Can the ATO take my Centrelink payments?

What the policy actually says

The ATO's garnishee policy is published, and on this point it is short: it will not garnishee Centrelink or Department of Veterans' Affairs pensions or benefits unless requested to do so by the tax debtor. The reason is obvious. Income support is set at a level to cover basic living costs, and taking part of it would push people into the serious hardship the ATO is supposed to avoid creating.

That policy covers the payment itself. It does not stop the ATO from pursuing the debt in other ways, and it does not make the debt go away. Interest keeps running at 11.43% a year, and any refund is still offset.

Where Centrelink recipients still get caught

• Refund offsetting. If you lodge a return and are due a refund, the ATO is required to apply it to your tax debt first. See can the ATO keep my tax refund.
• A mixed bank account. A garnishee notice tells the bank to pay from your balance. The bank does not know which dollars came from Centrelink. If you also have wages, business income or savings in the same account, the notice can catch the lot. Contact the ATO straight away, explain that Centrelink money was taken, and ask for it to be released.
• The reverse direction. Services Australia can recover a Centrelink debt from your tax refund, and it can reduce your payments for its own debts. That is not the ATO acting, but it feels the same.

The ATO's collection tools reach money before anything else, and our guide to what the ATO can reach shows how far away the serious steps are for someone on income support with no other assets.

Options if you are on Centrelink with a tax debt

Being on income support with a tax debt usually means one of three situations: a debt from an old business, a debt from casual or gig work that was never put aside, or a debt the ATO raised itself through a default assessment because returns were not lodged. The options differ.

1. Serious hardship release. Individuals and sole traders can apply to have income tax, PAYG instalments and related interest and penalties released where paying would leave them unable to afford basics. GST, PAYG withholding and super charge debts are excluded. Income support is strong evidence.
2. A small payment plan. The ATO will accept low instalments where that is all there is. It stops enforcement and can be reviewed if things change.
3. Fixing the figure. If the debt came from a default assessment, lodging the real returns often reduces it substantially.

Our page on being on Centrelink with an ATO debt works through which applies.

What to do next

1. If Centrelink money has been taken from your bank account, call the ATO on 13 11 42, say so, and ask for it to be released.
2. Check whether your debt is the kind that can be released for serious hardship, or whether it came from a default assessment you can correct by lodging.
3. If neither applies, ask about the smallest payment plan the ATO will accept so the debt stops escalating.

More questions: 21 What the ATO can and can't do questions answered · Full guide: Can the ATO take my house?