Quick answer
Under the National Employment Standards (NES), unused paid sick and carer’s leave is generally not paid out when employment ends. That is different from unused annual leave. An award, enterprise agreement or other enforceable arrangement may provide additional benefits, so check your specific employment conditions.
What is sick and carer’s leave?
Paid sick leave allows eligible employees to take time off when they cannot work because of illness or injury. Paid carer’s leave supports eligible caring responsibilities. Both draw on the same personal/carer’s leave balance. Full-time employees generally receive 10 days per year; part-time entitlements are pro rata. Unused balances normally carry forward while employment continues.
What happens when you resign?
If you resign with 40 hours of unused sick leave, those hours are normally not converted into cash on your final payslip. The same general rule applies if your employer ends the employment. Check your award, enterprise agreement and contract for any additional entitlement, but do not assume every accrued leave balance must be paid out.
Annual leave versus sick leave
Unused annual leave must generally be paid out on termination, including applicable annual leave loading. Unused sick/carer’s leave is generally not paid out under the NES. This is why your final payslip may show a payment for annual leave but no payment for the unused sick leave balance.
| Entitlement | Generally paid out when employment ends? |
|---|---|
| Unused annual leave | Yes, including applicable loading |
| Unused sick/carer’s leave | No, unless additional applicable terms provide otherwise |
Are there exceptions?
Some workplace arrangements may provide more generous entitlements than the NES. Separately, cashing out sick leave while still employed is only allowed in limited circumstances under certain awards or registered agreements and subject to strict conditions. Do not confuse an approved cash-out during employment with a payout when employment ends.
If sick leave is paid out, is it taxable?
A genuine payment for unused sick leave made because employment ends can fall within the Australian Taxation Office’s employment termination payment (ETP) rules. ETPs can have different tax and reporting treatment from ordinary wages or unused annual leave. The correct classification depends on the facts, including why and when the payment was made. Ask payroll for the payment description and seek tax advice before assuming a flat rate or claiming a deduction.
Does sick leave transfer to your next job?
Usually your unused sick leave does not follow you when you leave one unrelated employer for another. However, in a qualifying transfer of business, the new employer generally must recognise service for sick and carer’s leave purposes. Confirm with both employers if the business changes ownership or your employment transfers.
What about casual workers?
Casual employees do not receive paid sick and carer’s leave under the NES. They may be eligible for unpaid carer’s leave and other relevant protections. If you are employed as a casual, check whether your payslip actually shows a paid personal-leave balance before expecting a payout.
Final payslip checklist
Before accepting your final pay as correct, check outstanding wages and allowances, unused annual leave and applicable leave loading, any applicable notice or redundancy payments, your leave balances, and the classification of any exceptional termination payment. Keep the final payslip, employment contract and relevant correspondence.
Examples for Nepali workers
Example 1: A full-time hospitality worker resigns with 8 unused sick days and 4 unused annual leave days. Ordinarily the sick days are not paid out, but the unused annual leave is.
Example 2: An employee receives a special unused sick leave payment under an applicable agreement when employment ends. Payroll should assess whether the payment is an ETP and report/withhold accordingly.
Example 3: A business is sold and the worker continues with the new employer under a qualifying transfer. Accrued sick/carer’s leave may be recognised by the new employer.
What should you do?
Start by checking your employment type and applicable award or enterprise agreement. Compare your final payslip with your accrued leave balances. For entitlement disputes, use Fair Work’s resources; for taxation of an actual termination payment, consult a registered tax agent. Hamro Accountant can help you understand how the payment appears on your tax return.
Frequently asked questions
Will I be paid for 10 unused sick days when I resign?
Generally no. The NES does not require a payout of unused paid sick/carer’s leave when employment ends. Check for any more generous applicable employment terms.
Is sick leave the same as annual leave?
No. They are different entitlements. Unused annual leave is generally paid out when employment ends, but unused sick/carer’s leave is generally not.
Can I cash out sick leave before leaving?
Only in limited situations under certain awards or registered agreements and subject to conditions. Most awards do not allow it.
Do casual employees receive unused sick leave payouts?
Casual employees do not accrue paid sick/carer’s leave under the NES, so normally there is no paid balance to cash out.
What if my employer voluntarily pays unused sick leave on termination?
Ask payroll how the payment has been classified. Depending on the facts, it may be an employment termination payment with specific tax treatment.
Does my sick leave balance move to a new employer?
Usually not when changing unrelated employers. Special recognition rules can apply to a qualifying transfer of business.
Is unused sick leave tax deductible if it is not paid?
No. An unused leave balance that is not paid is not an expense you can claim as a tax deduction.
Official sources
Fair Work Ombudsman — Final pay ↗Fair Work — Paid sick and carer’s leave ↗Fair Work — Cashing out sick and carer’s leave ↗Fair Work — Transfer of business entitlements ↗ATO — Employment termination payments ↗Fair Work — Nepali-language sick and carer’s leave ↗Need help understanding your final payslip?
Hamro Accountant can help explain the tax reporting of employment income and eligible termination payments. For disputes about employment entitlements, contact Fair Work or a workplace relations adviser.
Contact Hamro Accountant →General information only, current to October 2026. Employment entitlements depend on your circumstances and applicable workplace instruments; tax treatment depends on the payment classification. This article is not individual legal or tax advice.