How the Centrelink Income Test Works
Centrelink reduces a payment above a free area, using a taper rate set for that payment type. This guide explains that mechanism for JobSeeker, Age Pension, Youth Allowance, Austudy and Parenting Payment. It does not estimate your payment or your eligibility.
What does the Centrelink income test actually do?
The income test compares your assessable income each fortnight against a threshold called the free area. Earn under the free area and your payment is not reduced at all. Earn over it and your payment drops by a set number of cents for every dollar above the free area, a rate Centrelink calls the taper. Keep earning and eventually you cross the cut-off point, where the taper has reduced the payment to nil.
Three numbers describe every payment's income test: the free area, the taper rate, and the cut-off point. All three are set separately for JobSeeker Payment, Age Pension, Youth Allowance, Austudy and Parenting Payment, and each is reviewed on three dates a year, 20 March, 1 July and 20 September. The tables below give the FY2026-27 figures for each, with the date they were last confirmed by Services Australia.
Why gross and net create a gap you actually feel
Centrelink counts the number on your payslip before tax. You live on the number after it.
A $40,000 salary produces about $36,505 in take-home pay for 2026-27, once income tax and the Medicare levy come out, or roughly $1,404a fortnight. That net figure, not the $40,000 gross figure, is what reaches your bank account. Centrelink's income test runs on the other number entirely: the gross fortnightly amount from your payslip, before any of that comes out. Two different numbers, both correct, both describing the same pay.
That gap is the reason an extra shift or a small pay rise can feel worse than it should. Your payment is cut on the full gross amount, while tax quietly takes its own slice of the same dollar before it reaches you. Both reductions are real and both happen at once, which is why the arithmetic below rarely matches the arithmetic in your head.
| Extra gross this fortnight | Payment cut (60c taper) | Extra wages after tax | Real change in your account |
|---|---|---|---|
| $100 | $60 | $85 (15% marginal rate) | $25 |
| $100 | $60 | $70 (30% marginal rate) | $10 |
Illustrative only, for a JobSeeker recipient (single, not a principal carer) already earning above $256 a fortnight, where the taper is a flat 60 cents per dollar. Marginal tax rates are the 2026-27 resident brackets. Your own withholding depends on your full pay and any other income.
Run the extra $100 through the maths and only $25 to $10 of it genuinely lands in your account, once the taper and tax have both taken their share. Neither the taper nor PAYG withholding is optional, and neither is a penalty; they are two separate systems reading the same gross dollar. Working out your own net figure, with your own hours and any HECS or private cover settings, is what our gross to net calculator and salary calculatorare for. Working out what that means for your actual payment is what Services Australia's Payment Finder is for, not this page.
Income free areas and taper rates by payment, 2026-27
What you can earn before a payment reduces, and how fast it reduces above that.
| Payment and situation | Free area per fortnight | Reduction above the free area |
|---|---|---|
| JobSeeker, single, not a principal carer | $150 | 50c per dollar to $256, then 60c per dollar |
| JobSeeker, single, principal carer of a child under 16 | $150 | 40c per dollar above $150 |
| Youth Allowance, job seekers | $150 | 50c per dollar to $250, then 60c per dollar |
| Youth Allowance, students and Australian Apprentices | $539 | 50c per dollar to $646, then $53.50 plus 60c per dollar |
| Austudy | $539 | 50c per dollar to $646, then $53.50 plus 60c per dollar |
| Age Pension, standard rate, single | $226 | 50c per dollar above $226 |
| Age Pension, standard rate, couple combined | $396 | 25c per dollar above $396 |
| Age Pension, transitional rate, single | $226 | 40c per dollar above $226 |
| Age Pension, transitional rate, couple combined | $396 | 20c per dollar above $396 |
| Parenting Payment, single, 1 child | $232.60 | 40c per dollar above the free area |
| Parenting Payment, single, 2 children | $257.20 | 40c per dollar above the free area |
| Parenting Payment, single, 3 children | $281.80 | 40c per dollar above the free area |
Parenting Payment adds $24.60 a fortnight to the free area for each child beyond three. Age Pension and Parenting Payment figures were last confirmed by Services Australia on 1 July 2026, JobSeeker on 10 July 2026, and Youth Allowance and Austudy on 3 June 2026, all current for FY2026-27. Transitional Age Pension rates apply to pensioners with dependent children, who can also earn an extra $24.60 a fortnight per child before the reduction applies.
