Paying tax on a Centrelink payment
You may have to pay income tax on your taxable Centrelink payments.
We don’t automatically deduct tax from most of our payments. But you can ask us to do this for you if you get a taxable Centrelink payment. This can reduce the amount of tax you may have to pay at the end of the financial year.
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 Australian Taxation Office (ATO) website.
If we deduct tax from your payment, you must lodge a tax return with the ATO.
You can ask us to make regular deductions of tax from your taxable Centrelink payments.
This means you pay tax in smaller amounts throughout the year. If you do this you may not have to pay a large lump sum after the end of the financial year.
This may be important if any of the following apply. You:
- have earnings as well as your Centrelink payment
- get other taxable income.
This extra income may either:
- put you over the tax-free threshold
- mean you have to pay the Medicare levy.
You can ask us to deduct tax from your 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.
How you set up the deduction to cover tax depends on the payment you get.
You may not need to visit a service centre. In most cases you can set up deductions from your payment in your online account or through self-service.
|Taxable Centrelink Payments||Where to set up your tax deduction|
If you get any of these:
Set up your tax deduction:
Set up your tax deduction:
You can set up a deduction by:
If you get one of these:
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 either:
Set up automatically during your claim process. You can make changes to the amount your want deducted for tax:
|If you got the Coronavirus Supplement||
You need to declare it as income in your tax return for the 2020–21 financial year.
The Coronavirus Supplement won’t be shown separately on your Centrelink payment summary.
Your total Centrelink payment rate was increased if you were paid the Coronavirus Supplement.
Sometimes you’ll get additional payments included with your main taxable Centrelink payment. You can’t set up 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
- Transitional Basic Pension Supplement
- Basic Pension Supplement
- Community Development Programme Supplement
- Partner Bereavement Payment above the tax exempt amount
- National Work Experience Programme
- PaTH Internship Incentive
- ABSTUDY School Fees Allowance for students aged 16 and over when getting the higher rate
- Work for the Dole Supplement
- Youth Disability Supplement when paid with Youth Allowance or ABSTUDY.
Reading your 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.
Managing tax deducted from your payment
You can set up, change or cancel the amount of tax you want deducted 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.
Read more about personal taxation on the ATO website.
Page last updated: 6 August 2021
This information was printed 21 October 2021 from https://www.servicesaustralia.gov.au/individuals/topics/paying-tax-centrelink-payment/29651. It may not include all of the relevant information on this topic. Please consider any relevant site notices at https://www.servicesaustralia.gov.au/individuals/site-notices when using this material.