When you leave a job in Australia, your employer must pay out your accrued but unused annual leave as a lump sum in your final pay. But here is the part that surprises many people: no superannuation is paid on that payout. The Superannuation Guarantee (SG) only applies to ordinary time earnings, and a lump sum for unused annual leave paid on termination is generally not ordinary time earnings — so your employer is not required to add the usual 12% on top of it.
That distinction is worth real money. Four weeks of unused leave on a $90,000 salary is worth about $6,923, and the super you would have received if that leave had been taken while employed is about $831. This guide explains the rule, the important exception for leave taken while you are still employed, what else in your final pay does and does not attract super, and how the payout is taxed.
The Short Answer: No Super on a Termination Leave Payout
Superannuation Guarantee is payable on an employee’s ordinary time earnings (OTE) — broadly, what you earn for your ordinary hours of work. From 1 July 2025 the SG rate is 12% of OTE.
A lump sum paid for unused annual leave when your employment ends is generally not OTE. It is a payment for leave you accrued in the past but never took, not payment for ordinary hours you are working now. The same treatment applies to any annual leave loading paid out as part of that lump sum, and to unused long service leave paid on termination. The ATO’s position is that these termination lump sums are not earnings for ordinary hours, so no SG is payable on them — even though you would have received super on the leave loading if you had taken the leave while still employed.
Leave Taken While Employed vs Leave Paid Out on Termination
The timing of the payment is everything. Compare the two situations:
| Situation | Super payable? | Why |
|---|---|---|
| You take annual leave while still employed | Yes — 12% SG | Paid leave during employment counts as OTE |
| Unused annual leave paid out when you resign or are dismissed | No | Termination lump sum is not OTE |
| Annual leave loading paid on termination | No | Follows the same treatment as the leave payout |
| You take annual leave during your notice period, then leave | Yes — 12% SG | You are still employed while taking the leave |
| Unused long service leave paid on termination | No | Termination lump sum is not OTE |
That fourth row is the practical tip in this guide. If you are resigning and you have unused leave, taking the leave during your notice period — where your employer agrees — means the leave is paid as ordinary wages while you are still employed, and super is payable on it. Having it paid out as a lump sum after your last day means no super on the same amount. The difference on four weeks of leave at $90,000 is about $831 in super. Always check the arrangement with your employer first, because some employers require notice to be worked rather than taken as leave, and your award or contract may set its own rules.
What the Super Difference Is Worth: Worked Examples
| Scenario | Unused leave payout | Super if leave taken while employed (12%) | Super on termination payout |
|---|---|---|---|
| $90,000 salary, 4 weeks unused leave | $6,923 | $831 | $0 |
| $75,000 salary, 3 weeks unused leave | $4,327 | $519 | $0 |
| $120,000 salary, 6 weeks unused leave | $13,846 | $1,662 | $0 |
The leave payout itself is calculated at your ordinary rate of pay at the time your employment ends, including any leave loading you would have received. The super “loss” is the 12% that would have applied had the leave been taken during employment. Over a career with several job changes, these amounts add up — which is why it is worth using your leave rather than banking large balances, where your employer and your plans allow.
Use our superannuation calculator to see what a difference like this means for your balance over time.
What Else in Your Final Pay Attracts Super?
Your final pay usually contains several components, and they are not all treated the same way:
| Final pay component | Super payable? |
|---|---|
| Ordinary wages for hours worked up to your last day | Yes |
| Annual leave taken during employment or notice | Yes |
| Unused annual leave paid out on termination | No |
| Annual leave loading paid out on termination | No |
| Unused long service leave paid on termination | No |
| Payment in lieu of notice | Generally yes |
| Genuine redundancy payment | No |
| Employment termination payment (ETP), e.g. ex-gratia amount | No |
| Accrued wages paid in the final pay run | Yes |
Payment in lieu of notice is generally treated as ordinary time earnings, because it represents the earnings you would have received for ordinary hours if you had worked out your notice — so SG is generally payable on it. Genuine redundancy payments and most employment termination payments are not OTE and do not attract super. Awards, enterprise agreements and contracts can impose additional requirements beyond the SG minimum, so it is always worth checking the instrument that covers your role.
