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ETP Tax Calculator

Work out the tax withheld from an employment termination payment in 2026-27: whether the ETP cap or the whole-of-income cap applies, the 32% or 17% rate up to it, and 47% on anything above. Payment in lieu of notice, a golden handshake or gratuity, severance pay, a non-genuine redundancy payment and unused sick leave or rostered days off are all ETPs. Unused annual leave and long service leave paid in the same final pay are not, and are worked out alongside, under their own rules. The Final Pay Calculator itemises a whole final pay, wages owed included.

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Also a golden handshake, severance pay, a non-genuine redundancy payment, or unused sick leave or rostered days off. It uses the smaller of the two caps.

Only the part of a genuine redundancy or early retirement scheme payment above its tax-free limit, a payment for permanent disability, or compensation for personal injury, unfair dismissal, harassment or discrimination. It uses the ETP cap only.

Only work before 1 July 1983 or an invalidity payment creates one. Enter the two payments above without it.

Taxable pay since 1 July, bonuses included. Leave the unused leave below out: it is added for you. Together they shrink the $180,000 whole-of-income cap.

Not part of the ETP. Schedule 7 taxes it separately. Leave accrued after 17 August 1993.

Not part of the ETP either. Leave accrued after 17 August 1993: older leave is withheld at different rates.

Sets the Schedule 7 rate on unused leave. The ETP rates do not depend on it.

Your last full week of pay before the termination payments, overtime and allowances included.

ETP after tax withheld

$13,600.00

ETP before tax
$20,000.00
Other ETP, smaller of the two caps
$20,000.00
Whole-of-income cap: $180,000 less $46,000
$134,000
ETP cap for 2026-27
$270,000
Withheld from the other ETP
$6,400
Tax withheld from the ETP, Schedule 11
$6,400
ETP after tax withheld
$13,600.00
Unused annual leave, not part of the ETP
$6,000.00
Withheld from annual leave, Schedule 7
$1,872
Final pay after tax withheld, ETP and leave
$17,728.00

Schedule 11 withholds 32% up to the cap because you will be under 60 on 30 June 2027, and 47% above it. Both rates include the 2% Medicare levy. The other ETP takes the whole-of-income cap, $134,000, because it is smaller than the $270,000 of ETP cap left. Unused leave is not an ETP, so Schedule 7 withholds from it separately, but it still counts as a taxable payment that shrinks the whole-of-income cap. This is the withholding, not your final tax, which is settled when you lodge.

Worked examples, with the arithmetic.

The same sums the tool runs, on real figures. Every number below is computed by the tested engine from the published rates, so the prose and the tool can never disagree.

How much tax is withheld from a $10,000 golden handshake?

$180,000 - $84,000 of wages       = $96,000 whole-of-income cap
smaller than the $270,000 ETP cap = whole-of-income cap applies
$10,000 x 32%                     = $3,200 withheld

This is the ATO's Schedule 11 Example 2. Jane, 50, resigns after $84,000 of salary and wages and is paid a $10,000 golden handshake under her contract. It is a non-excluded ETP, so the smaller of the two caps applies: $180,000 less $84,000 leaves a $96,000 whole-of-income cap, far under the $270,000 ETP cap. The whole payment fits under it, so 32% is withheld, $3,200, and $6,800 is paid.

What happens when an ETP goes over the whole-of-income cap?

$50,000 wages + $50,000 leave     = $100,000 taxable payments
$180,000 - $100,000               = $80,000 whole-of-income cap
$80,000 x 32%                     = $25,600
$40,000 above the cap x 47%       = $18,800
withheld in all                   = $44,400

Schedule 11 Example 3. Chris is dismissed in January, not as a genuine redundancy, after $50,000 of salary and wages and a $50,000 lump sum for leave. His $120,000 ETP is non-excluded, and the leave counts as a taxable payment even though it is not part of the ETP, so his whole-of-income cap is $80,000. That much is withheld at 32%, and the $40,000 above it at 47%: $44,400 in all, which this calculator reproduces with the leave entered as leave.

Which cap applies when a redundancy and a gratuity are paid together?

