Redundancy can feel like the floor giving way beneath you. One meeting changes your income, your routine, and the path you thought your career was taking. It is not only about losing a job. It can feel like losing the life you were building, even if only for now.
Right now, a lot of those meetings have nothing to do with how good you are at your work. Restructures, cost-cutting, offshoring and the shift to AI have all driven waves of redundancies over the past year, and plenty have hit capable, well-paid people in senior roles. Headline unemployment is still relatively low, but that figure hides how many experienced professionals are suddenly out of work.
If you are going through redundancy, it can feel frightening. But it can also be the start of a stronger chapter. Here we share what to do to protect your finances and make the most of the opportunity.
Give yourself space to process what has happened
Be gentle with yourself. The first step is to acknowledge the weight of what has happened. Shock, fear, anger and shame are all normal and valid responses. Give yourself permission to feel them. Speak with someone you trust, take a few days to breathe, and remember your worth is not tied to a job title.
Look after yourself physically while the dust settles. Keep a simple routine that supports you, such as regular sleep, nourishing food, fresh air and light movement. Even small habits like a short walk, drinking enough water and limiting late night screen time can steady your nervous system and help you think clearly.
Redundancy is a loss, and loss brings a wave of emotion. Some people feel relief if the role no longer suited them. Others feel devastated, humiliated or afraid. Both responses are valid. Name what you feel and give it time. If you rush straight into problem solving without pausing to catch your breath, decisions can become scattered, impulsive and stressful. Step back, reflect, and remind yourself that this event does not define who you are or your career. It is a chapter, not the whole story.
Take stock of your finances and responsibilities
Once you have had a chance to process the emotional impact, the next step is clarity. Understanding your financial position will help you make decisions from a place of control rather than fear. Review your redundancy package carefully, including severance, unused leave, superannuation and any potential bonuses. Take note of when payments will arrive so you can plan around them.
Then look at your financial commitments, such as mortgage or rent, loans, school fees, insurance and day-to-day expenses. Think about what buffers you have available, whether savings, investments or temporary income. From there, you can estimate how long you can maintain your lifestyle before income needs to resume. While it can feel daunting to bring everything into one picture, doing so provides clarity and replaces fear with facts so you can move forward with confidence.
Check the tax on your redundancy payout
Not all of a redundancy payout is taxed the same way, and the difference can be worth a lot to what you actually keep.
If your role has genuinely been made redundant, meaning the job itself no longer exists rather than you being let go for another reason, part of your payment is tax-free. For the 2026-27 financial year, that tax-free amount is $13,598 plus $6,801 for every complete year you worked for that employer. Someone with ten full years of service, for example, could receive up to $81,608 of their genuine redundancy payment completely tax-free. These figures are set by the ATO and are adjusted each July.
Anything above that limit is treated as an employment termination payment. It is still taxed at concessional rates rather than your usual marginal rate, up to a cap of $270,000 for 2026-27. Your age matters here, because the concessional rate is lower once you reach preservation age.
Unused annual leave and long service leave are taxed under separate rules again, so they will not all reach you at your full salary rate.
The tax-free treatment only applies to a genuine redundancy, and conditions apply, including being under age pension age when you finish. It is worth having the numbers checked for your situation before you plan around the money, because the after-tax figure can be very different from the headline payout.
Decide on your next step
With a clear financial picture, you can start to decide what you want this moment to mean. For some, the priority will be to re-enter the job market as quickly as possible, focusing on roles that maintain stability. For others, redundancy is the chance to take a pause, whether to reskill, rest or rethink their long term goals. It could also be the catalyst to transition to consulting, launch a business or pivot an entirely new career path.
There is no single right choice. The right path depends on your circumstances and what you want your future to look like. Some people blend approaches, maintaining part-time or contract work while exploring new opportunities. The important thing is that the decision feels intentional rather than reactive.
Rebuild your confidence and identity
One of the hardest parts of redundancy is the way it can shake your sense of self. We often tie our identity to what we do, so when a job disappears it can feel like our value has vanished with it. But you are more than your role. Use this time to reflect on what you bring to the table, the strengths you want to use more of, and the kind of life you want to create in the years ahead.
