Tax Benefits and Maintenance Exemption for Grandparent Carers in Australia

Grandparent carers often worry about how their carer payments affect their tax return — and separately, whether Centrelink will make them pursue child support from the birth parents. Both concerns have straightforward answers that most carers never hear about until tax time or a Centrelink review catches them off guard.

Tax-Free Carer Payments

The Australian Taxation Office (ATO) exempts most carer payments from assessable income. You do not need to declare the following on your tax return:

• Family Tax Benefit Parts A and B — tax-free
• Double Orphan Pension — tax-free
• Carer Allowance — tax-free (the supplement paid to carers of children with disability)
• Queensland state statutory carer allowances — the fortnightly caring allowance, HSNA, and CSNA are tax-exempt reimbursements

Payments that are taxable:

• Age Pension — taxable, but the tax-free threshold and senior tax offsets mean many pensioners pay no tax
• Carer Payment — taxable if you or the person you care for is Age Pension age or older; it is not taxable if neither of you is Age Pension age

The practical effect is that the bulk of the money you receive as a kinship carer is tax-free. Your fortnightly Centrelink statement or myGov payment summary shows which payments are taxable and which are exempt.

The FTB End-of-Year Supplement

FTB Part A and Part B both include end-of-year supplements ($970.90 per child for Part A, $478.15 per family for Part B) paid after Services Australia reconciles your estimated income against your actual tax return. To receive the supplements:

1. Lodge your tax return on time (or notify Services Australia if you do not need to lodge)
2. Ensure your income estimate was reasonably accurate throughout the year

If your actual income was significantly higher than your estimate, you may need to repay some FTB rather than receiving a supplement. Update your income estimate through myGov whenever your circumstances change.

The Maintenance Action Exemption

If you or your partner care for a child from a past relationship, Services Australia may require you to take "reasonable maintenance action" — usually applying for a child support assessment — to receive more than the base rate of FTB Part A. If you cannot apply for or collect child support, contact Services Australia to discuss whether an exemption applies.

For kinship carers, pursuing child support may be inappropriate or unsafe in some circumstances. Explain your situation to Services Australia if applying for or collecting child support could put you or the child at risk.

The maintenance action test exemption can remove this requirement if Services Australia approves it. Examples of circumstances that may qualify include:

• You have experienced, or fear, family and domestic violence or other abuse
• The child's parentage is unknown

Contact Services Australia and explain why applying for or collecting child support is difficult or unsafe. They will assess whether an exemption applies. You may also call the Grandparent Adviser line on 1800 245 965 for guidance. If granted, the exemption addresses the maintenance-action requirement; your FTB Part A rate still depends on your care, income, and other eligibility rules.

Centrelink Income Estimates and Tax Returns

If you receive FTB as a fortnightly payment (rather than a lump sum at year-end), Services Australia pays based on your estimated household income. At the end of the financial year, they reconcile against your actual ATO tax return.

Common pitfalls for grandparent carers:

• Forgetting to update estimates when income changes during the year
• Not lodging a tax return and not telling Centrelink you are a non-lodger (either one must happen for reconciliation)
• Counting tax-exempt payments as income in your estimate (do not — only count taxable income like the Age Pension, superannuation withdrawals, or employment income)

For a complete walkthrough of the payments, tax rules, and exemptions available to kinship carers in Queensland, our support guide covers each one in the order you need to deal with them.

See more Queensland guides →