$48,000 - $47,603 tax-free limit  = $397 excluded ETP
$397 x 32%                        = $127 withheld
$270,000 - $397                   = $269,603 ETP cap left
$180,000 - $140,000               = $40,000 whole-of-income cap
$17,678 gratuity x 32%            = $5,657 withheld

Schedule 11 Example 4. Alec, 30, is made redundant after 5 years and paid $48,000 of genuine redundancy and a $17,678 gratuity, after $140,000 of salary and wages. The part under the ETP cap only is always dealt with first: $13,598 plus 5 x $6,801 is tax-free, the $397 above it is an excluded ETP, and $127 is withheld. That leaves $269,603 of ETP cap, but the gratuity takes the smaller whole-of-income cap, $40,000, and fits under it, so $5,657 is withheld. His employer issues two ETP statements, one for each part. The Redundancy Calculator works out the tax-free limit.

Is less withheld from an ETP at 60?

$45,000 x 32%, under 60           = $14,400 withheld
$45,000 x 17%, 60 or over         = $7,650 withheld
difference                        = $6,750

Yes, up to the cap. Schedule 11 Example 1 is Lloyd, 41, whose $45,000 ETP is the part of a genuine redundancy payment above its tax-free limit. Under preservation age, 32% is withheld: $14,400. Preservation age is 60 for anyone born after 30 June 1964, and it is tested at the end of the income year the payment is made in, so the same ETP paid to someone who is 60 by 30 June 2027 has 17% withheld, $7,650. Above the cap the rate is 47% at any age.

How is the tax-free component of an invalidity payment worked out?

370 / (3,305 + 370) of the ETP    = $10,269 tax-free
$102,000 - $10,269                = $91,731 taxable
$91,731 x 17%                     = $15,594 withheld

The ATO's example is Jackson, whose job ends on medical grounds about a year before he turns 65. His $102,000 ETP (a golden handshake, unused rostered days off, unused sick leave and compensation) is all paid because of invalidity, so all of it uses the ETP cap only. The invalidity segment is the ETP times his days to retirement over his employment days plus days to retirement: $10,269, which is the tax-free component and has nothing withheld. The other $91,731 is taxable. He is past preservation age, so paid in 2026-27 it would have 17% withheld, $15,594, a figure worked out here rather than printed by the ATO.

Is unused annual leave part of an ETP?

$6,000 / 52, cents dropped        = $115 a week
resigned, on $1,500 a week        = $1,872 withheld
genuine redundancy, 32%           = $1,920 withheld

No. Unused annual leave, leave loading and long service leave arrive in the same final pay, but they are not ETPs and Schedule 11 does not apply to them. Schedule 7 does: on a resignation, $6,000 of leave on $1,500 a week is spread over 52 weeks and taxed at the marginal rate that gives, $1,872 withheld, while on a genuine redundancy, invalidity or early retirement a flat 32% is withheld, $1,920. Leave uses none of the ETP cap, but it is a taxable payment, so it shrinks the whole-of-income cap, which is what cut Chris's cap to $80,000.

Is this accurate, and how does it work?

The method is published rather than described. Nothing here is a black box, and the limits are listed as plainly as the workings.

