FIFO redundancy can create confusion around tax, final payouts, and what portion of your payment is taxable.
If you’ve been made redundant from a FIFO role, it’s important to understand how your redundancy package is treated under ATO rules — especially if it includes leave payouts, bonuses, or severance payments.
This guide explains what FIFO workers need to know about redundancy tax treatment in Australia.
Before lodging your return, review our FIFO tax return checklist to make sure you’re not missing required documents from your redundancy payout.
For a complete overview of FIFO tax rules and deductions, see the full FIFO Tax Guide 2026.
What Is a Genuine Redundancy Payment?
Under ATO rules, a genuine redundancy payment occurs when:
- Your position is no longer required
- You are dismissed from employment
- The redundancy is not voluntary resignation
Not all termination payments qualify as genuine redundancy payments.
The tax treatment depends on the structure of your payout.
Tax-Free Component of FIFO Redundancy
Part of a genuine redundancy payment may be tax-free.
The tax-free amount depends on:
- Your years of service
- A base amount set by the ATO
- An additional amount per completed year of service
This portion is not included in your taxable income.
Anything above the tax-free threshold is taxed.
Taxable Component of Redundancy
Amounts above the tax-free limit are generally taxed as:
- Employment Termination Payments (ETP)
- At concessional tax rates (up to a cap)
- Higher rates if caps are exceeded
Your employer should provide an ETP summary showing:
- Tax withheld
- Taxable component
- Tax-free component
Unused Leave Payouts
Redundancy often includes payout of:
- Unused annual leave
- Long service leave
These amounts are taxable but may be taxed at concessional rates depending on when employment started and redundancy status.
Bonuses and Allowances
If your redundancy includes:
- Outstanding bonuses
- Site allowances
- Overtime payments
These are generally taxed as normal income.
They are not part of the tax-free redundancy component.
Some final payments such as site allowances or overtime are taxed as normal income. These are explained in more detail in our FIFO overtime & allowances tax guide.
FIFO-Specific Considerations
FIFO workers should pay attention to:
- Remote area allowances
- Relocation payments
- Travel reimbursements
- Living away from home arrangements
Each may have different tax treatment depending on structure.
Common FIFO Redundancy Mistakes
- Assuming the entire payout is tax-free
- Not checking ETP caps
- Forgetting leave payouts are taxable
- Failing to plan for higher tax bracket impact
- Not seeking clarification on redundancy classification
Many FIFO workers make avoidable reporting errors during redundancy year — see our full guide on FIFO tax return mistakes that cost workers money for detailed examples.
Should You Seek Professional Advice?
Redundancy payouts can be large, especially in mining and resource sectors.
If your payout includes multiple components, you should consider confirming the tax treatment with a registered tax professional.
Quick Summary
• Part of a genuine redundancy payment may be tax-free
• Amount above the threshold is taxed as an ETP
• Leave payouts are taxable
• Bonuses are taxed as normal income
• Always confirm the breakdown provided by your employer