Paying tax on a Centrelink payment

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 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.

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 deductions depends on the payment you get.

If you get this payment	Where to set up your tax deduction
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 Newstart Allowance Parenting Payment Partner Allowance Sickness Allowance Special Benefit Widow Allowance Wife Pension – if you or your partner is of Age Pension age Youth Allowance – if you’re 16 years or older	Set up your tax deduction: using your Centrelink online account through myGov on your Express Plus Centrelink mobile app at a self service terminal at a service centre at a service centre
Disability Support Pension – if you’re Age Pension age	Set up your tax deduction: using your Centrelink online account through myGov at a self service terminal at a service centre at a service centre
Disaster Recovery Allowance Ex-gratia Income Support Allowance – where the payment has been deemed taxable Farm Household Allowance Income Recovery Subsidy Widow B Pension	Set up your tax deduction at a service centre
Parental Leave Pay – Department of Human Services delivered payment only Dad and Partner Pay	Set up automatically during your claim process. You can make changes: using your Centrelink online account through myGov at a service centre

Sometimes you’ll get payments added onto your main Centrelink payment. The following add on payments count towards the total amount that we use to deduct your tax:

Additional Assistance - regular
Basic Pension Supplement
Bereavement lump sum 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.

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: 17 February 2020