If you are considering bankruptcy, you may be wondering whether you can continue working, keep receiving your normal wage or salary, and still have enough money to meet your everyday living expenses.

There is no maximum amount you are allowed to earn while bankrupt. However, if your after-tax income exceeds an applicable threshold, you may be required to make compulsory payments from your income. These are known as income contributions. The amount you may need to contribute depends primarily on your assessed income and the number of qualifying dependants you have

As a Registered Trustee with more than 10 years' experience specialising in personal insolvency and bankruptcy throughout Australia, I understand that the impact on income is an important consideration when deciding whether bankruptcy is appropriate. My role is to help you understand what the rules mean in practical terms and how they may apply to your particular financial circumstances.

Can I Still Work While I Am Bankrupt?

Yes.

Becoming bankrupt does not normally stop you from working, and there is no limit on how much income you can earn during bankruptcy.

You can remain employed, change jobs, receive a pay rise or, subject to the relevant restrictions, continue operating as a sole trader.

However, your income must be disclosed to your trustee, and changes to your income or employment need to be reported. This can include situations where you:

• Start a new job
• Change employers
• Receive a pay rise
• Have your working hours reduced
• Receive a bonus or other additional income
• Begin receiving government assistance
• Stop working
• Experience another material change in income

Your trustee uses this information to determine whether you are required to make compulsory income contributions.

Does My Trustee Take All of My Income?

No.

This is an important misconception about bankruptcy.

You do not automatically hand your entire wage or salary to your trustee simply because you become bankrupt.

Instead, an income threshold applies. If your assessed after-tax income remains below the threshold relevant to your circumstances, you generally will not be required to make compulsory income contributions.

If your income exceeds your applicable threshold, the contribution is generally calculated as 50% of the amount you earn above that threshold.

This means the contribution applies to the amount above the threshold, not to your entire income.

What Are the Bankruptcy Income Thresholds in Australia?

Bankruptcy income thresholds are indexed and can change twice each year, on 20 March and 20 September.

As at August 2026, AFSA lists the following annual after-tax income thresholds:

These figures are current at the time of writing and should not be treated as permanent amounts. The thresholds are indexed, so you should check the latest figures when considering bankruptcy or assessing your expected contributions.

How Are Income Contributions Calculated?

A simple example can make the calculation easier to understand.

Suppose you have no qualifying dependants and your assessed after-tax income is $85,475.40 per year.

The current threshold for a person with no dependants is $75,475.40.

Your income is therefore:

$85,475.40 - $75,475.40 = $10,000 above the threshold

The compulsory contribution would generally be 50% of that excess:

$10,000 ÷ 2 = $5,000 annual contribution

You would not be contributing half of your entire $85,475.40 income. The calculation applies to the amount by which your assessed income exceeds the relevant threshold.

An Example With Dependants

The threshold increases when you have qualifying dependants.

For example, someone with two dependants currently has an after-tax income threshold of $95,853.76.

If their assessed after-tax income is $100,000:

$100,000 - $95,853.76 = $4,146.24 above the threshold

The approximate annual contribution would therefore be:

$4,146.24 ÷ 2 = $2,073.12

AFSA uses a similar example when explaining how income contributions operate.

Your trustee will make the actual assessment based on your circumstances.

Who Counts as a Dependant?

Having children or living with a partner does not necessarily mean they will automatically be treated as dependants for the bankruptcy income calculation.

AFSA generally considers a dependant to be someone who:

• Lives with you
• Depends on you wholly or partly for financial support
• Has income within the applicable dependant income limit

As at the current financial year, a person can earn up to $4,697 during the relevant assessment period and still potentially meet the income requirement for being treated as a dependant. Other requirements must also be satisfied.

The number of qualifying dependants matters because it affects the income threshold applied to you.

Does My Partner's Income Count Towards My Income?

Your spouse or partner's income is not simply added to your income when determining whether you must make compulsory bankruptcy contributions.

AFSA states that the trustee uses your income when assessing whether compulsory payments are required.

