When a FIFO worker leaves a job — whether due to redundancy, termination, or contract ending — part of the final payout may be classified as an Employment Termination Payment (ETP).
ETPs are taxed differently from normal income, and misunderstanding how they work can lead to unexpected tax outcomes.
This guide explains how Employment Termination Payments apply to FIFO workers and how they are taxed under ATO rules.
What Is an Employment Termination Payment (ETP)?
An Employment Termination Payment is a lump sum paid to an employee when their employment ends.
For FIFO workers, this may include:
• Redundancy amounts above the tax-free threshold
• Certain unused rostered days off payouts
• Golden handshakes
• Contract termination compensation
ETPs do not include:
• Unused annual leave
• Long service leave
• Superannuation
Those are treated separately.
How FIFO Redundancy Connects to ETP
If you received a genuine redundancy payment, part of it may be tax-free.
However, any amount above the tax-free limit is generally treated as an Employment Termination Payment.
If you haven’t reviewed how redundancy is structured, read our guide on FIFO redundancy tax explained before calculating the ETP portion.
How Are ETPs Taxed?
ETPs are taxed at concessional rates up to a cap.
The tax rate depends on:
• Your age
• The ETP cap amount for the financial year
• Whether the payment is classified as genuine redundancy
If the ETP is within the cap:
• It is taxed at a lower rate than normal marginal tax
If the cap is exceeded:
• Higher tax rates apply
Your employer will provide an ETP payment summary showing:
• Taxable component
• Tax withheld
• ETP code
Always check this summary carefully.
ETP Cap Amount (Why It Matters)
The ATO sets an ETP cap each financial year.
If your Employment Termination Payment exceeds this cap:
• The excess is taxed at the highest marginal rate
Large FIFO payouts can exceed this cap, especially in mining and resource roles with long service periods.
Understanding the cap prevents unexpected tax surprises.
Does ETP Affect Your Overall Taxable Income?
Yes.
Although ETPs are taxed separately, they can still impact your overall financial year position — especially if combined with:
• Overtime
• Bonuses
• Leave payouts
To understand how this affects your total tax position, see our breakdown of how much tax FIFO workers actually pay.
Common FIFO ETP Mistakes
• Assuming the entire redundancy payout is tax-free
• Ignoring the ETP cap
• Not reviewing the ETP code on your summary
• Forgetting leave is taxed separately
• Failing to plan for the financial year impact
ETP taxation can be confusing — especially when combined with redundancy and leave payouts.
Should FIFO Workers Seek Advice?
Large termination payments can significantly affect your tax year.
If your payout includes multiple components, you should confirm the breakdown with a registered tax professional before lodging.
This ensures:
• Correct classification
• Accurate reporting
• No unexpected tax liabilities
Quick Summary
• ETPs are lump sum payments when employment ends
• Redundancy above the tax-free amount becomes an ETP
• ETPs are taxed at concessional rates up to a cap
• Amounts above the cap are taxed higher
• Always review your ETP summary carefully
Full FIFO Tax Deduction Guide
If you want a full breakdown of FIFO tax rules, common deductions and ATO guidelines, read the guide below.