The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

1.1.E.105 Employment termination payment (ETP)


An ETP is generally part of a lump sum payment received when a person is:

  • made redundant
  • dismissed
  • resigns, or
  • retires or dies.

Types of ETP

An ETP includes:

  • unused rostered days off
  • amounts in lieu of notice
  • a gratuity or 'golden handshake'
  • an employee's invalidity (for permanent disability, other than compensation for personal injury), and
  • certain other payments after the death of an employee.

Exemptions & exclusions from ETP

As defined in the Income Tax Assessment Act 1997, the following payments are not considered ETPs:

  • a payment for unused annual leave or unused long service leave, or
  • the tax-free part of a genuine redundancy payment or an early retirement scheme payment.

Example: The tax free amount of a genuine redundancy payment or an approved early retirement scheme payment could be 2 weeks pay or wages for each year of service.

Definition of genuine redundancy payment

A genuine redundancy payment is so much of a payment that:

  • is received by an employee who is dismissed from employment because that employee's position is genuinely redundant, and
  • exceeds the amount that would normally have been paid if a person left their work voluntarily.

Example: A person who resigns after 10 years employment could expect payment of:

  • unused annual leave, and
  • long service leave.

A person who is made redundant may receive payments beyond their leave payments, such as 2 weeks pay or wages for each year of service.

Note: More detailed information on ETPs can be found on the ATO website.

Policy reference: SS Guide Description: employment termination payments (ETPs) & roll-overs for the IMP

ETPs & the IMP

For some income support payments any ETP a person receives may be used in calculating the length of their IMP.

Act reference: SSAct section 14A Social security benefit liquid assets test definitions, section 1064 Module F Ordinary income for the purposes of DSP, section 1066A Module G Payments taken to be ordinary income (DSP), section 1067G Module H Income test (YA), section 1067L Module D Income test (Austudy), section 1068A Module E Ordinary income test (PPS), section 1068-G7 Lump sum payments arising from termination of employment (WA, JSP, PA), section 1068-G7AQ Income test - Definitions (WA, JSP, PA)

Policy reference: SS Guide Application of the income maintenance period (IMP)

Last reviewed: