Taking a Redundancy at 60, 65 or Past Age Pension Age: Tax, Super and the Age Pension

We’re Maciej Stanek and Imran Amjad, the financial advisers at Véurr Financial Planning. Most redundancy guides are written for people mid-career. This one is for the members closest to the exit: public servants weighing a redundancy at 60, at 65, or at an age where the tax concessions everyone talks about no longer apply at all. Forum answers on this age line are contradictory and often a decade out of date — here is what the current rules actually say, with sources.

Is a redundancy still a “genuine redundancy” for tax after Age Pension age?

No. Under tax law, a genuine redundancy payment requires that you are under Age Pension age — currently 67 — on the day you are dismissed. At or past that age, the same payout is a “non-genuine” redundancy: the tax-free amount disappears, although the payment is still taxed concessionally as an employment termination payment.

The ATO’s list is explicit: a redundancy is non-genuine if you are “age pension age or older on the day of dismissal” — alongside dismissals at a normal retirement age, voluntary resignations and terminations for disciplinary reasons (ATO, genuine redundancy payments).

If you have read forum threads insisting the concessions stop at 65 — that was the law, and it changed. Legislation passed in October 2019 lifted the age limit from 65 to Age Pension age, applying to employees dismissed on or after 1 July 2019 (ATO, redundancy and early retirement). Your Age Pension age depends on your date of birth: for anyone born on or after 1 January 1957, it is 67 (Services Australia). So a 65- or 66-year-old taking a package today still gets the full genuine-redundancy treatment — the cliff now sits at 67.

What the tax difference actually looks like

Here is the same package, either side of the line, for the 2026-27 financial year:

The scale of the cliff depends on service. Twenty completed years means $13,598 + (20 × $6,801) = $149,618 tax-free if you are dismissed the day before your 67th birthday — and $0 tax-free the day after it. The 17% ETP rate applies once you have reached preservation age, which everyone at these ages has; the figures come from the ATO’s current threshold tables and withholding schedules (ETP thresholds, Tables 17 and 20; how ETP components are taxed; Schedule 7, unused leave).

One nuance that most general guides miss, and that works in your favour. ETPs fall into two categories: “excluded” payments get the full $270,000 ETP cap, while “non-excluded” payments — golden handshakes, payments in lieu of notice — are capped at the lesser of the ETP cap and a much harsher $180,000 whole-of-income cap. The ATO specifically classifies a payment that would have been a genuine redundancy had you not reached Age Pension age as an excluded payment (ATO, applying the ETP caps). In plain terms: you lose the tax-free amount at 67, but you keep the better of the two caps on what remains.

A scope note: Véurr are not tax agents. Your payroll area calculates the actual withholding on your package — our work sits on the other side of that calculation, planning what to do with the after-tax outcome.

The test is the day you are dismissed — not the day of the offer

The genuine-redundancy age test applies on the day of dismissal. Not the day the round opened, not the day you lodged an expression of interest, not the day the offer was signed. If you are 66 and the round drags past your birthday, a package that would have carried a six-figure tax-free amount can lose it entirely because the separation date landed a few weeks late. If that could be you, get the proposed separation date confirmed in writing before you respond to anything.

Working the other way: while you remain under the line, each completed year of service adds $6,801 to the tax-free amount. Tax is not the only variable — staying means continued salary, super contributions and leave accrual — but the arithmetic changes character at 67, and the timing of the separation date deserves as much attention as the package amount. This is a decision worth modelling with a licensed adviser before you respond, not after.

