FTB Income Test Thresholds for 2026-27: What Australian Families Need to Know

The income test is often the most confusing aspect of Family Tax Benefit for Australian families. Understanding how your income affects your payments can mean the difference between receiving thousands of dollars in benefits or missing out entirely. This guide breaks down the 2026-27 income test thresholds and explains exactly how they affect your FTB entitlements.

How the FTB Income Test Works

The Family Tax Benefit income test uses your "adjusted taxable income" (ATI) to determine how much you're entitled to receive. Your ATI includes your taxable income plus any reportable fringe benefits, reportable superannuation contributions, net investment losses, tax-free pensions or benefits, and certain foreign income. For couples, the income of both partners is combined to calculate the family's total ATI.

The income test doesn't simply cut off your payment when you reach a certain amount. Instead, it uses a "taper rate" system where your payment is gradually reduced as your income increases beyond specific thresholds. This ensures that working more always leaves you better off financially, even if you receive less FTB.

FTB Part A Income Thresholds for 2026-27

For Family Tax Benefit Part A, the key threshold is the "income free area" of $56,898 per year. If your family's combined ATI is below this amount, you'll generally receive the maximum rate of FTB Part A for your family circumstances. This threshold applies regardless of how many children you have.

Once your income exceeds $56,898, your FTB Part A payment is reduced by 20 cents for every dollar above the threshold. This is known as the first taper rate. For example, if your family income is $66,898 (which is $10,000 above the free area), your annual FTB Part A would be reduced by $2,000 ($10,000 × 0.20).

There's also a higher income free area of around $103,368 per year. Once your income exceeds this level, a second taper rate of 30 cents per dollar applies, reducing your payment more quickly. However, there's a base rate that ensures most families with dependent children receive at least some assistance, even at higher income levels.

FTB Part B Income Tests

The income test for FTB Part B works differently depending on your family type. For single parents, there's no income test on your own earnings—you can earn any amount and still receive your full Part B entitlement. This is a significant advantage for single parents in the workforce.

For couples, two income tests apply. First, the primary earner (the partner with the higher income) must earn less than $104,432 per year for the family to receive any FTB Part B at all. This is a hard cutoff—if the primary earner exceeds this amount, no Part B is payable regardless of the secondary earner's income.

Second, the secondary earner faces an income test with a free area of just $6,059 per year. For every dollar the secondary earner makes above this threshold, the FTB Part B payment is reduced by 20 cents. Given the low free area, even modest part-time work can significantly reduce or eliminate Part B payments for couples.

Calculating Your Income Reduction

Let's walk through a practical example. Consider a couple with two children aged 3 and 7, with a combined family income of $80,000. Their income exceeds the free area by $23,102 ($80,000 - $56,898). Using the 20% taper rate, their FTB Part A would be reduced by $4,620.40 per year ($23,102 × 0.20).

If their maximum FTB Part A entitlement (before the income test) was $11,000 per year based on their children's ages, after applying the reduction they would receive approximately $6,380 per year. This is still a substantial amount that makes a real difference to family budgets.

Strategies to Manage the Income Test

While you should never make financial decisions solely to maximize government benefits, understanding the income test can help with family planning. For couples considering whether the secondary earner should return to work, it's worth calculating the net benefit after accounting for reduced FTB Part B payments, childcare costs, and additional work-related expenses.

Salary sacrificing into superannuation can reduce your adjusted taxable income, potentially increasing your FTB entitlement. However, be aware that reportable employer superannuation contributions are added back to your ATI, so this strategy only works for pre-tax salary sacrifice amounts, not employer contributions.

Timing of income can also matter. If you have control over when you receive income (such as bonus payments or business income), consider how this might affect your FTB across different financial years. However, be cautious about "income splitting" arrangements that may not be legitimate for tax purposes.

Estimating Income Accurately

When you apply for FTB or update your details, you'll need to provide an income estimate for the current financial year. Accuracy is crucial—if you underestimate your income, you may be required to repay excess FTB at the end of the year. If you overestimate, you'll receive less than you're entitled to during the year (though you'll receive the balance after reconciliation).

Services Australia recommends updating your income estimate whenever your circumstances change—if you get a pay rise, change jobs, start or stop working, or experience any other change that affects your expected income. You can update your estimate online through myGov at any time.

End-of-Year Reconciliation

After the end of each financial year, Services Australia reconciles your actual income against your estimates. Once you've lodged your tax return (or confirmed you don't need to lodge), your FTB is recalculated based on your actual adjusted taxable income. This is when you'll either receive a top-up payment if you were underpaid, or a debt notice if you were overpaid.

The FTB Part A supplement ($91.90 per child for 2026-27) is also paid after reconciliation, provided your family income is below the Part A supplement income limit. This supplement is designed to help families with end-of-year expenses like back-to-school costs.

High-Income Families

Even families with higher incomes may still be eligible for some FTB. The base rate of FTB Part A means that many families with incomes over $100,000 still receive payments, especially those with multiple children. The exact cutoff depends on your specific circumstances, including the number and ages of your children.

It's always worth checking your eligibility rather than assuming you don't qualify. Many higher-income families are surprised to discover they're entitled to receive some FTB. The worst case is that you're not eligible, but you'll never know unless you apply or use a calculator to check.

Key Income Test Summary

• FTB Part A income free area: $56,898 per year
• FTB Part A taper rate (first): 20 cents per dollar above threshold
• FTB Part A higher income free area: $103,368 per year
• FTB Part A taper rate (second): 30 cents per dollar above higher threshold
• FTB Part B primary earner limit: $104,432 per year (for couples)
• FTB Part B secondary earner free area: $6,059 per year
• Single parents: No income test on FTB Part B

Understanding the FTB income test empowers you to make informed decisions about work, income, and family finances. While the rules can seem complex, the basic principle is straightforward—higher income means lower payments, but the taper system ensures that earning more always leaves you ahead overall.