Centrelink Income Test Guide

What Is the Centrelink Income Test?

The Centrelink income test is a means-testing formula that reduces your social security payment as your assessable income rises above a set “free area” threshold. Services Australia applies this test to every income-support payment including JobSeeker Payment, Youth Allowance, Age Pension, Parenting Payment, Austudy, and Disability Support Pension.

The test operates on a fortnightly reporting cycle. You report your gross employment income every 14 days, and Centrelink calculates your adjusted payment before the next pay run. Two separate means tests exist — the income test and the assets test — and your payment is set at the lower result of the two. Understanding both is essential for estimating your actual entitlement.

The Australian tax calculator treats Centrelink payments as assessable income for tax purposes. Your payment amount directly affects your take-home pay, so knowing the income test thresholds helps you plan part-time work alongside your benefit.

How Does the Income Test Work?

The Centrelink income test reduces your payment by a fixed number of cents for every dollar you earn above the free area — this reduction rate is the taper rate. Below the free area, your payment remains at the full maximum rate with no reduction.

Most working-age payments use a two-stage taper. JobSeeker Payment, for example, applies a 50-cent taper for each dollar earned between $150 and $256 per fortnight, then increases to a 60-cent taper for every dollar above $256. The Age Pension uses a single 50-cent taper above its free area of $204 per fortnight for singles.

Your payment reaches $0 (the “cut-off point”) once your income exceeds the level where the taper fully absorbs the maximum payment. For a single JobSeeker recipient on the maximum rate of approximately $762.70 per fortnight, the income cut-off sits at roughly $1,337 per fortnight. Earning above that amount means your fortnightly JobSeeker drops to nil.

What Is the Income Free Area?

The “Income Free Area” is the amount you earn each fortnight before any reduction applies. For JobSeeker and Youth Allowance (job seeker), the free area is $150 per fortnight. For Age Pension (single), it is $204 per fortnight. For Parenting Payment Single, it is $202.60 per fortnight. Earning at or below the free area means your Centrelink payment stays at the full rate.

What Is the Taper Rate?

The taper rate determines how quickly your payment reduces per dollar of income above the free area. A 50-cent taper means you lose 50 cents of payment for every $1 earned. A 60-cent taper means you lose 60 cents. Parenting Payment Single uses a gentler 40-cent taper, reflecting the policy goal of encouraging single parents to re-enter the workforce. You can use our Income Tax Calculator to estimate the combined effect of income tax and taper-rate reductions on your take-home pay.

What Are the Income Test Thresholds for FY2025-26?

Centrelink income test thresholds vary by payment type, relationship status, and number of dependants. The table below lists the current free areas, taper rates, and approximate fortnightly cut-off points for the major payments in the 2025-26 financial year.

Thresholds are indexed on 20 March and 20 September each year in line with CPI movements. The figures above reflect the rates effective from 20 March 2026. Couple thresholds represent combined income unless otherwise noted.

What Counts as Assessable Income for Centrelink?

Assessable income for Centrelink purposes includes all gross employment income, investment returns, and certain other receipts — broadly any money that increases your capacity to support yourself.

Income Types That Are Counted

• Employment income — wages, salary, commissions, bonuses, overtime, and penalty rates paid by an employer
• Self-employment income — net business profit after allowable deductions
• Investment income — bank interest, share dividends, managed fund distributions, and rental income
• Overseas income — any income earned from overseas sources, converted to AUD
• Superannuation income streams — account-based pensions and annuity payments if you are of Age Pension age
• Deemed income — income assumed from financial assets using the deeming rate, regardless of actual returns earned
• Director fees and trust distributions — payments received as a company director or trust beneficiary

Income Types That Are Not Counted

• Lump-sum leave payments on termination of employment
• Child support payments you receive
• Certain compensation payments (e.g., workers' compensation periodic payments are treated separately)
• Family Tax Benefit payments
• Rent Assistance
• Energy Supplement payments

Salary sacrifice arrangements require special attention. Any pre-tax salary sacrifice to superannuation reduces your gross employment income reported to Centrelink, potentially keeping your payment higher. Our Salary Sacrifice Guide explains how concessional contributions interact with both employer SG rate obligations and Centrelink reporting.

How Does the Assets Test Interact with the Income Test?

Services Australia applies both an income test and an assets test to your Centrelink claim, then pays you the lower of the two results. You must pass both tests to receive the full payment rate.

Assets above the full-pension limit reduce the Age Pension by $3.00 per fortnight for every $1,000 of assets above the threshold (single rate) or $1.50 each for couples. The assets test does not count your principal home, but it does count superannuation balances if you have reached Age Pension age.

For working-age payments such as JobSeeker and Youth Allowance, separate lower asset limits apply. A single homeowner on JobSeeker faces an asset limit of approximately $314,000, while a non-homeowner's limit is roughly $566,000. Understanding how both tests interact helps you decide whether to draw down savings, adjust your superannuation balance through Superannuation Calculator modelling, or restructure investments before claiming.