  1. 1Sort each payment by the cap it uses. Schedule 11 splits life benefit ETPs in two. A genuine redundancy payment above its tax-free limit, an early retirement scheme payment above its tax-free limit, a payment because of permanent disability, compensation for personal injury, compensation for unfair dismissal, compensation for harassment and compensation for discrimination use the ETP cap only. A golden handshake, a non-genuine redundancy payment, severance pay, a gratuity, a payment in lieu of notice, a payment for unused sick leave and a payment for unused rostered days off use the smaller of the ETP cap and the whole-of-income cap, and so does any ETP not in the first list. Employers report the first kind under code R and the second under code O.
  2. 2Take out any tax-free component. Nothing is withheld from the tax-free component of an ETP, and the caps apply only to the taxable component. A tax-free component arises only from employment before 1 July 1983 or from invalidity. The pre-1 July 1983 part is the ETP, less any invalidity segment, times the days of employment before 1 July 1983 over the total days of employment. The invalidity segment, where a job ends because of a permanent disability that two medical practitioners certify, is the ETP times the days to retirement, generally to age 65, over the days of employment plus the days to retirement. The tax-free part of a genuine redundancy payment is a different thing: it is not part of the ETP at all, and the Redundancy Calculator splits a redundancy payment at that limit.
  3. 3Withhold from the ETP-cap-only part first. Up to the $270,000 ETP cap for 2026-27, indexed each year from $260,000 in 2025-26, Schedule 11 withholds 32% or 17%, and 47% above it. Where one termination pays both kinds of ETP, the ATO deals with the ETP-cap-only part first, and that part reduces the ETP cap left for the rest.
  4. 4Work out the whole-of-income cap for the rest. Add up the taxable payments made to you in the income year, leaving the ETP out: salary, wages, bonuses and any unused leave paid out. Take the total from $180,000, a figure that is not indexed. Compare what is left with the ETP cap left and use the smaller; where the two are equal, Schedule 11 uses the whole-of-income cap. On $180,000 or more of other taxable payments the cap is nil, and the whole ETP is withheld at 47%.
  5. 5Apply the rate for your age. Preservation age is 60 for anyone born after 30 June 1964, and anyone born earlier has already reached it. It is tested at the end of the income year the payment is made in, so for 2026-27 the question is whether you are 60 or over on 30 June 2027. The rates include the 2% Medicare levy, and each ETP is rounded to the nearest dollar, 50 cents up.
  6. 6Withhold from unused leave under Schedule 7. Unused annual leave, leave loading and long service leave are not ETPs. On a resignation, retirement or dismissal, leave accrued after 17 August 1993 is spread over 52 weekly pays on top of your normal weekly earnings, the extra withholding on one week's share is multiplied back up, and under $300 the lesser of that and 32% is withheld. On a genuine redundancy, invalidity or an approved early retirement scheme, a flat 32% is withheld. The Annual Leave Calculator works out an annual leave payout, and the Long Service Leave Calculator splits long service leave by the dates it accrued.

What this does not cover.

  • Life benefit ETPs only. A death benefit ETP, paid to a dependant, a non-dependant or the trustee of the estate, is withheld at different rates and is not calculated.
  • It treats this as the only ETP for the termination. An earlier ETP for the same termination reduces the ETP cap left, and Schedule 11 says an ETP can sometimes count as a taxable payment for the whole-of-income cap. Neither is modelled, so enter only salary, wages and leave as other payments.
  • The tax-free component is entered, not worked out. The method above gives the ATO formulas for the pre-1 July 1983 and invalidity segments, but the day counts they need belong on your employer’s statement.
  • It assumes you are an Australian resident who has given your employer a tax file number. Without one, 47% of the taxable component is withheld. Foreign residents have the Medicare levy taken out of the rates, a tax treaty can remove withholding altogether, and working holiday makers use Schedule 15. None of these is modelled.
  • A payment made more than 12 months after the job ends is usually a delayed termination payment, and is not modelled.
  • Unused leave is leave accrued after 17 August 1993 only, on a weekly pay, as the long service leave engine is weekly. Annual leave and long service leave each go through the marginal rate calculation on their own, which is how the ATO sets out the steps for each; it publishes no example with both paid together. The Long Service Leave Calculator handles older long service leave.
  • For a genuine redundancy, enter only the part above the tax-free limit, as an excluded ETP. The Redundancy Calculator works out the NES redundancy pay and the limit.
  • Figures are Schedule 11 and Schedule 7 withholding on payments made in 2026-27, not your final tax, which is worked out in your tax return.

Where these figures come from.

Every rate this site uses is listed on the Methodology page.

Common questions.

What is an employment termination payment?

A lump sum paid because your job ends, whether you resign, retire, are dismissed or are made redundant, generally within 12 months of the end of the job. Payment in lieu of notice, a golden handshake or gratuity, severance pay, a non-genuine redundancy payment, the part of a genuine redundancy payment above its tax-free limit, compensation for unfair dismissal and payments for unused sick leave or rostered days off are all ETPs. Unused annual leave, leave loading and long service leave are not, and neither is a payment from a super fund. The Notice Period Calculator works out how much notice pay is owed.

What is the ETP tax rate?

