Summary Overview
Make sure you know how the test works, and that you consider your Adjusted Taxable income. If you are planning a baby and are within the income test time period you may make adjustments to quaualify.
To qualify for Parental Leave Pay, you must pass the income test. The individual cap is $180,007 for the 2025-2026 financial year. If your individual income exceeds this, Centrelink will assess you under the combined family income cap of $373,094. The assessment is based on the financial year prior to the birth or claim date, using your Adjusted Taxable Income (ATI).
Key Requirements:
- ✓ Individual Adjusted Taxable Income (ATI) must be <= $180,007.
- ✓ If individual ATI is exceeded, combined family ATI must be <= $373,094.
- ✓ Assessment uses ATI from the financial year prior to the birth or claim.
Common Misconceptions
Myth
"The income test looks at my current income when the baby is born."
Reality
It looks strictly at the prior financial year's Adjusted Taxable Income. Current job losses or promotions do not change this benchmark.
Myth
"Income test is based on gross salary only."
Reality
It is based on Adjusted Taxable Income, which adds back fringe benefits, super contributions, and investment losses to your taxable income.
Practical Examples
Scenario
Danielle earned $190,000 in the prior financial year, but her partner did not work.
Outcome
She passes the income test.
Her individual income failed the individual cap, but their combined family income ($190,000) was well under the $373,094 family cap.
Action Checklist
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Identify the correct tax year — Check which financial year's tax return will be used based on your baby's expected birth date.
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Calculate Adjusted Taxable Income — Use your Notice of Assessment and add back reportable super contributions and fringe benefits to find your ATI.