Simple way Aussies on Centrelink can avoid a tax debt

Services Australia has reminded Aussies tax can be deducted from their payments.

A composite image of a Centrelink sign with logo and tax return forms.
Centrelink recipients can request to have their tax deducted from payments. (Source: AAP)

Many Aussies found themselves getting hit with a tax debt instead of a tax refund this financial year, but there is a way for Aussies on Centrelink to avoid the same fate next year.

Services Australia said Centrelink recipients could request to have their tax deducted from eligible payments.

“If you get an eligible taxable payment from us, you can ask us to deduct tax from your payment to help you avoid a tax debt,” Services Australia said.

“We don’t automatically deduct tax from most eligible payments. But you can ask us to.”

What payments can have tax deducted?

Services Australia said Aussies could ask to have tax deducted if they received any eligible taxable payment, income from employment or self-employment or any other taxable income.

“If you ask us to deduct tax from your payment, you can update or cancel it at any time,” Services Australia said.

You can request tax be deducted from any payments, including payment for raising kids, living arrangements, ageing, work, education or health and disability. You can see the full list here.

How can you ask for a tax deduction?

How you set up a voluntary tax deduction to cover tax depends on the payment you receive, Services Australia said.

You can only set up a deduction if both of these apply:

  • You receive an eligible taxable Centrelink payment

  • You must report your payment to the Australian Taxation Office as income at tax time

“You can ask us to deduct tax from your eligible taxable payment when you submit a claim,” Services Australia said.

“You need to make sure you tick the option to have tax deducted from your payment.”

Centrelink recipients can choose to have the tax deducted as either a percentage of their total taxable payments or as a set dollar amount.

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