32% up to the relevant cap if you are under preservation age at the end of the income year the payment is made in, and 17% if you have reached it. Anything above the cap is taxed at the top marginal rate of 45% plus the 2% Medicare levy, 47% in all. Those are the rates the ATO gives for the taxable component, and the rates your employer withholds at under Schedule 11. Preservation age is 60 for anyone born after 30 June 1964, and anyone born earlier has already reached it.

What is the ETP cap for 2026-27?

$270,000, up from $260,000 in 2025-26. The ETP cap is indexed each year and applies to every life benefit ETP. For a non-excluded ETP, such as payment in lieu of notice or a golden handshake, the $180,000 whole-of-income cap applies as well, less your other taxable payments for the year, and the smaller of the two is the one that counts. That cap is not indexed.

What is the whole-of-income cap on an ETP?

$180,000 less the other taxable payments you receive in the income year, such as salary, wages and unused leave paid out. It applies only to non-excluded ETPs: a golden handshake, gratuity, severance pay, a non-genuine redundancy payment, payment in lieu of notice and unused sick leave or rostered days off. It is usually the cap that bites. On $100,000 of other taxable payments it leaves $80,000, far under the ETP cap, and on $180,000 or more it leaves nothing, so the whole ETP is withheld at 47%.

What is an excluded ETP?

One that uses the ETP cap only and ignores the whole-of-income cap: a genuine redundancy payment above its tax-free limit, an early retirement scheme payment above its tax-free limit, a payment because of permanent disability, compensation for personal injury, compensation for unfair dismissal, compensation for harassment and compensation for discrimination. Death benefit ETPs use the ETP cap only too. Because the whole-of-income cap does not apply, a high salary earlier in the year does not push an excluded ETP into the 47% rate.

Does unused annual leave count towards the ETP cap?

No. Unused annual leave, leave loading and long service leave are not ETPs, so they use none of the ETP cap, and Schedule 7, not Schedule 11, sets the tax withheld from them. They do count as taxable payments for the whole-of-income cap, so a large leave payout leaves less room for a non-excluded ETP paid at the same time. In the ATO's own example, $50,000 of leave and $50,000 of wages cut the cap to $80,000.

Is there a tax-free component in my ETP?

Probably not. An ETP has a tax-free component only where part of it relates to employment before 1 July 1983 or to invalidity, and your employer works it out and shows it on your statement. Nothing is withheld from it and it is not income you report. The tax-free part of a genuine redundancy payment is separate: it is not part of the ETP, and the Redundancy Calculator works it out.

Is the tax withheld from an ETP my final tax?

Not necessarily. Your employer withholds under Schedule 11 using what it knows, including the taxable payments it has made to you that year for the whole-of-income cap, and the tax on the ETP is settled in your tax return. Withholding is higher if you have not given your employer your tax file number: 47% of the taxable component, or 45% for a foreign resident.

What if the ETP is paid more than 12 months after I leave?

Then it is generally a delayed termination payment, not an ETP, unless the ATO approves otherwise. It is reported with your other gross payments, and 32% is withheld if you have given your employer your tax file number. The part of a genuine redundancy payment above its tax-free limit stays an ETP however late it is paid.

Related pages.

  • Redundancy CalculatorWork out NES redundancy pay by years of service, your notice period, and how much is tax-free as a genuine redundancy in 2026-27, with the ETP tax on the rest.
  • Notice Period CalculatorHow much notice to give when you resign, from the clause in 25 awards, and the notice your employer must give under the NES, with pay in lieu and its tax.
  • Annual Leave CalculatorWork out an annual leave payout when you leave a job: your unused hours at the base rate, any leave loading, and the tax withheld under Schedule 7 for 2026-27.
  • Long Service Leave CalculatorLong service leave in every state and territory: weeks accrued, when pro rata is paid on leaving and for which reasons, and what it is worth at your pay.
  • Tax Withheld CalculatorWork out the PAYG tax withheld from a weekly, fortnightly or monthly pay on the ATO 2026-27 formulas, with the working and the tax owed when you lodge.
  • Income Tax CalculatorWork out income tax, the Medicare levy and the low income tax offset on any salary for 2026-27, with the bracket-by-bracket working shown.

Every calculator on this site is listed on the Wage Calculator page.