i am retiring is better to use up all my annual and long service leave or get it paid out

 Author: PayrollDeanne(Taxicorn)Taxicorn

20 Oct 2025

Hiya @Hoges67 👋

I can't know your personal circumstances, so I'll explain the difference in the payment/tax withheld by your employer 🤓

Taking Paid Absences:

• Leave Accrual - you continue to accrue leave during your paid absence
• Tax - you are taxed at your normal rate (link assumes Australian tax resident)
• Super - annual leave and long service leave are OTE so your employer pays SG
• Reporting - your paid leave is separately reported on your Income Statement as Paid Leave Type O (other), aggregated by the ATO to be included as your taxable gross

Unused Leave on Termination:

• Tax - for voluntary resignations (including retirement) are taxed based upon the period of accrual of the leave. For example, if your leave balance accrued after 17 August 1993, then you would be taxed marginally (as if the extra amount was instead paid as a periodic payment each pay of the FY). The section below the table I hyperlinked explains how that is calculated.
• Super - unused leave on termination is not OTE so your employer doesn't pay any SG
• Reporting - your unused leave is reported separately on your Income Statement as Paid Leave Type U (unused leave on termination), aggregated by the ATO to be included as your taxable gross

Tax may or may not be different but the big difference is that employer superannuation contributions, currently at the SG rate of 12%, is not paid for unused leave on termination.

I hope that assists you to make the decision for your circumstances? 😉

Deanne

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