How Much JobSeeker Do You Keep with Part-Time Work?

A single person on JobSeeker Payment with no children who earns $600 per fortnight from part-time work retains approximately $556.70 of their JobSeeker payment, giving a combined fortnightly income of $1,156.70.

Here is the step-by-step calculation:

1. Maximum JobSeeker rate (single, no children): $762.70 per fortnight
2. Gross fortnightly employment income: $600
3. First $150 (free area): no reduction — $0 reduction
4. $150 to $256 ($106 at 50c taper): $106 x 0.50 = $53.00 reduction
5. $256 to $600 ($344 at 60c taper): $344 x 0.60 = $206.40 reduction
6. Total reduction: $53.00 + $206.40 = $259.40
7. Adjusted JobSeeker: $762.70 − $259.40 = $503.30

If the recipient has accumulated Working Credits, up to 48 credits per fortnight can offset employment income, effectively increasing the free area. In this example, using 48 credits would reduce assessable income from $600 to $552, lowering the total reduction and increasing the retained JobSeeker amount.

To estimate the income tax payable on your combined JobSeeker and employment income, use our Take-Home Pay Calculator. Centrelink payments are included in your assessable income for ATO purposes and affect your income tax brackets for FY2025-26.

How Do You Report Income to Centrelink?

You report your gross employment income to Centrelink every 14 days on your designated reporting day, using one of four channels: the myGov app, the Centrelink online account, the Express Plus app, or by phone on 13 28 50.

Step-by-Step Reporting Process

1. Log in to myGov and navigate to your linked Centrelink account
2. Select “Report Employment Income” from the Payments and Claims menu
3. Enter your gross income for the reporting period — this is your total pay before tax, Medicare levy, or salary sacrifice deductions
4. Declare any other income such as bank interest, rental income, or overseas income received during the fortnight
5. Confirm hours worked — Centrelink requires both the dollar amount and the total hours for mutual obligation tracking
6. Submit your report before 7:00 pm AEST on your reporting day to avoid payment delays

Failing to report on time suspends your payment. If you miss your reporting day, submit as soon as possible — late reports are processed the next business day. Deliberately underreporting income results in a Centrelink debt, and Services Australia applies a 10% recovery fee on debts caused by false reporting.

Employers now report payroll data to the ATO through “Single Touch Payroll” (STP), and Centrelink cross-references this data against your self-reported figures. Discrepancies trigger automated reviews. Our Understanding Your Payslip guide explains which payslip figure to use when reporting to Centrelink.

What Changed in the Centrelink Income Test for FY2025-26?

The 2025-26 financial year brought CPI-indexed increases to free-area thresholds and maximum payment rates, effective from 20 September 2025 and 20 March 2026.

The taper rates themselves — 50 cents, 60 cents, and 40 cents depending on payment type — did not change. The Stage 3 income tax cuts that took effect on 1 July 2024 continue to lower income tax obligations for most Australians, meaning higher after-tax income from employment alongside Centrelink payments. Review the updated Tax Brackets Guide to see how these cuts affect each income tax bracket.

How Does Working Credit Help You Keep More of Your Payment?

Working Credit is a Centrelink mechanism that lets you accumulate credits during low-income fortnights and use them to reduce assessable employment income during higher-income fortnights, effectively raising your income free area temporarily.

You earn 1 Working Credit for every dollar your employment income falls below the income free area in a given fortnight. The maximum balance is 1,000 credits. When you earn above the free area, Centrelink automatically deducts credits from your balance at up to 48 credits per fortnight, reducing your assessable income dollar-for-dollar.

Working Credit Example

A Youth Allowance recipient who earns $0 for 10 fortnights accumulates 1,000 credits (capped). In fortnight 11, they earn $400. Without Working Credits, the income test reduces their payment by $125 (the standard taper calculation). With 48 credits applied, the assessable income drops to $352, reducing the payment cut by $24 and delivering a higher combined income for that fortnight.

Working Credit applies only to employment income — it does not offset investment income, self-employment income, or deemed income from financial assets. Students receiving Youth Allowance who also earn from casual work benefit significantly from this system, particularly during semester breaks when hours increase.

Related Resources

These tools and guides help you model the combined impact of Centrelink income testing, Australian income tax, and employer obligations on your take-home pay and salary planning.

• Take-Home Pay Calculator — estimate your after-tax income including Centrelink payments in your total assessable income
• Tax Brackets Guide — view the FY2025-26 marginal tax rates that apply to your combined employment and Centrelink income
• Income Tax Calculator — calculate PAYG withholding on your employment income, including the Medicare levy and surcharge thresholds
• Superannuation Calculator — check how your employer's SG rate contributions affect your retirement savings alongside Centrelink entitlements
• Parental Leave Pay Guide — understand government-funded parental leave and how it interacts with Centrelink family payments
• Low Income Tax Offset Guide — find out if you qualify for the LITO, which reduces tax for Australians earning under $66,667

Frequently Asked Questions