Parenting Payment for a partnered parent runs differently again. If your partner is not on a Centrelink pension, your own free area is $150 a fortnight (50c to $256, then 60c per dollar) and your partner's income has its own $1,415 free area, taxed at 60c per dollar above that. If your partner receives a pension, the test switches to a combined-income scale: no reduction to $300 a fortnight, 25c per dollar from $300 to $512, then $53 plus 30c per dollar above $512.
Where does each payment cut off?
Above this fortnightly income, the taper has reduced the payment to nil.
| Payment and situation | Fortnightly income cut-off |
|---|---|
| JobSeeker (varies by situation) | $1,530.17 to $2,815.75 |
| Youth Allowance, job seekers (varies by situation) | $871.34 to $1,943.84 |
| Youth Allowance, students and apprentices (varies by living arrangement) | $1,261.50 to $1,995.84 |
| Austudy (varies by circumstances) | $1,697.17 to $1,995.84 |
| Age Pension, standard rate, single | $2,627.80 |
| Age Pension, standard rate, couple combined | $4,016.80 |
| Age Pension, standard rate, couple apart due to ill health | $5,199.60 |
| Age Pension, transitional rate, single | $2,670.25 |
| Age Pension, transitional rate, couple combined | $4,340.00 |
| Age Pension, transitional rate, couple apart due to ill health | $5,284.50 |
| Parenting Payment, single, 1 child | $2,898.35 |
| Parenting Payment, single, 2 children | $2,922.95 |
| Parenting Payment, single, 3 children | $2,947.55 |
Austudy recipients aged 22 or over who previously received another income-support payment have a separate cut-off of up to $1,904.00. Parenting Payment adds $24.60 to the cut-off for each child beyond three, matching the free area increase. Ranges reflect different personal circumstances within the same payment, not a single sliding scale.
None of these figures says what you would be paid at any income between the free area and the cut-off. They mark the two ends of the taper, not the amounts in between, which depend on your maximum payment rate, worked out from your own circumstances by Services Australia.
How do Working Credit and the Income Bank work?
Both let irregular income average out, instead of every high fortnight hitting the taper in full.
Working Credit is available to JobSeeker Payment and Youth Allowance (job seekers) recipients. It builds up in fortnights where your income, including employment income, is below $48. Once you have Working Credit banked, it offsets income above the free area before the taper applies, softening the reduction on a fortnight where you happen to earn more. Services Australia does not publish a single flat accrual formula for the general public beyond that $48 threshold, so treat the mechanism, not a specific balance, as the takeaway here.
The Income Bank does the same job for Youth Allowance (students and Australian Apprentices) and Austudy. It credits the gap between $539 a fortnight and your actual income whenever you earn less than $539, and those credits are drawn down first, before your payment reduces, in a fortnight where you earn more. The maximum balance is 13,500 credits for students and 1,000 credits for Australian Apprentices.
| Mechanism | Applies to | Accrual trigger | Maximum balance |
|---|---|---|---|
| Working Credit | JobSeeker, Youth Allowance (job seekers) | Fortnightly income below $48 | Not published by Services Australia |
| Income Bank | Youth Allowance (students), Austudy | Fortnightly income below $539 | 13,500 credits (students), 1,000 (apprentices) |
Neither mechanism is an extra payment. Both simply change when the taper bites, by letting quiet fortnights build a buffer against busier ones. Source: Services Australia, How an Income Bank works, last confirmed 1 January 2026.
How does the Work Bonus reduce assessed income?
It shrinks the employment income Centrelink counts, before the income test even runs.
The Work Bonus credits $300 to an eligible Age Pension recipient's account each fortnight, up to a maximum balance of $11,800. That balance is then used to reduce Work Bonus-eligible employment income, wages, salary and self-employment income, before the income test is applied. A fortnight where employment income is under $300 is reduced to zero for income test purposes, and the unused amount adds to the balance instead.
