Annual Leave Accrual & Resignation Payout Rules (2026–2027)
Learn how annual leave accrues in Australia and how leave payouts work when employment ends, including applicable loading and tax withholding considerations.
- ✓ Under the NES, full-time workers accrue 4 weeks (152 hours) of annual leave per year, while shiftworkers accrue 5 weeks (190 hours).
- ✓ Part-time workers accrue leave on a pro-rata basis according to their contracted ordinary weekly hours.
- ✓ Casual workers do not receive paid annual leave; instead, they receive a 25% casual loading in lieu of leave benefits.
- ✓ Unused annual leave MUST be paid out upon resignation or termination at the employee base hourly pay rate.
- ✓ Under ATO Ruling SGR 2009/2, Super Guarantee (12.0%) is NOT payable on unused annual leave paid out upon termination.
Managing annual leave entitlements is a fundamental component of Australian employment law. Regulated under the National Employment Standards (NES) administered by the Fair Work Ombudsman, paid annual leave ensures that Australian workers can take time off while maintaining financial income.
This comprehensive guide details pro-rata accrual rates, resignation payout calculations, ATO Schedule 7 tax withholding, and superannuation rules.
1. Statutory National Employment Standards (NES) Accrual Rates
Annual leave accumulates progressively throughout the working year from an employee's first day of employment:
2. Resignation & Termination Payout Rules
When an employee leaves a business—whether through voluntary resignation or termination—the employer is legally required under Section 90(2) of the *Fair Work Act 2009* to pay out all accrued, unused annual leave.
Payout Components:
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1
Base Ordinary Pay: Total accrued unused hours multiplied by the final base hourly rate.
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2
Applicable Leave Loading: If the employee's award or enterprise agreement specifies leave loading (e.g. 17.5%), that loading must be included in the termination payout.
3. ATO PAYG Tax Withholding & Super Guarantee Rules
The Australian Taxation Office (ATO) applies specific tax and superannuation rules to termination payouts:
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•
ATO Schedule 7 Marginal Withholding: Unused leave payouts are taxed using ATO Schedule 7 Marginal Method B(i). The payout is annualized to determine the marginal tax withholding rate.
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•
Super Guarantee Exemption (SGR 2009/2): Under ATO Ruling SGR 2009/2, unused annual leave paid out upon termination is NOT Ordinary Time Earnings (OTE) and does not attract the 12.0% Super Guarantee contribution.
4. Calculate Your Annual Leave Payout
Estimate your accrued leave hours, payout value, ATO tax withholding, and net cash outlays using Calcivo's Annual Leave Calculator.
Frequently Asked Questions
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