Unused Leave & Lump Sum Tax 2025-26 & 2026-27
Calculate withholding on unused annual leave, long service leave and other termination payments. Select the income year and pay cycle for the applicable ATO Schedule 7 and Schedule 11 settings.
2025-26 is the return being lodged now; 2026-27 is the year in progress.
Post-1993 leave uses an estimated Schedule 7 marginal withholding rate
Salary/wages earned this year (excluding leave payouts)
Schedule 7 uses your last normal fortnightly pay. Leave blank to estimate it as annual income ÷ 26.
Gratuity, severance, or other termination payment
2025-26 ATO Schedule 7 & Schedule 11 withholding rates
Enter your leave payout or termination payment details to see the withholding breakdown
When you leave a job, your employer must pay out any accrued but untaken annual leave. The ATO treats this as a lump sum payment (Type A) — the tax rate depends on when the leave was accrued and why you left.
| Scenario | Tax treatment |
|---|---|
| Leave accrued before 18 Aug 1993 | Flat 32% (includes Medicare levy) |
| Leave accrued after 17 Aug 1993 — normal termination | Schedule 7 marginal withholding estimate |
| All annual leave — genuine redundancy | Flat 32% (includes Medicare levy) |
Long service leave has three accrual periods, each with different tax treatment. The pre-1978 concession is very generous — only 5% of that component is added to your assessable income.
| Accrual period | Tax treatment |
|---|---|
| Pre-16 Aug 1978 | Only 5% assessable; marginal withholding estimated on that portion |
| 16 Aug 1978 – 17 Aug 1993 | Flat 32% (includes Medicare levy) |
| Post-17 Aug 1993 — normal termination | Schedule 7 marginal withholding rate |
| Post-17 Aug 1993 — genuine redundancy | Flat 32% (includes Medicare levy) |
If you are made genuinely redundant, part of the genuine redundancy payment may be tax-free. For 2026-27:
$13,598 base amount + $6,801 × completed years of service
For example, with 10 completed years of service, the maximum tax-free limit is $13,598 + $68,010 = $81,608. The actual tax-free amount cannot exceed the genuine redundancy payment received. For a 2025-26 return, the limit was $13,100 base + $6,552 per year (10 years = $78,620). Any genuine redundancy amount exceeding the applicable limit is treated as an ETP and taxed accordingly.
This tax-free treatment only applies to genuine redundancies where the position is no longer required. It does not apply to voluntary resignation, misconduct, or reaching retirement age.
ETPs are payments made because of the termination of employment, such as severance pay, gratuities, or golden handshakes. Taxed under ATO Schedule 11 with concessional caps.
| Component | Tax rate (incl. Medicare) |
|---|---|
| Within cap — below preservation age | 32% (30% + 2% ML) |
| Within cap — at/above preservation age | 17% (15% + 2% ML) |
| Above cap | 47% (45% + 2% ML) |
Need to separate genuine redundancy from ETP?
See what stays tax-free, what gets excluded from the redundancy concession, and when the balance falls into ETP rules.
Read the redundancy vs ETP explainer →The genuine redundancy tax-free limit is indexed each 1 July in line with AWOTE (average weekly ordinary time earnings), and only completed years of service count — a part-year is rounded down. Find the row closest to your completed years of service below.
| Years of service | 2026-27 tax-free limit | 2025-26 tax-free limit |
|---|---|---|
| 1 | $20,399 | $19,652 |
| 2 | $27,200 | $26,204 |
| 3 | $34,001 | $32,756 |
| 5 | $47,603 | $45,860 |
| 8 | $68,006 | $65,516 |
| 10 | $81,608 | $78,620 |
| 15 | $115,613 | $111,380 |
| 20 | $149,618 | $144,140 |
| 25 | $183,623 | $176,900 |
These examples use the same engine as the calculator above, at 2026-27 rates.
Example A — Resignation: $85,000 salary + $8,000 unused annual leave (all accrued after 17 Aug 1993)
Gross annual leave: $8,000
Tax-free component: none — this is a resignation, not a genuine redundancy
Estimated marginal withholding using the $85,000 other-income input: $2,600
Total tax withheld: $2,600
Net payment: $5,400 — effective rate 32.5%
Example B — Genuine redundancy: $70,000 salary, 10 completed years of service, $12,000 unused annual leave, $95,000 taxable ETP
Maximum genuine redundancy tax-free limit: $81,608 ($13,598 + $6,801 × 10 years) — shown separately and not added to this example's gross payment
Unused annual leave, taxed at 32% flat (redundancy rate): $3,840 tax on $12,000 gross
Taxable ETP within cap, taxed at 32% (below preservation age): $30,400 tax on $95,000
Total gross payment: $107,000
Total tax withheld: $34,240
Net payment: $72,760 — effective rate 32.0%
Example C — Resignation with split long service leave: $90,000 salary, $20,000 LSL (post-17 Aug 1993) + $5,000 LSL (16 Aug 1978 – 17 Aug 1993)
LSL (16 Aug 1978 – 17 Aug 1993), taxed at 32% flat: $1,600 tax on $5,000 gross
LSL (post-17 Aug 1993), estimated marginal withholding using the $90,000 other-income input: $6,396 on $20,000 gross
Total gross LSL: $25,000
Total tax withheld: $7,996
Net payment: $17,004 — effective rate 32.0%
Excluded ETPs (genuine redundancy excess, invalidity, early retirement) use the ETP cap alone. Non-excluded ETPs (e.g. a golden handshake) use the lesser of the ETP cap and the whole-of-income cap, which is fixed by statute and does not index.
| Cap | 2026-27 | 2025-26 |
|---|---|---|
| ETP cap (excluded ETPs) | $270,000 | $260,000 |
| Whole-of-income cap (non-excluded ETPs) | $180,000 | $180,000 |
How is unused annual leave taxed in Australia?
How is unused long service leave taxed?
What is the genuine redundancy tax-free amount for 2026-27?
What is the difference between leave payments and ETP?
What is the 32% flat rate for leave?
Are leave payouts included in my tax return?
Don't know your redundancy payout yet? Calculate your NES redundancy weeks and notice pay before working out the tax here.
Not sure how many weeks of long service leave you've accrued? Use the Long Service Leave Calculator for your state before entering an LSL amount here.
Working out the gross annual leave figure first? The Annual Leave Loading Calculator adds the 17.5% loading to your unused-leave payout before you tax it here.
Tax Accuracy & Sources
Estimates PAYG withholding on unused annual leave, long service leave, and ETP taxable components using selectable 2025-26 or 2026-27 ATO Schedule 7 and Schedule 11 settings. Schedule 7 marginal withholding uses the selected pay cycle and normal gross pay, combining all applicable leave components before per-period rounding. The redundancy figure is a maximum tax-free limit only and is not added to payment totals. It does not calculate the actual tax-free part of a gross redundancy payment, or cover payment in lieu of notice, back pay, multiple ETPs in one year, or pre-July 1983 service components.