Like Working Credit and the Income Bank, the Work Bonus is not an extra payment. It is a reduction applied to the income figure that goes into the test, and eligible pensioners get it automatically, with no separate application. Source: Services Australia, How a Work Bonus works, last confirmed 14 February 2025, an older date than the other tables on this page; check the source link below if you need the current wording.
What counts as employment income, and what does not?
The list is broader than most people expect, and a few common payments sit outside it.
| Counts as assessable employment income | Does not count |
|---|---|
| Salary, wages and commissions | Superannuation pension income |
| Allowances and loadings | Injury compensation |
| Piece work | Insurance payouts related to employment |
| Fringe benefits | Lump sum leave payments when employment ends |
| Salary sacrifice amounts | |
| Directors' fees | |
| Bonus payments | |
| Other work-related lump sums |
Source: Services Australia, Employment income, and Centrelink online account help, Report employment income, both last confirmed 1 July 2026. You must report the gross figure from your payslip, not the amount you actually banked.
Reporting itself runs on two tracks. Most recipients have a scheduled reporting date and submit their income by then. If you are not on scheduled reporting, you must tell Centrelink within 14 days of being paid. Either way, the number you report is gross income, which is why the gross versus net gap covered earlier applies to every report you make.
How is salary sacrifice treated?
As if you had been paid the cash yourself, even though you never touched it.
If you salary sacrifice part of your wage into super, a novated lease or health insurance, that amount is still counted as assessable income for the Centrelink income test. Services Australia treats it as though it had been paid to you in cash, then redirected, rather than as income you never received. Sacrificing salary lowers what the ATO taxes; it does not lower what Centrelink assesses.
Reportable superannuation contributions your employer makes on your behalf, separate from ordinary salary sacrifice, can also be relevant to Centrelink's assessment. Services Australia's current published guidance does not spell out the exact treatment of every kind of reportable super contribution for FY2026-27 clearly enough for this page to state it as fact. If reportable super contributions apply to your pay, confirm the treatment directly with Services Australia rather than relying on a general rule here.
This page explains the mechanism, not your entitlement
Free areas, taper rates and cut-off points tell you how the test works. They cannot tell you your payment rate, your assets test position or whether you qualify at all.
Open Services Australia's Payment FinderFor the other half of the picture, what a wage or a pay rise does to your actual bank balance after tax, use the gross to net calculator, the salary calculator or the income tax calculator. None of them touch your Centrelink payment. They show the net side of the same gross dollar the income test assesses, which is the genuinely useful comparison this page can make and Services Australia's tools cannot.
Centrelink income test questions
Where these figures come from
- Services Australia, Income test for JobSeeker Payment, last confirmed 10 July 2026.
- Services Australia, Income test for Age Pension, last confirmed 1 July 2026.
- Services Australia, Personal income test for Youth Allowance for job seekers, last confirmed 3 June 2026.
- Services Australia, What the personal income test is for Youth Allowance for students and Australian Apprentices, last confirmed 3 June 2026.
- Services Australia, Income tests for Austudy, last confirmed 3 June 2026.
- Services Australia, Income and assets tests for Parenting Payment, last confirmed 1 July 2026.
- Services Australia, How an Income Bank works, last confirmed 1 January 2026.
- Services Australia, How a Work Bonus works, last confirmed 14 February 2025.
- Services Australia, Centrelink online account help, Report employment income, last confirmed 1 July 2026.
- Services Australia, Employment income, Age Pension, last confirmed 10 March 2026.
- Services Australia, Income, Age Pension, and What adjusted taxable income is.
Last verified 27 July 2026. Free areas, taper rates and cut-off points are reviewed on 20 March, 1 July and 20 September each year; figures here reflect the most recent review before that date. Gross-to-net figures are computed live from this site's 2026-27 tax engine.
Written by Marcus Kelleher, editor, pay and tax contentat pay-calculator.au. He works from Services Australia and ATO source documents and is not a registered tax agent or a Centrelink representative. This page explains how the income test counts employment income. It is general information, not advice about your entitlement, and it is not a substitute for Services Australia's own assessment of your circumstances.