Centrelink Debt – Paying It Off & Avoiding It in the Future

How To Pay Off Your Debt To Centrelink

Have you been receiving Centrelink and are now made aware that you owe a debt? In this article, Nifty has broken down the reasons you might owe Centrelink, how to rectify it, and how to avoid it in the future.

Why might you owe Centrelink money?

There are several reasons why you may owe Centrelink money. One of those may be that you forgot to claim any income you were earning. Therefore, Centrelink might have paid you more than you were entitled to. Another reason might be that you got a Centrelink cash advance and now you must repay the money you received. To learn about Centrelink loans, click here.

What do you do when you owe Centrelink money?

You may receive a notification from Centrelink saying that you owe money. It will often mean that you received more money than you should have been paid. You are likely to receive a letter from Centrelink explaining why they think you owe money. It will detail how much you owe, the due date to repay, and how you can repay the money.

What if you don’t think you owe Centrelink any money?

If you think Centrelink has made a mistake and that you shouldn’t owe any debt, you can appeal. There may be some circumstances where you owe the debt but you are told that you owe more than you owe. Some circumstances under which this could happen is when Centrelink says that you were in a couple but were, in fact, single or it says you were not a full-time student when you were indeed studying full-time.

How do you repay your debt while receiving Centrelink payments?

If you are receiving Centrelink payments, your debt will come out of your benefits. It will only slightly reduce your income by about 15% that will go towards paying off your debt.

How do you repay your debts if you are not receiving Centrelink payments?

Even if you aren’t receiving Centrelink benefits you will still be expected to repay your Centrelink debt. There are also consequences if you do not pay your Centrelink debt by the due date.

What happens if you don’t repay your debt to Centrelink?

If you are not receiving Centrelink benefits and you don’t repay your debt to Centrelink, you might have to pay interest on your debt. Alternatively, your debt could be referred to a debt collection agency. Your debt could also be claimed on your tax return. You may also be prohibited from travelling outside of Australia.

What happens if you can’t repay your debts?

If you can’t make any repayments, you could consider entering a debt agreement. It is a way of managing your debt and avoiding bankruptcy. It can be a way to pay off your debts and free up your finances, however, you are still expected to make the repayments on your debt agreement – this is part of the debt agreement.

How to manage your debts to Centrelink

Debt can happen to anyone, and having debt is often a normal and necessary part of life. Nevertheless, it is important to ensure you can manage your debt. Otherwise, if you let things get out of hand, this is where you can find yourself in trouble. Debt can easily spiral out of control if you don’t know how to manage it properly so here are some Centrelink debt recovery strategies to help you manage the debt that you have.

1. Outline what debts you have

It’s important to first establish how much you owe and whether you are paying interest to Centrelink.

2. Look at your expenses

This next step is an important part of budgeting and will help you to see clearly how much you can allocate to paying off your debts. Looking at your expenses will also allow you to identify if you can cut any unnecessary expenses out of your lifestyle and help you to prioritize the important expenses.

3. Make an action plan

Once you’ve worked out what you owe and what your expenses are, this is when you can create a plan of action. This can involve talking to Centrelink and clearly outlining what your responsibilities are. This will give you a good starting point, as it will give you a clear idea of what you owe and how you are going to go about repaying it. This may also involve getting free financial advice, which is always a good starting point. Here is a good resource for free debt advice.

How to avoid getting into Centrelink debt

Having to repay debts can be stressful and unpleasant. Especially when you receive a letter in the mail that is telling you that you owe money. How inconvenient! However, there are some steps you can take to avoid getting into this situation. The best way to do this is to keep Centrelink informed if your situation changes. That means if your living situation were to change, or if your income increases, you need to let Centrelink know.

Some of the income and assets details you will have to let Centrelink know about include:

  • Details about your savings
  • Any shares you may have
  • Details about managed investments or superannuation fund
  • Real estate assets you may own
  • Other assets such as boats, cars, or caravans
  • Other income such as lump-sum payments, grants, scholarships, and leave payments

To let Centrelink know about this information, you will need to log into your Centrelink account via myGov and click on the income and assets tile on the page. This will allow you to update all your details in relation to your finances. This will allow Centrelink to automatically adjust the amount that you are entitled to. It means you won’t be paid more than you are entitled to, and you won’t get an unexpected letter in the mail stating that you owe a debt to Centrelink.

Need any advice or support?

