What does redundancy mean for your super?
20 April 2026 | 6 min read
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Read on to understand:
- How your redundancy payment is taxed
- What happens to your super and insurance
- Your options for any lump sum you receive
- What support we offer
What are the components of redundancy payments?
Your redundancy payment is likely made up of a few different parts, and each is taxed differently. Your employer will provide you with a detailed summary outlining the calculations and applicable tax.
Up to a certain limit, this portion is tax-free and paid as cash. You can't roll it directly into super, but you can make separate contributions later from the payment, subject to eligibility and contribution caps. The tax-free portion is not included in your assessable income at tax time.
For tax purposes, there are payments you need to exclude from the genuine redundancy amount. These are payments you are already entitled to, such as unpaid salary or wages, and lump sums for unused annual or long service leave when your employment ends. Payments made instead of superannuation benefits are also excluded from a genuine redundancy payment.
Note: If you've reached age pension eligibility age, currently 67, you're not eligible for the tax-free genuine redundancy component. Your full payout will be treated as an Employment Termination Payment (ETP).
Your tax-free limit determines how much of your redundancy payment is tax-free and anything above it becomes your Employment Termination Payment (ETP).
The limit is made up of a base dollar amount, plus an additional amount for each completed year of service with your employer. The longer you've worked there, the higher your limit. Part-years don't count, only completed years of service are included. This limit is indexed and changes on 1 July each year.
For the current figures, visit ato.gov.au/redundancy
If your redundancy payment goes above the tax-free threshold, the amount over that limit is called an Employment Termination Payment, or ETP. It also includes payments like unused rostered days off, payment in lieu of notice, and a gratuity. Depending on your years of service, this could be one of the largest lump sums you receive. ETPs are taxed differently to your regular income and cannot be rolled directly into super for more information visit ato.gov.au/redundancy.
What happens to your super when you’re made redundant?
Employer contributions
Your employer's superannuation guarantee contributions stop when your employment ends. Check your final payslip, as you're entitled to super on your earnings up to your last day. If you start a new job at a new workplace, simply ask your new employer to contribute into your Aware Super account.
Your insurance cover
Many super accounts include life insurance, total and permanent disability (TPD) cover, and income protection cover. Your cover can lapse if your account becomes inactive, or your balance falls below a certain threshold. It's worth reviewing your insurance now particularly if you have dependants, a mortgage, or other financial commitments. Find more information about insurance through super.
What are my options with lump sum payments?
Your redundancy payment may be one of the larger sums of money you receive at one time. Here are some common options to consider. The right choice depends on your personal situation.
Consider placing your payment in a high-interest savings or cash management account while you work through your options. This keeps you financially flexible while still earning interest. Avoid locking funds away in the early weeks you may need access to them for everyday expenses.
This can be a tax-effective option for some members, depending on your income, tax rate, existing super balance, and how much you've already contributed this year.
Contribution caps apply, and depending on your total super balance, you may be able to take advantage of either:
- The bring-forward rule, which may let you make up to three years' worth of after-tax contributions in a single year, rather than spreading them out. Eligibility and the amount available depend on your total super balance.
- The carry-forward rule, which may let you make larger before-tax contributions by using unused cap amounts from the past five years. This is available if your total super balance was under $500,000 on 30 June of the previous financial year.
It's worth understanding which rules apply to you before making a large contribution as exceeding contribution caps can result in additional tax.2
If you have high-interest debt, paying it off can make financial sense. Just make sure you retain enough to cover living costs while you're between jobs.
If your mortgage account has an offset facility, parking funds there reduces the interest you pay while keeping the money accessible.
What can I do to manage my finances?
Set a budget
It’s normal to feel overwhelmed and unsure of what to do first but setting a clear budget can give you confidence. Estimate how long your redundancy payment needs to last, factor in your regular expenses, and build in a buffer, because job searches can take longer than expected. Use the Aware Super budget calculator at aware.com.au to get started.