In CSS or PSS? The scheme clock is separate from the tax clock

Much of the forum confusion about “redundancy after 65” comes from mixing two different rulebooks: the ATO’s tax rules above, and the benefit rules of the closed Commonwealth schemes. They move independently — fixing the tax question tells you nothing about your scheme options, and vice versa. What CSC’s current guidance says:

• CSS members: your redundancy benefit can include a lifetime pension, a lump sum, or a combination, and the election windows are tight — an election for the deferred benefit option must be submitted from one month before to 21 days after your cessation date; any other option allows 3 months either side. Miss the window and your benefit can be treated as unclaimed money and paid to the ATO (CSC, CSS redundancy). If you have been on extended sick leave, CSC suggests asking your employer about an invalidity assessment before accepting a redundancy.
• PSS members: options range from preserving through to a full pension — which of them are open to you depends on your circumstances and age — and the Redundancy Benefit Application must be submitted within 90 days of ceasing work. An elected pension starts the day after you exit (CSC, PSS redundancy).

For members at or past Age Pension age, the practical step is the same one CSC itself puts first: get a benefit estimate showing your actual options at your actual age before you respond to anything — your employer requests it once you authorise them. These elections are generally irreversible, which is why we treat the scheme decision, not the severance cheque, as the main event for CSS and PSS members. If you are a CSS member in your late 50s rather than late 60s, the interaction between redundancy and the 54-11 strategy is its own topic — see our CSS 54-11 and voluntary redundancy guide. Our guide to financial planning for public servants explains the schemes themselves.

Does the payout affect your Age Pension?

Three parts to this, and the first surprises people. There is no redundancy waiting period for the Age Pension. The income maintenance period — the mechanism that can delay JobSeeker for roughly the number of weeks your redundancy payment represents — applies to JobSeeker Payment, Parenting Payment, Youth Allowance, Farm Household Allowance, Austudy and (in most cases) Disability Support Pension. The Age Pension is not on the list (Services Australia, income maintenance period).

The payout is still means-tested, though. Once banked, it is a financial asset. Under the assets test, a full pension is currently payable while assets sit under $333,000 for a single homeowner ($499,000 for a homeowner couple, combined; $600,000 and $766,000 for non-homeowners), and from 1 July 2026 a part pension cancels above $733,500 for a single homeowner ($1,102,500 for a homeowner couple) — limits are reviewed in March, July and September (Services Australia, assets test). Under the income test, the banked payout is deemed to earn income — currently 1.25% on the first $66,800 for a single ($110,600 combined for a pensioner couple) and 3.25% above that — regardless of what it actually earns (Services Australia, deeming). A large payout landing in the bank can therefore reduce, or temporarily pause, a part pension even though no waiting period applies.

And super is not a hiding place at these ages. From Age Pension age, superannuation is counted in the means tests whether or not you have started drawing it (Services Australia, asset types). You can generally still contribute a payout to super — between 67 and 74, non-concessional contributions no longer require a work test, though tax deductions still do and the contribution caps apply (ATO, personal super contributions) — and access to super itself is unconditional from 65 (Moneysmart). Whether contributing is worthwhile is a tax-and-cash-flow question, not a means-test dodge. If you plan to keep working part-time alongside a pension, the Work Bonus quarantines up to $300 of employment income a fortnight from the income test, banking unused credit to a maximum of $11,800 (Services Australia, Work Bonus). Our retirement planning guide and superannuation advice hub cover how these pieces fit together.

Before you respond: five checks in order

1. Confirm the proposed separation date in writing. The tax test applies to your age on the day of dismissal — near your 67th birthday, the exact date determines whether the tax-free amount applies at all.
2. Get your severance, leave and tax figures from payroll. Severance, pay in lieu, leave payouts, and the tax expected on each component — payroll calculates the actual tax.
3. Request a CSC benefit estimate if you are in CSS or PSS. Elections are generally irreversible and the windows are short — 21 days after cessation for the CSS deferred option.
4. Check your Age Pension means-test position. No waiting period, but the banked payout counts in the assets test and is deemed to earn income.
5. Take licensed financial advice before you elect. The tax cliff, scheme elections and means tests interact — model accepting and declining while both are still open.

If an offer is on the table — or a round is open and your 67th birthday is in play — that is the moment to get the numbers modelled. Request a call back from Véurr here.

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