This is a worked-numbers calculator page: assemble the dollars for a departure pay run, component by component, then apply the right tax treatment to each stream. For the full method narrative, legal sequence and process checklist, use how to calculate final pay in Australia. Here we stack ordinary pay, notice (or pay in lieu), unused annual leave, unused long service leave, and any redundancy / ETP amounts with example figures so payroll can see the total before payday. Get components right but tax treatment wrong and you either short-change the employee or mis-withhold to the ATO. General information only; confirm awards, state LSL acts and current ATO withholding tables for the payment date. Fair Work’s final pay overview is the employer baseline for what must be paid out.
Published: July 2026
A complete final pay can include several distinct elements. The reason for leaving changes which apply. Method detail for each is on the how-to guide; below is the plug-in list.
Outstanding ordinary pay. Wages for hours worked up to the termination date, taxed as normal income.
Notice or payment in lieu of notice. Where the employer ends employment, NES notice (or a longer contractual or award period) applies; if not worked out, pay in lieu.
Unused annual leave. Accrued but untaken annual leave paid out on termination, including any applicable leave loading, with its own tax treatment.
Unused long service leave. State-act entitlement or pro-rata paid out, with concessional tax depending in part on when leave was accrued.
Redundancy pay (if applicable). Where the departure is a genuine redundancy, the NES scale applies and a genuine-redundancy tax-free component shelters part of the payment; the excess is an ETP.
Employment termination payments (ETPs). Certain other termination amounts are ETPs, taxed concessionally up to the ETP cap and at the top marginal rate above it. Confirm live caps on the ATO ETP rates page.
Standing tools: human resources services, full on-cost breakdown, leave liability by employee estimator.
Hypothetical permanent employee resigning (not a redundancy):
Gross stack before tax:
$680 + $12,984 + $8,840 = $22,504
Tax treatment (method, not a withholding quote):
- $680 ordinary: marginal withholding as normal pay
- Annual leave and loading: concessional termination leave rates where eligible
- LSL: concessional LSL termination rates (possibly split by accrual period)
Do not apply one flat rate to $22,504. Each stream needs its own STP category and withholding path.
Interpretation. The employee should receive a breakdown that shows ordinary, leave and LSL separately. A single “final pay” line with one tax rate is how disputes and amended STP events start. Prepare the calculation before the last day so payment is on time under the award or agreement.
Same pay rates, employer-initiated genuine redundancy, 6 completed years of service, not a small-business NES exemption case.
Employer cash out (selected streams): severance + notice + leave ≈ $38,484 before LSL and super analysis on each component.
Interpretation. Redundancy changes both the employment-law stack and the tax stack. Calculate severance and tax-free treatment separately from leave; never blend leave into the genuine redundancy tax-free bucket.
Ordinary pay and notice are generally taxed as income; unused annual leave and long service leave are taxed at their own concessional rates in defined circumstances; the genuine redundancy tax-free amount is not taxed at all up to its limit; and ETP amounts are taxed under the ETP rules with their own cap and rates. A payroll process that lumps these together and applies a single withholding rate will mis-tax the payment. The correct approach calculates each stream, applies its own tax treatment, and reports each correctly through Single Touch Payroll.
Final pay is high-stakes for three reasons: it is the last financial interaction with a departing employee, it combines employment-law entitlements with multiple tax treatments, and it is time-pressured. A rushed final pay, calculated under time pressure by someone applying a single tax rate to a mixed payment, is exactly how departing employees end up underpaid or mis-taxed. An embedded payroll function runs final pay as a checklist, not a scramble. Pair with managed payroll support via finance services and how much does managed payroll cost in Australia.
Hypothetical business with weak leave provisioning. Employee exits with 8 weeks annual leave and 6 weeks LSL at $1,850 ordinary weekly pay.
If the balance sheet showed $0 leave liabilities, the entire amount hits as a cash and P&L shock in the exit month. If provisions existed, the exit is mostly a balance sheet drawdown with a smaller P&L true-up for rate changes and loading. That is why final pay calculators and leave liability estimators belong in the same finance toolkit: leave liability by employee estimator and annual leave liability estimator.
Interpretation. Final pay is not only a payroll event. It is the moment accrued people liabilities become cash. Businesses that provision leave are not being pessimistic; they are refusing to be surprised.
