What you're actually owed
Notice, redundancy pay, accrued leave, super, bonuses, equity. AU rules. Tax. The actual numbers.
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Notice, redundancy pay, accrued leave, super, bonuses, equity. AU rules. Tax. The actual numbers.
When the offer letter landed in my inbox, the bottom-line figure looked generous until I broke it down. Half of it was leave I had already earned. Some of it was notice they were legally required to pay. The actual ex-gratia (the bit that is genuinely a goodwill payment) was smaller than the headline. Always smaller than the headline.
This module is about reading the page properly. Numbers will be hedged because the thresholds shift each tax year, but the structure does not.
Every Australian redundancy payout is some combination of these five buckets. Get a coffee, get the offer letter, and tick them off:
Each one has its own tax treatment. Each one has different rules about when it must be paid. Treat them separately.
The National Employment Standards set minimum notice based on continuous service: typically 1 week if you have less than a year, scaling up to 4 weeks if you have over five years, plus an extra week if you are over 45 with two-plus years of service.
Your contract may give you more (senior roles often have 4-12 weeks regardless). The longer one wins. If they pay it out as a lump sum ("payment in lieu"), it is taxed as ordinary income at your marginal rate. If they make you work it, you are still on payroll.
Ask the question: "Is super paid on the notice period?" The answer is usually yes if you work it, and a hedged "depends on the structure" if it is paid in lieu. Push back if they try to skip it.
The NES scale, roughly, runs from 4 weeks (for one year of service) up to 16 weeks (for nine-plus years), then drops back to 12 weeks at ten-plus years (yes, the scale dips, no it is not a typo, it is in the legislation).
Two things to know:
If your contract or EBA gives you 3 weeks per year of service uncapped, you get that. The NES is just the safety net.
This is where the variation lives. Read your contract. Look for phrases like:
Common structures: 2-4 weeks per year of service, sometimes capped at a number of months, sometimes uncapped. Senior contracts may have a flat figure ("twelve months base salary").
If your contract is silent, you fall back to the NES. If your contract is generous, do not let HR quote the NES at you. The contract wins.
This is your money already. Not a gift. Three sub-buckets:
Audit your final payslip against the accruals on your last normal payslip. Mistakes here are common and almost always in the employer's favour. I have seen 80 hours of annual leave "reset" by a payroll system, and only the employee noticed.
Bonus: if your scheme has a pro-rata clause for redundancy, ask for it in writing. Many schemes say "must be employed on payment date", which is the clause they will quote. Read your scheme document.
Commission: any deals closed but not yet invoiced? Trail commission on accounts you brought in? This is contract-dependent. Sales contracts often have a redundancy carve-out (sometimes called a "sales tail"), check for it.
Equity: this is the one most men leave on the table. Unvested options usually lapse, but vested-and-unexercised options may have a 30-90 day exercise window after termination. RSUs often have a "good leaver" provision in redundancy cases. ESOP scheme docs are dense, but the answer is in there. Read it, or pay your accountant an hour to read it for you.
Super: the Super Guarantee rate (currently in the 11.5-12% range, indexed each July) is paid on ordinary time earnings. It is generally not paid on the genuine redundancy lump sum, and that is correct under the rules, do not waste a fight on it.
Ex-gratia: the goodwill bit. Negotiable. The pull you have here is your willingness to sign the deed of release without a fight, plus the cost to them of you not signing.
A genuine redundancy payment (the package, not your leave or notice) gets a tax-free threshold made up of two components: a base amount, plus a per-year-of-service amount. Both indexed annually. As of recent years, the base sat around the $12,000 mark and the per-year amount around the $6,000 mark, but check the current ATO figures (or ask your accountant) before you do the maths. Do not quote me at the BAS lodgement.
Anything above the tax-free threshold is taxed as an Employment Termination Payment (ETP), which has a concessional rate up to a cap (around the $245k mark for the lifetime ETP cap, indexed). Your accountant earns their fee here.
Accrued annual leave and long service leave have their own concessional rates, separate from the ETP rules. Pay-in-lieu of notice is taxed at your marginal rate as ordinary income.
The headline number on the offer letter is the gross. The number that lands in your account is anywhere from 60-95% of that, depending on the mix.
Both are usually free for them to give. Ask. The aphorism for this module is short. Read the offer. Run the maths. Sign nothing rushed.
Before the deed of release goes back, do a final read-through with three questions in your head:
If anything is missing or unclear, send a short email back: "Before I sign, can you confirm the treatment of [X], and provide the calculation behind [Y]?" Polite. Specific. In writing. Most queries get fixed without drama. Start there.
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