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A genuine redundancy payment is a payment you receive because the job you were doing is abolished. That is, your employer has made a decision that the job you are doing no longer exists and your employment is to be terminated.

A genuine redundancy has special tax treatment under the tax law where an amount paid up to a limit is tax free. If your redundancy does not meet the definition of genuine redundancy then it will be taxed under the normal employment termination payment rules.

A genuine redundancy payment is made up of two components:

  1. A tax free amount and
  2. An assessable amount==> see our post Tax Rates On Excessive Redundancy Component

Tax Free Amount:

To work out the tax free amount of a Genuine Redundancy Payment use the following formula:

Base amount + (service amount × years of service)

Below is a table setting out the Base Rates and Service Limits for a number of years.

Example – the tax free component for 2013 would be $9246 + ($4624 x years of service)

Income year
Base limit
For each complete year of service


The tax free amount is non-assessable/non-exempt income – ie TAX FREE.

Note: the base amount and the service amount are indexed annually.

Assessable amount:

The amount in excess of the tax free amount of a genuine redundancy payment is taxed at specified rates – see this post ==> Tax Rates on component in excess of the TAX FREE amount.

For further information see this FREE fact sheet on taxation of redundancy payment.


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