If you find yourself in an unmanageable debt situation you can call the Centrelink debt line on this number 1800 076 072.

What income do you have to report to Centrelink?

While you are receiving Centrelink benefits, if you were to earn any other income, you will have to report it to Centrelink, and so will your partner if you are in a couple. This is so that you will be paid the right amount and won’t get overpaid. This will inevitably avoid you getting into debt with Centrelink.

You’ll need to let Centrelink know how many hours you worked and the hourly pay rate you worked for. It’s important that the amount that you earn matches your reporting dates. Therefore, it’s important to note down your hours each time you work. One useful tool to calculate your hours is on the Centrelink app.

Other income to report to Centrelink

There are several forms of income that you must report to Centrelink if you receive them. These include:

Overtime or penalty rates:

If you work any overtime, you will also be required to report these hours to Centrelink. Keep track of any overtime hours you work, and find out what your work’s penalty rates are so that you can accurately record what overtime you have earned.

Leave payments:

If you take any paid leave from work you will also have to report this to Centrelink. This will also include any sick leave.

Income from more than one job:

If you have multiple jobs, it’s important that you report the income that you earn from each job, separately.

Severance or redundancy payments:

If you leave your job and are given a severance or redundancy payment you’ll be required to report this to Centrelink too.


In addition, if you make any voluntary superannuation payments you will be required to report this, as it is counted as assemble income, otherwise known as income from investments.

Ongoing income:

If your income reduces your Centrelink income to zero for more than 6 fortnights in a row, your payments might get cancelled.

Other things you need to inform Centrelink about

You must also let Centrelink know if you have any other changes to your circumstances. To inform Centrelink of any of these changes you can access your myGov account. Alternatively, you can go to your nearest Centrelink service centre and speak to someone in person. Matters you will need to inform Centrelink about include:

  • Personal and contact details
  • Bank details
  • Relationship status
  • Care arrangement i.e. for your children, or elderly parents
  • Work status
  • Gender identity
  • Accommodation details
  • Living arrangements i.e. whether you are single or living with anyone else
  • If you are leaving the country permanently or temporarily
  • You get a lump sum payment
  • Your partner’s income and assets change
  • If you have started or finished studying

It’s important to inform Centrelink about any of these details because changes in your circumstances could have an impact on what you are entitled to receive from Centrelink.

How to budget when you’re on Centrelink

If you do find yourself owing a debt to Centrelink, as mentioned above, one of the best things to do is look at your expenses by creating a budget. Creating a budget can take a little time to work out at first, but it’s worth doing because it will help you feel organised and in control of your personal finances. So, how do you create a good budget when you are on Centrelink?

Here is a step-by-step guide on how to create a budget so you can repay your Centrelink debt. Here is another useful budgeting tool

Step 1

Work out what your monthly income is: it might be a combination of both your Centrelink benefits as well as any employment income from you and/or your partner if you are in a couple. This is your starting point because it will show you that you can’t spend any more than this. All your expenses and Centrelink debt repayments must all be less than your total income.

Step 2

Work out your necessary expenses: these will be your monthly fixed costs such as rent, utility bills, internet, mobile phone costs, food costs, petrol, insurance, school fees, or medical costs. These are the expenses that are necessities and you know that they will stay the same. If you have to repay a Centrelink debt, your repayment amounts can fall under the necessary expenses list.

Step 3

Work out your unnecessary costs: these will be things like takeaway, alcohol, cigarettes, snacks, coffees, and other entertainment expenses. This will allow you to look at what things are not necessary that you might be able to cut out and reduce your expenses. However, it’s important not to cut all your entertainment costs out because you still want to enjoy your life. Just reduce the amount you spend on unnecessary purchases.

Step 4

Work out how much you have leftover: once you have worked out your income and your total expenses you can do a calculation to see whether any income is leftover. If you don’t have any income left over, it will show you that you need to cut down on some of your expenses. If you do have any income leftover, this is what will go towards your debt repayments. As you consistently repay your debts, the amount you owe will decrease and before you know it you will be debt-free.

Step 5

Start saving: once you have paid off all your debts, the money that originally went to paying off debt can now go towards your savings.

At the end of the day, if you do have Centrelink debt, it’s not the end of the world. You just need to make sure you get organised and face your debts head-on. If you bury your head in the sand, the situation could get worse. But to avoid owing money to Centrelink in the first place you must make sure that you always report your income or any changes to your circumstances. 

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