Access your Employee Assistance Programme (EAP)
Some employers include access to financial advice as part of their redundancy support often through an EAP or a specific outplacement package. It's worth checking with your employer or HR team before your final day to find out what's available to you.
Consider Centrelink assistance
Depending on your circumstances, you may be eligible for income support payments from Centrelink. Note that a redundancy payment may trigger a waiting period before payments begin. Contact Services Australia to confirm your eligibility.
What's your next move?
Your next steps may depend on where you’re heading next. Start with the option that best fits you:
Ask your new employer to contribute to your Aware Super account.
Keep an eye on your insurance and consider contributing to super when you're able.
Talk to us about setting up a retirement income plan that works for you. Book an appointment or try our retirement budget calculator.
FAQs
Your Aware Super account stays open and invested, whether you're between jobs, taking a break, or figuring out what's next. Employer contributions will pause, but your money keeps working for you. When you're ready to start a new job, just ask your new employer to contribute to your existing Aware Super account. No need to open anything new.
It’s important to take your time and make a decision that works for your particular circumstances. Some people find it helpful to keep their redundancy payment somewhere accessible, such as a savings account, while they work out their options such as a savings account.
When you're ready to think through next steps, our financial advisers are here to help. As an Aware Super member you can book a general advice session at no extra cost.[AD2]
You can't put your redundancy payment directly into super, as it's paid to you as cash first. But once you've received it, you may be able to make a separate contribution to your super, depending on your income and how much you've already contributed in that financial year.
Contribution limits apply, so it's worth getting some guidance before you make any large contributions. As an Aware Super member, you can also book a Super Helpful Check-in with one of our financial experts.
If your account becomes inactive or your balance drops below a certain level, your life insurance, TPD, or income protection cover could lapse. It’s a good idea to log in to Member Online to check your cover.
The changes will depend on which TelstraSuper account you have. You can read more about the merger and what it means for you in this TelstraSuper merger FAQ.
As an Aware Super member, everything you need is in one place. Your account details, insurance cover, and investment options are all accessible when you log in through Member Online. Our Learn Hub also has a range of educational resources and tools.
If you have questions about your account or what's available to you now, our team is ready to help. Call us on 1300 650 873. As an Aware Super member, you can also book a session with one of our financial experts for a Super Helpful Check-in.
If you're a member of a defined benefit scheme and you've been made redundant, how your benefit is calculated may be different to a standard super account, and the rules can vary depending on your specific scheme and employment terms.
Rather than a balance from contributions and investment returns, your benefit is typically based on a formula linked to final average salary, years of service and the accrual factor (the rate benefits build up). Redundancy can affect how that benefit is calculated and when you're able to access it.
Because the details depend on your individual circumstances and scheme rules, we can’t give you personalised advice, but you can book an appointment with one of our financial experts who can walk you through it. As an Aware Super member, you can also book a session with one of our financial experts for a Super Helpful Check-in.
Where to next?
General advice only. Consider your objectives, financial situation, or needs, which have not been accounted for in this information and read the Product Disclosure Statement and Target Market Determination at aware.com.au/pds before acting. Issued by Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 293340) trustee of Aware Super (ABN 53 226 460 365).
1 Tax outcomes depend on your individual circumstances. This example is for illustrative purposes only. It relies on various assumptions. If actual circumstances differ from these assumptions, actual results will be different.
2 Before contributing, consider the relevant superannuation thresholds including the current annual limit for all before-tax contributions and after-tax contributions. Exceeding any of these thresholds, may reduce any tax benefits you could receive. Visit aware.com.au/grow.
[AD2] Members can get advice about their Aware Super accounts at no extra cost, or advice on their broader needs for a fee.
[AD3] Fees are payable for comprehensive advice, including about your financial situation outside super. If you decide to move forward with comprehensive financial planning, we’ll explain our fees before you begin.