How Centrelink turns your profit into fortnightly income
If you are a sole trader, subcontractor or partner and get a Centrelink payment, Services Australia assesses your business profit, not your sales. You send a profit and loss statement covering about 3 months, on the SU580 form or from your accountant. Centrelink adds back the costs it does not allow, then divides the profit by the number of fortnights in the period. It reassesses every 3 months until you have a tax return covering a full year of trading.
The costs it adds back are the ones the ATO allows but the Social Security Guide does not: super for yourself, the instant asset write-off and simplified pool depreciation, entertainment, private health and personal life insurance, losses from earlier years, and any "wage" you pay yourself. It does allow depreciation under Division 40, so that comes off instead. The Centrelink profit and loss statement guide goes through the SU580 and getting each figure out of Xero.
A worked example: a landscaper's quarter
Mia is a sole trader landscaper in Queensland, registered for GST. Her Xero Profit and Loss for 1 July to 30 September (13 weeks) shows a net profit of $9,550 after a $3,000 instant asset write-off on a new mower, $1,500 of super for herself and $250 of client lunches. Her accountant's schedule gives $190 of Division 40 depreciation on the mower for the quarter. (Made-up figures to show the arithmetic.)
| Amount | |
|---|---|
| Net profit in Xero | $9,550 |
| Add back: write-off $3,000 + own super $1,500 + entertainment $250 | +$4,750 |
| Take off: Division 40 depreciation | −$190 |
| Profit for Centrelink | $14,110 |
| Fortnightly: $14,110 ÷ 6.5 | $2,171 |
The income Centrelink sees is 48% higher than her accounts' profit. Had she copied $9,550 onto the form, her payment would have been worked out on about $1,469 a fortnight instead of $2,171, and the difference can come back later as a debt. Press "Load the worked example" above to see it in the calculator.
Before you send the SU580
- Reconcile the bank first. An unreconciled line is a sale or a cost missing from the report. Why your Xero bank balance does not match covers the usual causes.
- Use the exact dates the statement covers, and say whether the figures are on a cash or accrual basis. Cash vs accrual in Xero shows how far apart they can be.
- No accounting software? The free profit and loss sheet adds up a quarter's income and expenses and downloads a spreadsheet. Its total is your accounting profit: make the add-backs here before you copy it onto the form.
- A landlord or lender asking instead? They want the accounting profit, not Centrelink's: see the profit and loss statement for the self-employed.
- Tell Centrelink within 14 days if your business income changes a lot, rather than waiting for the next quarter.
Questions
- How does Centrelink work out fortnightly income from a profit and loss?
- It averages your business profit over the period the statement covers. A 13-week quarter is 6.5 fortnights, so a quarter's adjusted profit of $14,110 is 14,110 ÷ 6.5 = about $2,171 a fortnight. Services Australia does its own assessment; this calculator shows the same sum so the figure is not a surprise.
- Why is my Centrelink profit higher than my accounts?
- Centrelink allows fewer deductions than the ATO. Super for yourself, the instant asset write-off and simplified pool depreciation, entertainment, private health and personal life insurance, losses from earlier years and any "wage" paid to yourself all go back on. Depreciation under Division 40 is allowed, so that comes off instead.
- What is Division 40 depreciation?
- The general depreciation rules in Division 40 of the Income Tax Assessment Act 1997: an asset is depreciated over its effective life rather than written off at once. Centrelink allows it but not the small business concessions (Subdivision 328-D). Your accountant's depreciation schedule gives the figure for the period.
- Do I include GST?
- If you are registered for GST, leave it out of income and expenses, the way Xero's Profit and Loss already shows them. If you are not registered, your costs include the GST you paid, because you cannot claim it back.
- Who uses the SU580?
- Sole traders, subcontractors and partners in a partnership who started a business or whose business income changed. Businesses run through a private company or trust are assessed differently, and employees report their gross pay instead.
- Will this tell me my payment?
- No. It works out the business income Centrelink assesses, not your payment. Payment rates, income free areas and taper rates depend on the payment and your circumstances and change during the year; use the estimators on the Services Australia website for that.
- Are my figures stored or sent anywhere?
- No. The calculation runs in your browser. Nothing you type is saved or sent to our server or anyone else. The only exception is if you ask us to email you the result: then your email address and a short summary of the result are stored, and nothing is sent until you confirm.
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This calculator shows the arithmetic from the figures you enter, following the deductions described in the Social Security Guide. It is not advice on your payment, and Services Australia makes its own assessment: check the current SU580 notes before you send it. ReportPilot is not affiliated with Services Australia. Xero is a trademark of Xero Limited. This tool and ReportPilot are independent and are not made or endorsed by Xero.