Offboarding well in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Offboarding an employee in Australia is a legal process with specific obligations — get it wrong and you risk underpayment claims, unfair dismissal applications, or STP compliance failures. Done well, it protects the business and leaves the departing employee with a clear, accurate record of their employment.
Confirm the termination type and notice period
The first step is to establish why the employment is ending, because that determines what you owe and what process you must follow.
Resignation, redundancy, end of a fixed term, and dismissal all carry different obligations. For redundancy, the National Employment Standards require a graduated redundancy payment based on years of continuous service — a separate entitlement from notice pay, not a substitute for it.
Notice periods are set by the employment contract, the applicable modern award or enterprise agreement, or the NES minimum — whichever is highest. You can require the employee to work the notice period, or pay it out in lieu. If you pay in lieu of notice, that amount is treated as ordinary earnings and is subject to PAYG withholding. Check the award or agreement carefully; some impose additional obligations such as consultation requirements for redundancy.
Calculate all final entitlements
Before you run the final pay, compile every component owed:
- Wages to the last day worked, including any overtime or allowances
- Unused annual leave, paid out at the employee's ordinary rate (plus any applicable leave loading under their award)
- Notice pay if not being worked out
- Redundancy pay if applicable under the NES or a more generous instrument
- Long service leave, where the employee has reached the threshold under the relevant state or territory legislation — this varies by jurisdiction, so check the rules for your state
Superannuation is payable on ordinary time earnings. If the final pay includes amounts that qualify as ordinary time earnings (typically wages and annual leave), the Superannuation Guarantee of 12% applies. Notice payments in lieu and redundancy pay are generally excluded from the SG base, but confirm this against ATO guidance for your specific circumstances.
HECS/HELP withholding continues to apply in the final pay on any earnings subject to the repayment bands.
Run the final pay and report via STP
Process the final pay as a separate pay run or clearly itemised within a regular cycle, so all components are transparent and auditable.
At each pay event — including the final one — you must report to the ATO via Single Touch Payroll. This updates the employee's year-to-date figures in real time. Following the final pay, you need to submit an STP finalisation for that employee by 14 July at the latest. Finalisation marks their income statement as "tax ready" in myGov so they can lodge their tax return.
If you miss finalisation or report incorrect figures, the employee cannot accurately file their return, and the ATO may query your payroll records. Make it a checklist item for every offboarding.
Handle the administrative close-out
A few practical steps sit alongside the payroll obligations:
Provide a separation certificate if the employee requests one — this allows them to claim Centrelink income support if needed. Refusing to provide it is not optional.
Revoke system access on or before the last day. This means email, payroll software, internal tools, cloud storage, and any third-party platforms. Document when access was removed.
Recover company property — laptop, phone, access cards, company credit cards — and confirm receipt in writing.
Update your payroll records to reflect the termination date. If you use a modern payroll platform, this flows automatically into your STP reporting, but verify it regardless.
Protect yourself against post-termination claims
Unfair dismissal applications in Australia must be filed within 21 days of the dismissal taking effect. Adverse action claims have a longer window. The best protection is contemporaneous documentation: written notice of termination (or written acknowledgement of resignation), a record of entitlements paid, and evidence of any process followed for dismissal or redundancy.
For redundancy specifically, ensure you can demonstrate that the role was genuinely redundant and that you considered redeployment — two criteria the Fair Work Commission looks at closely.
Keep all records for at least seven years. That includes pay slips, STP data, leave balances, and correspondence about the termination. Australian tax and employment law both impose record-keeping obligations, and employment disputes can surface well after the employment has ended.
A clean offboarding process — accurate pay, timely STP finalisation, clear documentation — costs little to execute and significantly reduces your exposure if the termination is ever questioned.
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