Resignation. Focus on ordinary pay, unused leave, state LSL pro-rata rules, and any contractual notice the employee must work or pay. No NES redundancy scale. Tax streams still split leave from ordinary pay.
Dismissal (not redundancy). Notice or payment in lieu, leave, possible LSL, careful ETP analysis on any ex-gratia amounts. Performance or misconduct facts affect process; they do not let you skip leave payout rules.
Genuine redundancy. Add NES or instrument severance, test genuine redundancy for tax, compute tax-free limit, keep leave outside the tax-free bucket, document the role abolition. See also Australian redundancy and retrenchment.
Expensive option: one gross “termination payment” with one withholding rate. Practical option: component schedule signed off before the last day, STP categories mapped, payment timed to the award.
Superannuation. Do not assume 12 per cent applies to every final pay dollar. Ordinary time earnings concepts and termination payment rules differ by component; check current ATO treatment per stream.
STP. Report each category correctly. Finalisation and year-to-date figures must reflect the termination so the employee’s income statement is not a mess.
Timing. Awards and agreements often require prompt payment. Calculating three days after the employee has left is how disputes start. Prepare the calc when notice is given.
Offsets and debts. Only deduct amounts you are legally allowed to deduct. “They owe us a laptop” is not a free-form set-off against leave.
Communications. Give the employee a plain-language breakdown: ordinary, leave, LSL, severance, tax withheld by stream. Transparency prevents most good-faith disputes.
HR process support: human resources services and termination of employment guide.
Days 1 to 30. Document a final-pay checklist by termination type (resignation, dismissal, redundancy). Confirm which awards and state LSL acts you use. Check that leave balances in payroll match reality for a sample of long-tenured staff.
Days 31 to 60. Refresh leave and LSL provisions on the balance sheet. Train the payroll owner on separate tax streams and STP categories. Build a template breakdown payslip narrative employees can understand.
Days 61 to 90. Dry-run one hypothetical resignation and one hypothetical redundancy with full component maths. Fix any system or knowledge gaps before a real exit lands on a Friday afternoon. Final pay should be a controlled process, not a heroics contest.
What is included in an employee’s final pay?
Outstanding ordinary pay, notice or payment in lieu, unused annual leave (with any loading), unused long service leave, and, for a redundancy, redundancy pay. Some amounts may also be employment termination payments. Which apply depends on the reason for leaving.
Why is final pay taxed differently from normal pay?
Because its components fall under different tax rules: ordinary pay and notice as income, unused annual and long service leave at concessional rates in defined circumstances, the genuine redundancy tax-free amount not taxed up to its limit, and ETP amounts under the ETP rules.
How is unused annual leave taxed on termination?
At a concessional flat rate in defined circumstances, and otherwise at marginal rates, which differs from ordinary pay. Unused long service leave has its own concessional treatment.
Does the reason for leaving change the final pay?
Significantly. A genuine redundancy brings the NES redundancy scale and the genuine-redundancy tax-free component into play and affects tax analysis on some termination amounts, none of which apply to a simple resignation in the same way.
When does final pay have to be paid?
Generally promptly on termination, with the specific timing set by the applicable award, enterprise agreement or contract. Preparing the calculation before the termination date is the safest way to pay correctly and on time.
What is the most common final pay mistake?
Applying a single withholding rate to a mixed payment, which over-withholds or under-withholds. Each stream must be calculated and taxed under its own rules and reported correctly through STP.
How does long service leave affect final pay?
Where the employee has an LSL entitlement or pro-rata right under the relevant state act, the unused balance is paid out with its own concessional tax treatment. The employee’s state is essential.
Can I calculate final pay after the employee has left?
It is far better to prepare it before the termination date, so it is ready to pay on time and correctly. Calculating a complex final pay under time pressure after the fact is how errors and STP amendments arise.
Does superannuation apply to every final pay component?
Not necessarily. Super treatment depends on the component and current ATO rules. Check each stream rather than applying 12 per cent to the entire final pay gross.
What records should we keep?
The component calculation, award/NES references, leave balance reports, LSL workings, genuine redundancy assessment if relevant, and the STP submission evidence.
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We review and check this guide periodically. At the time of writing (July 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
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