = $2,054. Marginal rates on $39 + $14,820 = $14,859: $285 a week, $279 − $188 = $91 × 52 = $4,732. Total $6,786.
- Robyn (genuine redundancy): $8,000 of long service leave at 32% = $2,560.
- Matt (retirement, 270 days of LSL from 1 Jan 1977 to 31 Dec 2014, $80,000): 13 / 106 / 151 days, split $3,852 / $31,407 / $44,741.
- Helen (resignation): $85,000 of annual leave accrued from 18 Sep 1992 to 17 Sep 2014. 334 of 8,035 days were before 18 Aug 1993, so $3,533 is pre-1993.
- Lloyd (genuine redundancy ETP $45,000, age 41): 32% = $14,400.
- Jane (golden handshake $10,000, $84,000 wages): whole-of-income cap $96,000, so 32% = $3,200.
- Chris ($120,000 ETP, $50,000 wages + $50,000 leave): cap $80,000: $25,600 + $18,800 = $44,400.
- Alec (age 30, 5 years, $48,000 redundancy + $17,678 gratuity, $140,000 wages): $397 over the $47,603 limit → $127. Gratuity under the $40,000 cap → $5,657.
FAQ
How is unused annual leave taxed when I resign?
Leave that accrued after 17 August 1993 is taxed at your marginal rate. Your employer spreads it over a year of pay periods, works out the extra tax per period and multiplies back. Leave from before 18 August 1993 is withheld at 32%. If you’re made genuinely redundant, all unused annual leave is withheld at 32%.
What is the ETP cap for 2026-27?
$270,000. The whole-of-income cap is $180,000 less your other taxable payments for the year. Golden handshakes, payments in lieu of notice, unused sick leave and RDOs use the smaller of the two caps; the taxable part of a genuine redundancy uses the ETP cap only.
How much tax is withheld from an ETP?
32% up to the cap if you’re under preservation age (60) at the end of the income year, 17% if you’re 60 or older, and 47% on any amount above the cap. If you haven’t given your TFN, 47% applies to the whole payment.
Is payment in lieu of notice taxed as an ETP?
Yes. Payment in lieu of notice is an ETP that uses the smaller of the ETP cap and the whole-of-income cap. Unused annual leave and long service leave aren’t ETPs: they’re taxed under their own rules.
How is long service leave taxed on termination?
Long service leave is split by when it accrued. The part before 16 August 1978 is 5% taxable at marginal rates. The part from 16 August 1978 to 17 August 1993 is withheld at 32%. The part after 17 August 1993 is taxed at marginal rates, or 32% for genuine redundancy, invalidity or an early retirement scheme.
Sources (checked 17 Oct 2026): ATO Schedule 7 – Tax table for unused leave payments on termination of employment; ATO Schedule 11 – Tax table for employment termination payments (2026-27 caps and examples); ATO Unused long service leave examples; ATO ETP cap amounts. Marginal rate amounts use the 2026-27 Schedule 1 weekly, fortnightly and monthly tax tables.
General information, not tax advice. This shows the PAYG amount your employer withholds. Your final tax is worked out in your tax return, where offsets can reduce the tax on ETPs and pre-1993 leave. Working holiday makers use Schedule 15 instead.