Increases in High Income and Redundancy Tax-free Thresholds

19 June 2013

As from 1 July 2013, the high income threshold relating to unfair dismissal claims and the coverage of Modern Awards, will be increased from $123,300.00 p.a. to $129,300.00 p.a.

This figure includes:

  • salary/wages;
  • money which is paid on an employee’s behalf (e.g. superannuation top-ups or salary sacrifice);
  • the agreed value of non-monetary benefits (e.g. laptops and mobile phones).

This figure does not, however, include:

  • payments which can’t be set or agreed in advance (e.g. commissions, bonuses or overtime);
  • reimbursements of expenses;
  • statutory employer superannuation contributions. 

Unfair Dismissal Claims

Employees whose earnings are higher than $129,300.00 p.a. and who are not covered by an industrial instrument, are not protected from unfair dismissals, i.e. they are not able to bring an unfair dismissal claim.  Conversely, employees who are not covered by an industrial instrument, but whose earnings are equal to or less than this threshold amount, are able to bring an unfair dismissal claim.

This increase does not affect employees whose terms and conditions of employment are governed or covered by an industrial instrument such as a Modern Award or Enterprise Agreement.  This class of employee can bring an unfair dismissal claim, irrespective of their income. 

However, it is important to note that this high income threshold does not preclude any employees from bringing other claims, such as a “general protections” under the Fair Work Act 2009, or a discrimination claim under the relevant Federal or State legislation. 

Coverage by a Modern Award

Modern Awards will not apply to employees who have agreed to a written guarantee of annual earnings of about the new threshold (i.e. $129,300.00 p.a.) in accordance with the relevant provisions of the Fair Work Act.

However, this does not affect their entitlement, bring an unfair dismissal claim or, indeed, any other claim under the Fair Work Act, notwithstanding the fact that they would not otherwise be covered by the Modern Award.  


As from 1 July 2013, the tax-free threshold for bona fide redundancy payments will be increased from $8,806.00 to $9,246.00 as a base limit and from $4,404.00 to $4,624.00 for each completed year of service. 

If an employee is entitled to a bona fide redundancy payment on termination, then accrued annual leave and/or long service entitlements will continue to be taxable at 31.5%. 

Please note:  There is legislation currently before the Senate which, if passed, will change the way the tax-free threshold amount referred to above is indexed.  If the Bill becomes law, the above amounts are likely to change. It is advisable that you check with the Australian Taxation Office for up-to-date figures before making any payments.