Redundancy and Super: Is Super Paid on Your Payout — and Can You Put It Into Super?

We’re Maciej Stanek and Imran Amjad, the financial advisers at Véurr Financial Planning. The short answers first. No, super guarantee is not payable on the redundancy payment itself — your employer owes super on your normal earnings up to your last day and on any payment in lieu of notice, but not on the severance component or on unused leave paid out as a lump sum. And yes, you can generally put payout money into super, but only as a contribution you make yourself, under the contribution caps — a termination payment cannot be rolled over. The detail behind both answers is below, current for 2026-27.

Is super paid on a redundancy payment?

Not on the redundancy payment itself. Employer super — the super guarantee, currently 12% for 2026-27 (ATO, super guarantee percentage) — is calculated on ordinary time earnings (OTE): broadly, what you are paid for your ordinary hours of work, as defined in the Superannuation Guarantee (Administration) Act 1992. The ATO’s position on termination is blunt: payments made in consequence of the termination of employment are generally not OTE (ATO, list of payments that are ordinary time earnings).

But a redundancy package is several components stapled together, and they are treated differently. From the ATO’s termination-payments checklist:

The one that surprises people is payment in lieu of notice: for tax it is bundled into your employment termination payment, yet for super it is still ordinary time earnings. The ATO’s own worked example on the checklist page runs a redundancy package where the in-lieu component is the only part of the payout that attracts super guarantee. A missing super line on that component is a payroll error worth querying — not a rule.

CSS, PSS and PSSap: how the Canberra schemes change the question

PSSap and other accumulation-fund members. The mechanics above apply. As a government employee, your employer contributes at least 15.4% of your super salary to PSSap (CSC, PSSap) — well above the 12% SG floor. That rate follows the employment, not simply the fund, and it attaches to salary while you are working rather than to the payout. The severance component generates no contribution at any rate.

CSS and PSS members. The question barely maps at all. In a defined benefit scheme your benefit is set by scheme rules — salary, service and multiples — not by contributions on individual payments. The frame that matters is that redundancy triggers a benefit election, generally irreversible, on short windows: a CSS member choosing the deferred benefit option has from one month before to 21 days after the cessation date to apply, with 3 months either side for other options (CSC, CSS redundancy); a PSS Redundancy Benefit Application is due within 90 days of ceasing work (CSC, PSS redundancy). Our guide to financial planning for public servants explains the schemes themselves.

Can you put your redundancy payment into super?

Generally yes — but the mechanism matters, because the door most people imagine does not exist. You cannot roll a termination payment into super. The ATO states it directly: “You can’t roll over your ETP to your superannuation” (ATO, employment termination payments for employees). The employer pays you, tax is withheld under the redundancy rules, and what lands in your bank account is yours — anything you want inside super, you contribute yourself.

You cannot salary sacrifice it either. An effective salary sacrifice arrangement must be entered before the work is performed, and cannot include salary, leave entitlements, bonuses or commissions that accrued beforehand (ATO, salary sacrificing for employees). By the time a redundancy offer exists, those entitlements already exist — too late to sacrifice them. That leaves two genuine doors, taxed very differently.

Door one: after-tax (non-concessional) contributions

You bank the payout, then contribute from it. For 2026-27 the non-concessional cap is $130,000, and if your total super balance on 30 June 2026 was under $1.84 million, the bring-forward arrangement can allow up to $390,000 across three years — tapering above that balance and reaching nil at $2.1 million (ATO, non-concessional contributions cap). Since 1 July 2022 there is no work test for these contributions if you are under 75 — which matters when a redundancy is effectively retirement.

Door two: deductible (concessional) contributions

You contribute, then claim a tax deduction, converting the amount into a concessional contribution taxed at 15% in the fund (ATO, understanding contribution types). Four constraints bite:

• The cap is shared. The concessional cap is $32,500 from 1 July 2026 — up from $30,000 — and your employer’s contributions for the year count against it first (ATO, concessional contributions cap).
• Carry-forward can widen it substantially. If your total super balance was under $500,000 at the previous 30 June, unused concessional cap from up to five prior years (from 2018-19 onward) can be used on top. It can also be detrimental rather than beneficial — particularly if the payout itself was already lightly taxed — which is why this one warrants modelling with an adviser before execution.
• Paperwork and age rules. A deduction requires a valid notice of intent lodged with your fund and acknowledged, and between 67 and 74 you must meet the work test (or exemption) to claim it — even though the contribution itself needs no work test (ATO, personal super contributions).
• The Canberra trap. Deductions cannot be claimed for personal contributions to a Commonwealth public sector scheme in which you have a defined benefit interest, or to an untaxed fund that would not include the contribution in its assessable income (same ATO page). For CSS and PSS members, where a deductible contribution can actually go is a real question.

One interaction worth naming: in a genuine redundancy for tax, part of the payment arrives tax-free — $13,598 plus $6,801 per completed year of service in 2026-27 (ATO, ETP thresholds; definition). Claiming a large deduction against money that was substantially tax-free on arrival can achieve very little — the value of door two depends on how much of your package was actually taxed, and at what rate. That arithmetic is individual, which is why it is adviser work rather than a rule of thumb. Our superannuation advice hub covers contribution strategy in more depth.

Finally, remember what contributing means: super is preserved. Money in is generally locked away until an access condition is met — from age 60 if retired or leaving a job, from 65 regardless (Moneysmart, getting your super). If the payout has to fund living costs while you find the next role, super is the wrong vehicle for that slice, whatever the tax saving.

Before the money moves: five checks in order

1. Get the component breakdown from payroll. Ask for severance, any payment in lieu of notice, unused leave payouts and final salary as separate line items. The in-lieu-of-notice component should have super guarantee paid on it; the severance and leave payouts should not.
2. Check your contribution-cap headroom. ATO online services through myGov shows your total super balance, employer contributions already made this financial year, and any unused concessional cap carried forward. Your headroom is what is left of the concessional cap after employer contributions.
3. Decide which door the money would go through. After-tax contributions are measured against the non-concessional cap. Claiming a deduction instead needs a valid notice of intent, the work test if you are 67 to 74, and a fund that can accept deductible contributions — not a Commonwealth public sector scheme in which you have a defined benefit interest.
4. If you are in CSS or PSS, deal with the scheme election first. A redundancy triggers benefit elections that are generally irreversible — the CSS deferred benefit option closes 21 days after your cessation date, and PSS applications are due within 90 days of ceasing work. The election usually matters more than the contribution question.
5. Model the decision with a licensed adviser before the money moves. A contribution generally cannot be taken back out — super is preserved until you meet an access condition, typically age 60 and retired, or 65 regardless. Model the tax saved against the years of lost access before contributing anything.

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