However, your partner's financial circumstances can still be relevant to other aspects of the assessment, including whether that person qualifies as your dependant.

This is another reason why the assessment should be based on your individual household circumstances rather than assumptions.

What Types of Income Can Be Assessed?

The meaning of income for bankruptcy purposes can be broader than simply the salary deposited into your bank account.

Depending on the circumstances, assessable income can include wages and salary as well as other forms of income or benefits.

The Bankruptcy Act contains specific rules about what is treated as income, and certain deductions or arrangements do not necessarily reduce your assessable income for bankruptcy purposes simply because they reduce the amount appearing in your take-home pay.

For example, AFSA specifically notes that certain amounts such as salary-sacrificed amounts and HECS/HELP repayments may still need to be included when estimating income for contribution purposes.

Superannuation received as an income stream, such as a pension, can also form part of assessable income during bankruptcy.

Because different types of payments can be treated differently, it is important to provide your trustee with complete information about the income you receive.

What About Centrelink and Family Tax Benefits?

Bankruptcy does not prevent you from applying for Centrelink benefits.

However, different government payments can be treated differently when assessing income.

AFSA states that Family Tax Benefit does not form part of the income assessment for compulsory payments. Centrelink eligibility itself is administered separately through Services Australia.

If you receive government assistance while bankrupt, you should still keep your trustee informed about changes to your income and provide whatever information is requested.

What Happens If My Income Changes?

Your income is not necessarily going to remain the same throughout bankruptcy.

You might:

• Receive a promotion
• Start earning overtime
• Change jobs
• Lose your job
• Reduce your working hours
• Start a business
• Receive variable commissions
• Return to work after unemployment
• Experience a significant reduction in income

You have an obligation to tell your trustee when your income or employment changes.

If your circumstances change, your income contribution assessment can also change.

For example, if you initially earn below your applicable threshold but later receive a substantial pay increase, you may become liable to make contributions.

The reverse can also happen. If your income falls significantly, the amount you are required to contribute may need to be reassessed.

The important point is to communicate with your trustee rather than simply stop or change payments yourself.

What If My Income Is Irregular?

Not everyone earns the same amount each fortnight.

You may be:

• Self-employed
• A contractor
• Working casually
• Receiving commissions
• Working seasonal hours
• Receiving overtime
• Operating a sole trader business

Irregular income does not remove your bankruptcy obligations.

Your trustee assesses the income you are likely to derive during the relevant contribution assessment period and may subsequently reassess the position if your actual income differs. The Bankruptcy Act also allows trustees to seek evidence of income when making these assessments.

Good record-keeping becomes particularly important if your earnings fluctuate.

Can I Save Money While I Am Bankrupt?

Yes.

AFSA confirms that there is no general limit on how much income you can save during bankruptcy.

Income you earn after becoming bankrupt can generally be retained, subject to any compulsory income contribution liability.

However, there is an important distinction between saving income and using that income to purchase assets.

AFSA explains that while post-bankruptcy income itself may be retained, property or assets purchased with that money can be treated differently under bankruptcy law.

If you are considering making a significant purchase while bankrupt, it is sensible to discuss it with your trustee beforehand.

What Happens to Money Already in My Bank Account?

Money already held when your bankruptcy begins is different from income earned afterwards.

AFSA states that a trustee may claim cash or money held in a bank account at the date of bankruptcy, although an amount will generally be left to meet modest living expenses.

By comparison, income earned after the bankruptcy begins does not automatically become property of the trustee, although compulsory income contributions may apply if your income exceeds the relevant threshold.

This distinction can be important when planning for the immediate practical effects of bankruptcy.

What Happens to My Tax Refund?

Your tax position can also affect the income assessment.

You still need to lodge your tax returns while bankrupt.

A tax refund relating to income earned before bankruptcy may be an asset that your trustee can claim.

A refund relating to income earned after you become bankrupt can form part of your assessable income for the purpose of determining compulsory contributions.

The ATO may also retain a tax refund where you owe money to the ATO or another relevant Commonwealth agency.

