Taxation of your unused leave when leaving a job

When your job ends, whether there has been a termination of employment or redundancy you will receive a payment for unused leave. This payment will be taxed differently from your normal income.

The taxation will vary depending on the reason why you left the job and any unused entitlements that have been accrued over your employment (long service leave or sick leave).

Lump sum payments that you receive for unused annual leave or unused long service leave are taxed at a lower rate than other income. These lump sum payments will appear on your income statement or payment summary as either ‘lump sum A’ or ‘lump sum B’.

These payments may also be taxed differently if you lost your job as a result of Covid-19.