Final Pay in Australia: What's Owed, When It's Due, and How It's Taxed

Australian employers must pay wages owed and any unused annual leave in full when employment ends, but no single national law sets a universal number of days for when that payment must land, because timing is set by the applicable award or enterprise agreement first and the Fair Work Act only fills the gap.

This article covers final pay under the Fair Work Act 2009 (Cth) and the Fair Work Ombudsman's current guidance, current as at August 2026. It does not cover the length of the notice period itself, covered on recordinglaw.com's notice of termination guide, the redundancy pay scale, covered on the redundancy pay guide, long service leave formulas, which are entirely state and territory law, or the criminal offence of deliberate wage underpayment, covered on the wage theft and underpayment guide. For the full set of National Employment Standards minimums, including notice, redundancy and leave entitlements, see recordinglaw.com's Australia employment law hub.

What Final Pay Includes

The Fair Work Ombudsman's current guidance sets out what final pay is made up of. It always includes wages owing for hours the employee has worked, including any penalty rates and allowances that applied, plus any annual leave owing, including annual leave loading if it would have been paid during employment. Where they apply, final pay can also include payment in lieu of notice, redundancy pay, and accrued or pro rata long service leave.

One negative point is worth stating plainly because it is a common source of confusion: sick and carer's leave is not paid out when employment ends. The Fair Work Ombudsman's guidance states this directly, with no carve-out or exception mentioned. An employee who has accrued a large balance of unused personal or carer's leave does not receive a cash payout for it on termination, unlike unused annual leave.

When Final Pay Must Be Paid

This is the point most often misunderstood, so it is worth setting out precisely rather than reducing it to a single figure. Rules about when final pay must be paid can come from an award, an enterprise agreement, the National Employment Standards, or the Fair Work Act itself, and they apply in that order.

An employer must first follow whatever their award or enterprise agreement says about final pay timing. Most awards require final pay within 7 days after the employee's last day of employment, but this is an award pattern reported by the Fair Work Ombudsman, not a figure written into the Fair Work Act. Different awards can and do set different timeframes, so the correct step is to check the specific award or agreement that covers the employment, using the Fair Work Ombudsman's Find My Award tool if it is not already known, rather than assuming 7 days applies.

If an award or enterprise agreement has no rule at all about when final pay must be paid, the Fair Work Act applies directly. Section 323(1)(c) of the Act requires an employer to pay amounts owed to an employee at least monthly. This is the only general, Act-wide payment frequency rule that exists, and it operates as a fallback, not as the default figure most employees will actually rely on, since most are covered by an award or agreement that sets its own timing.

There is one genuine exception with its own specific, NES-sourced deadline: payment in lieu of notice. Where an employer chooses to pay an employee in lieu of notice instead of having them work out the notice period, that payment must be made before or on the day employment ends. This is a distinct requirement from the general final pay timing rules above, and it comes from the notice provisions of the National Employment Standards rather than from the general final pay guidance.

Beyond the legal minimums, the Fair Work Ombudsman's own best practice guidance encourages employers to pay final pay as soon as possible after employment ends, for example in the next regular pay cycle, and without unreasonable delay, even where the applicable award or the Act's own fallback would technically allow longer.

Unused Annual Leave and Leave Loading

Section 90(2) of the Fair Work Act requires that where an employee has untaken paid annual leave when their employment ends, the employer must pay the amount that would have been payable had the employee taken that leave. This is a National Employment Standards entitlement, so it applies regardless of what an award, agreement or contract says.

The Fair Work Ombudsman's current guidance on final pay makes a genuinely counter-intuitive but clearly stated claim about leave loading: annual leave loading is paid out on termination even when an award, enterprise agreement or employment contract says that it is not. In other words, if an employee's award or agreement provides for leave loading when annual leave is taken during employment, that loading must also be included in the final payout of any unused leave, and a contrary term in the award, agreement or contract does not override this. The Fair Work Ombudsman's guidance frames this as flowing from the requirement that the termination payout match what the employee would have been paid had they taken the leave while still employed; the deeper case law mechanism behind that framing was not independently verified for this article, so it is stated here as Fair Work Ombudsman guidance rather than attributed to a specific case.

It is worth remembering that leave loading itself is never a National Employment Standards entitlement. Whether an employee gets it at all, and at what rate, depends entirely on their specific award, enterprise agreement or contract; a commonly cited figure such as 17.5 percent is an award rate, not a statutory one. What section 90(2) guarantees is only that whatever loading applies during employment must also be reflected in the final termination payout, not that loading exists in the first place.

Deductions From Final Pay

An employer must generally pay final pay in full, and section 324 of the Fair Work Act sets out the only grounds on which a deduction can lawfully be made. A deduction is permitted if it is authorised in writing by the employee and is principally for the employee's own benefit, authorised by the employee under the terms of an enterprise agreement, authorised by or under a modern award or a Fair Work Commission order, or authorised by or under a law of the Commonwealth, a state or a territory, or a court order.

