Deduct tax from your payment

You can ask us to deduct tax from most taxable Centrelink payments. This can help reduce how much tax you may have to pay at the end of the tax year.

Especially if you get other taxable income as well as your Centrelink payment. This includes income from employment or self employment.

If you get extra income and a Centrelink payment, your income may be more than the tax-free threshold. If it is, you’ll have to pay tax and may need to pay the Medicare levy at tax time. You’ll find out after you lodge your tax return.

If you ask us to deduct tax from your eligible taxable payment, you can see it on your payment summary.

How to set up a deduction

How you set up a voluntary tax deduction to cover tax depends on the payment you get. You can only set up a deduction if both of these apply:

  • you get an eligible taxable Centrelink payment
  • you must report your payment to the Australian Taxation Office (ATO) as income at tax time.

If you submit a claim

You can ask us to deduct tax from your eligible taxable payment when you submit a claim. You need to make sure you tick the option to have tax deducted from your payment.

You can ask us to deduct the tax as either:

  • a percentage of your total taxable payments
  • a set dollar amount.

We automatically take a 15% deduction for tax when we approve you for either:

If you don’t want to pay this, you can ask us to change it at any time.

The amount of tax you ask us to deduct will depend on your circumstances. You can check the tax rates and find out about tax offsets on the ATO website.

You can set up a voluntary tax deduction when you claim a taxable emergency payment such as Disaster Recovery Allowance. Not all emergency events are taxable or reportable. Please check your natural disaster event to see if it’s taxable.

If you get a payment

In most cases, you can set up deductions from your payment in your online account or through self-service. You may not need to visit a service centre.

If you get one of these payments, you can set up a deduction using a self-service option:

  • ABSTUDY Living Allowance, if you’re 16 or older
  • Age Pension
  • Austudy
  • Carer Payment, if you or the care receiver is of Age Pension age
  • Disability Support Pension, if you’re Age Pension age
  • JobSeeker Payment
  • Parenting Payment
  • Special Benefit
  • Youth Allowance, if you’re 16 or older.

Use one of these self service options to set up a deduction:

If you get Farm Household Allowance, you can set up a deduction one of these ways:

If you get add-on payments

Sometimes you’ll get extra payments as part of your main taxable Centrelink payment. You can’t set up a deduction for tax on these add-on payments, but they are taxable.

We’ll deduct the amount or percentage you nominated from the combined total of your taxable Centrelink payment and add-ons.

Add-on payments include:

  • ABSTUDY Living Allowance Additional Assistance
  • ABSTUDY School Fees Allowance for students 16 or older when getting the higher rate
  • Basic Pension Supplement
  • Community Development Programme Supplement
  • National Work Experience Programme
  • Partner Bereavement Payment above the tax exempt amount
  • PaTH Internship Incentive
  • Transitional Basic Pension Supplement
  • Work for the Dole Supplement
  • Youth Disability Supplement when paid with Youth Allowance or ABSTUDY Living Allowance.

How to change or stop a deduction

You can change or stop the amount of tax you want us to deduct at any time.

You can do this using the same options to set up the deduction for when you get a payment above.

Use our online guide to help you manage tax deductions with your Centrelink online account.

If you can’t access a self-service option, fill in the Tax Deduction Authority form for your main payment.

If you get Dad and Partner Pay, Parental Leave Pay or Disaster Recovery Allowance

We automatically deduct tax from these payments. But you can change or stop the tax amount through any of these options:

Page last updated: 26 August 2022