Through Centrelink, the government provides financial and other assistance to people under a variety of programs. Some common payments you may have heard of are austudy, Newstart, youth allowance, parenting payment (single) and CDEP, the Community development employment program (one of the largest Indigenous programs in Australia). Depending on your circumstances you may be entitled to one or more of these payments.
Many Centrelink payments are assessable for income tax purposes and need to be included on your tax return.
Other government pensions, allowances and payments are exempt from income tax, for example, the disability support pension (when paid to a person who is below the age pension age).
Tax offset for government payments
If you receive a taxable government payment you may be entitled to a tax offset called the beneficiary tax offset. A tax offset will directly reduce the amount of tax you pay. The beneficiary tax offset is available if you receive more than $6,000 of an assessable government payment in a financial year (that is, the offset cuts in at the point you go over the tax-free threshold and would otherwise have to start paying tax). If you have other assessable income you may still need to pay some tax.
To claim the offset you must enter the payment you receive at the correct item on your tax return. The ATO will automatically calculate the offset for you when we process your tax return.
The offset will only reduce your tax, it will not reduce any Medicare levy you may have to pay.
You may also be entitled to the low income tax offset.