How the Unused Leave Payout Is Taxed
The super treatment and the tax treatment are separate questions. An unused annual leave payout on termination is included in your assessable income and taxed at your marginal tax rate in the year you receive it — it is not an employment termination payment and it does not get the concessional treatment that applies to genuine redundancy payments.
There is one historical exception: leave accrued before 17 August 1993 can be taxed concessionally, but for almost everyone working today that is irrelevant. For modern accruals the rule is simple — the payout is taxed like ordinary wages. Because the lump sum can push your income for the year into a higher bracket, a large payout in the same year as a pay rise or a bonus can cost you more tax than you expect. If you have a HECS debt, the payout also counts toward your repayment income, so it can increase your compulsory HECS repayment for the year.
Your employer withholds tax from the payout using the ATO’s tables, and the exact amount is reconciled when you lodge your return. You can check the tax on any lump sum with our income tax calculator.
What to Check on Your Final Payslip
When your final pay arrives, check these five things:
- The leave balance is right. Compare the hours paid out against your last payslip’s accrued balance plus any leave accrued since. Annual leave accrues at 4 weeks a year for full-time employees, pro-rata for part-time.
- Leave loading is included. If your award or agreement provides the standard 17.5% leave loading, it should be included in the payout of unused leave.
- Super was paid on the right components. Super should appear on ordinary wages and any leave taken while employed, but not on the termination leave payout itself. If super is missing from your ordinary wages, that is an underpayment worth raising.
- The tax withheld looks reasonable. A lump sum is taxed at your marginal rate, so the withholding on your final pay will be higher than a normal pay. Your tax return reconciles any difference.
- Your super fund received the contributions. Employers must pay SG at least quarterly, and from 1 July 2026 payday super rules require contributions to be paid within 7 days of payday. Check your fund to confirm the final contributions landed.
If something looks wrong, raise it with your employer’s payroll team first, then the Fair Work Ombudsman for leave entitlements or the ATO for super issues.
Frequently Asked Questions
Do I get super on my unused annual leave payout?
No. Unused annual leave paid out when your employment ends is generally not ordinary time earnings, so no Superannuation Guarantee is payable on it. The same applies to leave loading and unused long service leave paid on termination.
Do I get super if I take annual leave before I resign?
Yes. Leave taken while you are still employed — including during your notice period, if your employer agrees — is paid as ordinary wages and attracts the 12% SG, just like normal pay.
Is payment in lieu of notice superable?
Generally yes. Payment in lieu of notice is usually treated as ordinary time earnings because it stands in for the ordinary hours you would have worked, so SG is generally payable on it. Check your award or agreement, which may say otherwise.
How is an unused annual leave payout taxed?
It is included in your assessable income and taxed at your marginal tax rate in the year you receive it. It is not an employment termination payment and does not receive concessional tax treatment (except for leave accrued before 17 August 1993).
Does my employer pay super on redundancy pay?
No. A genuine redundancy payment is not ordinary time earnings, so no SG is payable on it. Super is still payable on your ordinary wages up to your last day and on any payment in lieu of notice.
Can I salary sacrifice my leave payout into super?
Generally no — a termination payout cannot be salary sacrificed after your employment has ended, because there is no future pay to sacrifice from. You can, however, make a personal deductible super contribution from the payout, subject to the $30,000 concessional contributions cap and the rules for claiming a tax deduction.
Conclusion
No super is paid on unused annual leave paid out when you leave a job — the lump sum is not ordinary time earnings, so the 12% Superannuation Guarantee does not apply. The same goes for leave loading and unused long service leave paid on termination. But leave taken while you are still employed does attract super, so if you are resigning with a large leave balance, taking the leave during your notice period can be worth hundreds of dollars in extra super. Check your final payslip carefully: super should be paid on your ordinary wages and any leave taken, the payout itself should be taxed at your marginal rate, and your fund should show the final contributions landing.
Work out what your leave is worth with our free annual leave calculator, check your super balance projections with the superannuation calculator, or see what your final pay is worth after tax with the income tax calculator.
