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.
Deducting tax from your payment
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:
- get the Coronavirus Supplement
- 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.
Setting up a deduction from your payment
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 |
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If you get:
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Set up your tax deduction:
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Set up your tax deduction:
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You must visit a service centre to set up a deduction. |
If you get:
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:
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If you get:
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Set up automatically during your claim process. You can make changes to the amount your want deducted for tax:
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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:
- Additional Assistance, regular
- Transitional Basic Pension Supplement
- Basic Pension Supplement
- Bereavement lump sum above the tax exempt amount
- Coronavirus Supplement, a temporary payment due to COVID-19
- Community Development Programme
- Partner Bereavement Payment above the tax exempt amount
- Living Allowance, Term or School Boarder
- National Work Experience Programme
- PaTH Internship Incentive
- School Fees Allowance Group 2 or Board
- Work for the Dole
- Youth Disability Supplement when paid with Youth Allowance and 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.
Any tax deducted from payments that stopped on 20 March 2020, will be on your 2019-20 payment summary. These include:
- Newstart Allowance
- Wife Pension if you or your partner is of Age Pension age
- Widow B Pension.
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.
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 on the ATO website.
Page last updated: 21 December 2020
This information was printed 5 March 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.