Guide
Annual leave payout on termination: loading and super
Updated
This one has a clear answer, and it is the answer employees are most often told wrongly.
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- Leave loading is not a universal statutory entitlement. The Fair Work Ombudsman states that annual leave loading is an additional amount paid to some employees when they take annual leave. It does not apply to all employees, and depends on what their award or enterprise agreement says (Fair Work Ombudsman: payment for annual leave).
- The Fair Work Ombudsman's library article says the annual leave loading amount and what it is calculated on varies based on the individual award or agreement. Its examples are not a full list of every way loading is calculated.
- Source: Fair Work Ombudsman library: annual leave loading in awards and agreements. That is why the percentage is a field rather than a fixed 17.5%.
- Many awards require a comparison rather than a flat payment. In the library article's Retail Award example, non-shiftworkers get the higher of two amounts. One is a 17.5% loading calculated on the employee's minimum hourly rate; the other is the weekend or shift penalty rates they normally get. The penalty field here models that comparison.
- Whether loading is calculated on an above-award rate or on the award minimum depends on the wording of the clause. The library article gives both patterns, so check yours before assuming the higher base.
- Annual leave itself is paid at the employee's current base pay rate for all hours of leave taken. That does not include overtime rates, penalties, allowances or bonuses (Fair Work Ombudsman). The loading sits on top of that base.
- Loading may not apply at all in three cases, all covered by the library article. It may be absorbed into an annualised wage arrangement permitted by the award or agreement, varied by an individual flexibility arrangement, or offset under a contractual arrangement.
- Superannuation generally applies. The ATO states that annual leave loading is included in ordinary time earnings unless it is clearly linked to lost overtime. Excluding it needs written evidence, such as the award, the agreement, or a documented policy stating the reason for the entitlement (ATO).
- Figures are gross. PAYG withholding on leave loading is a separate question and depends on how and when it is paid, so ask your payroll team rather than assuming a rate.
The rule
The Fair Work Ombudsman states that when employment ends, employers must pay their employee for any unused annual leave accumulated during their employment. It adds that the annual leave payment must be the same amount the employee would have received if they had taken the annual leave during their employment.
It gives an example. If an employee would be entitled to annual leave loading or other payments when taking annual leave, those must be in the final payment. Source: Fair Work Ombudsman: payment for annual leave.
A contract cannot switch it off
The same page adds that unused annual leave payments apply even if an award, enterprise agreement or employment contract says that they do not. The page cites Fair Work Act 2009 sections 16, 89(2) and 90 as its source reference.
The Fair Work Ombudsman's library article says the same from the loading side. When employment ends, unused accumulated annual leave is paid out as if taken during employment, calculated the same way. It includes any annual leave loading, penalty rates or shift loading that would have applied (Fair Work Ombudsman library).
What that means in practice
- If your award gives you 17.5% loading on leave taken, that 17.5% belongs in your termination payment too.
- If your award pays the higher of loading or penalties, the same comparison is run on the termination payment.
- If your award never gave you loading, there is no loading to pay out. The rule preserves your entitlement, it does not create one.
- A clause in a contract saying loading is not paid on termination has no effect on the statutory position.
Do you get super on an annual leave payout?
No. The ATO lists unused leave paid on termination, including annual leave and annual leave loading, as not ordinary time earnings. This applies regardless of the reason for termination or its tax treatment (ATO: list of payments that are ordinary time earnings).
The qualifying earnings list that applies from 1 July 2026 marks the same payment no for both columns. Source: ATO: what payments are qualifying earnings, both read 30 October 2026.
So the super guarantee does not require superannuation on an annual leave payout. The ATO notes an award or agreement can oblige an employer to pay super on amounts that are not ordinary time earnings.
That is the opposite of leave taken during employment, where super is paid on annual leave and on most leave loading. The payout itself is still owed in full; only the super on it differs.
Working out the number
Put your accrued balance into the calculator as weeks of leave, at the rate your leave would have been paid at, with your award's loading percentage. The total is what the untaken leave is worth gross, before PAYG withholding. Termination payments are withheld from under separate rules, so the net figure on your final payslip will not match this total.
| Accrued balance | Base pay | Loading at 17.5% | Total payable |
|---|---|---|---|
| 1 week | $1,330 | $233 | $1,563 |
| 4 weeks | $5,320 | $931 | $6,251 |
Both rows use this site's own calculator formulas. If your accrued balance is held in hours rather than weeks, divide by your ordinary weekly hours first.
If your balance is held in hours, the annual leave calculator shows how leave accrues week by week, so you can check the balance before it is paid out.