Paying tax on a Centrelink payment

You may have to pay tax on your payments.

You can choose to pay tax on your payment if you get a taxable Centrelink payment.

We don’t automatically take tax from most of our taxable payments. But you can ask us to do this for you. We call this a tax deduction.

There’s a tool to work out the amount of tax that we should deduct from your payment. Use the Australian Taxation Office (ATO) tax withheld for individuals calculator tool on their website.

If we deduct tax from your payment, you must lodge a tax return with the ATO.

Payment summary

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

Your payment summary shows:

  • the total payment amounts you got from us for the financial year
  • any tax we deducted from these payments.

It won’t show income you get from an employer that reports straight to the ATO during the financial year. This’ll show on an income statement in the ATO online service through myGov instead.

If you wait to lodge your tax return until later in July, the ATO will have your payment information prefilled. This means you can avoid having to amend your tax return.

Deducting tax from your payment

You can ask us to make regular tax deductions from taxable Centrelink payments.

This means you pay tax in smaller amounts throughout the year. If you do this you won’t have a large lump sum after the end of the financial year.

You can do this when you submit a claim for payment. You just need to make sure you tick the option to have tax taken out of your payment.

You can choose for us to deduct the tax as either a:

  • percentage of your total taxable payments
  • dollar amount.

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

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

Set up a tax deduction

How you set up a tax deduction depends on the payment you get.

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

Taxable Centrelink Payments Where to set up your tax deduction

If you get:

  • ABSTUDY - Living allowance for students and Australian Apprentices if you’re 16 years or older
  • Age Pension
  • Austudy
  • Bereavement Allowance
  • Carer Payment – if you or the care receiver is of Age Pension age
  • JobSeeker Payment
  • Parenting Payment
  • Partner Allowance
  • Sickness Allowance
  • Special Benefit
  • Widow Allowance
  • Youth Allowance – if you’re 16 years or older.

Set up your tax deduction:

  • Disability Support Pension – if you’re Age Pension age.

Set up your tax deduction:

  • Farm Household Allowance.
You must visit a service centre to set up a deduction.

If you get:

  • Disaster Recovery Allowance
  • Ex-gratia Disaster Recovery Allowance.

Not all emergency events are taxable. Please check your event, to see if it’s taxable.

Set up automatically during your claim process or at a service centre. You can make changes to your tax deduction:

If you get:

  • Parental Leave Pay from Services Australia
  • Dad and Partner Pay.

Set up automatically during your claim process. You can make changes to your tax deduction:

These taxable payments stopped on 20 March 2020, any tax deductions made will be included on your 2019-20 Centrelink payment summary:

  • Newstart Allowance
  • Wife Pension if you or your partner is of Age Pension age
  • Widow B Pension.

Sometimes you’ll get additional payments included with your main taxable Centrelink payment. You can’t set up a tax deduction on these add on payments, but they are taxable. We’ll deduct your nominated dollar amount or percentage from the combined total of your taxable Centrelink payment and your add on payments. Add on payments include:

  • Additional Assistance - regular
  • Transitional Basic Pension Supplement
  • Basic Pension Supplement
  • Bereavement lump sum above the tax exempt amount
  • Coronavirus Supplement – temporary payment due to COVID-19
  • Partner Bereavement Payment above the tax exempt amount
  • Living Allowance, Term or School Boarder
  • National Work Experience Programme
  • PaTH Internship Incentive
  • Remote Jobs and Communities Programme Supplement
  • School Fees Allowance Group 2 or Board
  • Work for the Dole
  • Youth Disability Supplement when paid with Youth Allowance and ABSTUDY.

Manage your tax deduction

You can set up, change or cease your tax deduction at any time. You can do this depending on the type of payment you get.

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

You can also fill in the Tax Deduction Authority form for any main payment. When you’ve filled it in, take it to a service centre.

More information

Read more about personal taxation advice on the ATO website.

Page last updated: 23 June 2020