The Act closes an obvious loophole around the first ground: an employer cannot rely on a written authorisation that is supposedly for the employee's benefit to make a deduction that is actually for the employer's own benefit and that can vary in amount, unless the deduction would independently qualify as reasonable. Separately, the Act can void certain award, agreement or contract terms that purport to authorise a deduction outright, so a clause in a contract saying a deduction is allowed does not by itself make it lawful.

One specific scenario the Fair Work Ombudsman flags in the final pay context is withholding pay for insufficient notice of resignation. An award or enterprise agreement can include a rule allowing an employer to withhold an amount of pay where an employee resigns without giving the minimum notice period required. This is a deduction authorised through the award or agreement mechanism above, not a separate freestanding right.

Notice, Redundancy and Long Service Leave

Final pay often overlaps with, but is not the same calculation as, three other entitlements the site covers separately, so this section links out rather than repeating the detail.

Payment in lieu of notice forms part of final pay where the employer chooses it instead of a worked notice period, calculated on the scale in recordinglaw.com's notice of termination guide, with the before-or-on-the-day payment deadline described above. Redundancy pay forms part of final pay where the redundancy is genuine, on the scale set out in recordinglaw.com's redundancy pay guide. Long service leave is different again: it is not a National Employment Standards entitlement at all. It is entirely state and territory law, and whether accrued or pro rata long service leave is owed as part of final pay depends on the qualifying period and formula in the employee's own state or territory. Check the relevant guide rather than assuming a national rule: New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania, Australian Capital Territory, and Northern Territory.

Employment Termination Payments and Tax

Not every component of final pay is taxed the same way. This is a genuinely tax-specific topic, so the article stays within what the Australian Taxation Office's own guidance states and flags anything more complex as a matter for an accountant.

An employment termination payment, commonly called an ETP, can include payments for unused sick leave or unused rostered days off, payment in lieu of notice, a gratuity or so-called golden handshake, an invalidity payment for permanent disability, compensation for loss of a job or wrongful dismissal, the part of a genuine redundancy or early retirement payment that exceeds the tax free limit, and certain payments made after an employee's death. Lump sum payments for unused annual leave or unused long service leave are not employment termination payments; they are taxed separately, generally at a lower rate than ordinary income.

A genuine redundancy or early retirement scheme payment is tax free up to a limit that is indexed each year. For the 2026-27 income year, that limit is a base amount of $13,598 plus $6,801 for each complete year of service, and only the amount above that limit becomes an employment termination payment. Beyond any tax free component, employment termination payments are concessionally taxed up to a cap: 17 percent if the person has reached preservation age, or 32 percent if they have not, up to the applicable ETP cap or whole of income cap depending on the type of payment. For the 2026-27 income year, the ETP cap is $270,000 for both life benefit and death benefit termination payments, and the whole of income cap is $180,000, which is not indexed and is reduced by any other taxable income received in the same year. Amounts above the relevant cap are taxed at the top marginal rate, currently 45 percent plus the 2 percent Medicare levy.

The detailed mechanics of the 12-month rule that can affect which rate applies, how preservation age is determined, and how the whole of income cap interacts with other income in more complex cases are beyond what this article covers; an accountant or registered tax agent should be consulted for a specific calculation.

If Final Pay Is Late, Missing or Underpaid

This section covers the civil recovery path available to an individual employee. The site's wage theft and underpayment guide separately covers the criminal offence that applies where an employer's underpayment is deliberate and dishonest; that is a different, more serious layer and is not repeated here.

The Fair Work Ombudsman can help with underpayments and non-payment of wages and entitlements, pay rates including penalty rates, notice of termination, redundancy entitlements or final pay, leave entitlements, and other breaches of the Fair Work Act or the National Employment Standards. The Fair Work Ombudsman does not handle unfair dismissal claims, which go to the Fair Work Commission, and cannot generally help with issues more than 6 years old.

For unpaid amounts, the Fair Work Act's small claims procedure allows an employee to bring a claim in a magistrates court or the Federal Circuit and Family Court of Australia for amounts an employer was required to pay under the Act or an applicable award or agreement. The court cannot award more than $100,000 in a small claims proceeding unless a higher amount is prescribed by regulation, though interest does not count toward that cap, and the procedure is designed to be informal: the court is not bound by the usual rules of evidence, and legal representation generally requires the court's leave. An application must generally be made within 6 years of the underpayment occurring, matching the Fair Work Ombudsman's own 6-year complaint window.

This article provides general legal information about the Fair Work Act 2009 (Cth), Fair Work Ombudsman guidance, and Australian Taxation Office guidance on employment termination payments, current as at August 2026. It is not legal or tax advice and does not account for individual circumstances. Award and enterprise agreement terms vary and should be checked directly; a specific tax outcome should be confirmed with a registered tax agent or accountant, and a specific legal question with a legal practitioner admitted in the relevant Australian state or territory.