Tax refunds can therefore be more complicated than ordinary wages, so it is important to inform your trustee before spending a refund received during bankruptcy.

What If Paying the Contribution Would Cause Financial Hardship?

There are specific circumstances where a person may be able to apply for a reduction in their income contribution because paying it would cause financial hardship.

These provisions are not a general discretion to reduce contributions simply because household expenses are high.

The Bankruptcy Act provides specific hardship grounds. AFSA guidance identifies circumstances that may include:

• Ongoing medical expenses for you or a dependant
• Childcare expenses that are necessary for you to work
• Particularly high housing costs where suitable alternatives are not reasonably available
• Substantial expenses associated with travelling to and from work
• Loss of the financial contribution of someone who lives with you and helps meet household expenses

Any hardship application needs to be considered on its individual facts and supported by appropriate evidence.

If your circumstances change and you are struggling to meet an assessed contribution, speak with your trustee as early as possible.

Will My Employer Know I Am Bankrupt?

Bankruptcy does not normally mean that your employer will automatically be told.

AFSA states that bankruptcy normally does not prevent you from working and that employers are not generally notified simply because you become bankrupt.

However, bankruptcy can affect certain occupations, professional licences and positions.

For example, a bankrupt person cannot be a company director or manage a company unless permission is obtained from the court. Restrictions can also apply to certain professions, public positions or roles involving trust accounts.

If you work in a regulated occupation, it is important to check the rules that apply to your profession before entering bankruptcy.

Do Income Contributions Continue If I Change Jobs?

Changing jobs does not remove your bankruptcy obligations.

Your contribution is based on your assessable income rather than on a particular employer.

If you move to another job, become self-employed or experience another significant change in income, you need to advise your trustee so your position can be assessed appropriately.

You should not avoid earning more simply because you are bankrupt.

There is no maximum income you can earn. Even where compulsory contributions arise, they are based on the amount above your applicable threshold rather than taking all of the additional income you earn.

Bankruptcy Is About More Than Your Income

Understanding income contributions is important, but your income is only one part of the decision to become bankrupt.

Bankruptcy can also affect your:

• Property
• Vehicles and other assets
• Existing debts
• Access to credit
• Business activities
• Overseas travel
• Tax position
• Certain professional or company roles

Whether bankruptcy provides an appropriate solution depends on your overall financial circumstances, not simply on whether your income falls above or below a particular threshold.

There may also be other options available, including informal arrangements with creditors, hardship arrangements, debt agreements or a Personal Insolvency Agreement, depending on your circumstances.

Before making a decision, it is important to understand both the relief bankruptcy may provide and the obligations that come with it.

How I Can Help You Understand Your Income Position

If you are considering bankruptcy and are concerned about what will happen to your wage or salary, I can help you understand your position before you make a decision.

As a Registered Trustee specialising in personal insolvency and bankruptcy, I can help you consider:

• Your current after-tax income
• The number of qualifying dependants you have
• The income threshold that applies to you
• Whether compulsory contributions are likely
• How a change in employment may affect your assessment
• Irregular or self-employed income
• Your assets and liabilities
• Your broader financial circumstances
• Whether bankruptcy or another personal insolvency option may be suitable

My approach is to explain the process in plain English and help you understand the practical consequences before deciding what comes next.

Every financial situation is different, and there is rarely value in making an important decision based on assumptions or fear.

Understanding Your Position Before Taking the Next Step

Bankruptcy does not mean that your trustee automatically takes your wages

You can continue working, there is no maximum amount you are allowed to earn, and if your assessed after-tax income remains below the threshold applicable to your circumstances, compulsory income contributions may not be required.

If you earn above your threshold, you will generally contribute 50% of the amount above that threshold, rather than 50% of your total income. Your number of qualifying dependants and any changes to your financial circumstances can affect the calculation.

The income thresholds are indexed regularly, so it is important to work from current figures rather than information you may have read in an older bankruptcy article.

The income thresholds are indexed regularly, so it is important to work from current figures rather than information you may have read in an older bankruptcy article.