When you can articulate your skills and vision with confidence, you become clearer in job interviews, in networking conversations, and in your own decision making. Redundancy does not diminish your worth. It simply creates a space to redefine it.
Reaching out to your network can also make a significant difference. Opportunities often come through conversations rather than job boards, and the sooner you connect with people you trust, the more supported you will feel.
Protect your financial base
As you navigate this transition, protecting your financial foundation is essential. If required, simplify your spending and direct your resources toward what matters most. Start with a clear budget that shows what is coming in and what is going out, so you know exactly how long your redundancy payout and savings can support you. Managing cash flow with intention helps you avoid panic decisions and gives you space to plan the next step.
Speak with lenders about options such as refinancing, repayment pauses or restructuring. Review your insurances to make sure your cover is still appropriate for your needs, use your extra time to renegotiate your utilities, and consider whether short-term income streams such as consulting, project work or contract roles can help bridge the gap.
If you are already feeling overwhelmed by the financial pressure, you may find it useful to read our article on how to manage financial stress and anxiety.
Build resilience for the future
When you eventually return to work or launch something new, use the experience of redundancy to build stronger financial and personal foundations. Saving more during good times, diversifying income, keeping debt under control and maintaining a healthy buffer all help reduce the impact of future shocks.
Redundancy is a good reminder that while you cannot control everything, you have influence over how you respond to it.
Take the next step with confidence
Redundancy can feel like a dead end, but it is often the beginning of a stronger and more intentional chapter. You do not have to navigate it alone.
At Financial Spectrum, we help people turn uncertainty into clarity, from structuring redundancy payouts to managing cash flow and mapping out a financial strategy for the next stage of life. We can model different scenarios with you, whether that means re-entering the workforce, taking time out, or using your payout to launch a business, so you can see the options clearly and make decisions with confidence.
If you are facing redundancy, book a chat with one of our Sydney-based advisers today and take the first step toward rebuilding your confidence and your future.
Frequently asked questions
What should I check in my redundancy package?
Make sure you know exactly what you are owed, including severance, unused annual and long service leave, super and any bonuses, and get it in writing. It is also worth checking how much of the payment is tax-free, because the after-tax figure can be very different from the headline number.
Is redundancy pay taxed in Australia?
Part of a genuine redundancy payment is tax-free, and the rest is taxed at concessional rates rather than your normal marginal rate. For 2026-27 the tax-free amount is $13,598 plus $6,801 for each complete year of service with that employer. Anything above that is treated as an employment termination payment and taxed at a lower rate up to a cap.
How much of my redundancy is tax-free?
It depends on how long you were with the employer. The 2026-27 tax-free limit is $13,598 plus $6,801 for every completed year of service, so ten years would give up to $81,608 tax-free. The ATO sets these amounts and adjusts them each July.
What counts as a genuine redundancy?
A genuine redundancy is when your position is abolished and the work no longer needs to be done by anyone, and you are under age pension age when you finish. If you resign, reach the end of a contract, or are let go for performance or misconduct, it is not a genuine redundancy and the tax-free limit does not apply.
What should I do with my redundancy payout?
There is no single right answer, and a lot depends on how secure your income is from here. For many people the first priority is a cash buffer to cover living costs while they work out their next move, followed by any high-interest debt. Some choose to top up super or invest part of the payout, though that depends on your circumstances and the contribution caps that apply. Because both the after-tax figure and the best use of it vary so much, it helps to map the options against your own situation before committing the money.
Do older workers pay more tax on a redundancy payout?
Age changes the treatment in two ways. Once you reach preservation age, the part of your payout above the tax-free limit is taxed at a lower concessional rate, which works in your favour. But the tax-free redundancy concession only applies if you are under age pension age when you finish, so anyone made redundant after that age is treated differently and should get advice on where they stand.
Rebecca is passionate about promoting the positive impact of quality financial advice on personal wellbeing. Read her full bio here.
