Unused Leave Tax (AU)
Updated November 2026 · Free · No sign-up
Calculate tax on unused leave payouts — Australian annual leave and long service leave at termination tax differently by exit type: genuine redundancy → capped at 32% (or less); ordinary resignation → marginal rates via the lump-sum mechanics.
Quick answer: Unused annual leave + LSL at exit: genuine redundancy/early retirement → taxed at a maximum 32% (30% + Medicare, via the offset); resignation/ordinary termination → post-1993 accruals at marginal rates (withheld at 32% flat, reconciled at filing). Leave loading pays out too and follows the same buckets.
The Buckets
| Payment | Redundancy exit | Ordinary exit |
|---|---|---|
| Unused annual leave (+ loading) | Max 32% (30% + Medicare via offset) | Marginal rates (post-Aug-1993 accrual); 32% withheld then reconciled |
| Unused LSL — post-1993 portion | Max 32% | Marginal rates |
| Pre-1993/1978 LSL slices | Concessional legacy rates (5% assessable pre-78) | |
| The redundancy payment itself | Separate: tax-free base + per-year amounts, then ETP rates — see the redundancy page | |
Worked Examples
Example 1 — resignation, $8,000 leave, 39% marginal. Withheld ~$2,560 (32%); true tax ~$3,120 → a small bill at filing. At an 18% marginal: refund ~$1,120 — the flat withholding cuts both ways.
Example 2 — redundancy, same $8,000 + $6,000 LSL. Capped at 32%: ~$4,480 max, whatever your bracket — the cap is the concession.
Example 3 — the timing lever. Resigning in July (low-income year ahead) vs June (on top of a full year’s income) can swing the marginal-rate outcome by thousands on big LSL balances — the classic exit-date optimization. Not tax advice; model your year.
Mechanics
These payouts are NOT ETPs (they have their own lump-sum categories on the income statement — labels A/B) and do NOT earn super (SG excludes termination leave payouts in most cases). Employers withhold per the ATO schedules; the wash-up happens at filing. Verify current rates/thresholds at the ATO.
Frequently Asked Questions
How is unused annual leave taxed at exit?
Genuine redundancy: capped at ~32% (30% + Medicare). Resignation: marginal rates on post-1993 accruals, with 32% withheld upfront and reconciled when you file.
Is long service leave taxed the same?
Broadly yes — post-1993 LSL follows the same split; pre-1993/pre-1978 slices keep concessional legacy treatment.
Does super apply to leave payouts?
Generally no — unused-leave payments on termination sit outside ordinary time earnings for SG.
Why did I get a tax bill after my payout?
The flat 32% withholding under-covers higher marginal rates (and over-covers lower ones) — filing reconciles it.
Can timing my exit reduce the tax?
Shifting a big payout into a lower-income year changes the marginal outcome on ordinary terminations — worth modelling before picking the date; not tax advice.
✓ Formula verified • Last updated: November 3, 2026