The Age Pension work bonus applies to the Age Pension income test, which is a means test you must pass as one of the requirements to access this government payment. The other requirements are passing the assets test, being age-eligible, and qualifying as an Australian resident.
The work bonus will apply to your Age Pension income test if you satisfy all of the following criteria:
- you have reached your Age Pension eligibility age (which depends on your date of birth),
- you’re still earning income from working, and
- you’re not currently receiving a single parenting payment.
How does the work bonus work?
From 1 July 2019 the work bonus provision of the Age Pension income test allows you to earn up to $300 per fortnight if you’re still working, without this amount being included in your income test. You can therefore still earn this amount from working without it affecting the Age Pension rate that you’re entitled to.
This work bonus amount can be accumulated up to an amount of $7,800. This can be very beneficial for pensioners who don’t work regularly. In addition, if you don’t use all of your available $7,800 work bonus balance in any one year, the unused amount can be carried forward to future years indefinitely.
It’s important to understand that the work bonus only applies to your individual income test. The $300 work bonus cannot be shared by a couple.
Note: Prior to 1 July 2019, the work bonus was $250 per fortnight, or up to $6,500 annually.
The work bonus should not be confused with the following:
- The work test, which is applied when you are aged 65-74 and want to make voluntary super contributions. To pass the test you must work a minimum of 40 hours in any 30 consecutive day period.
- The Pension Bonus Scheme, which is a lump sum payment you may be entitled to if you have kept working, registered for this scheme prior to 1 July 2014, and delayed receiving any Age Pension.
Examples of how the work bonus is applied
Note: For the benefit of simplicity, the following examples are assumed to be eligible for the Age Pension, and the value of their assets is below the full Age Pension threshold.
It is important to remember that if you reach the threshold limits in both the assets and income tests, your pension will be based on the lower amount. For example if you are eligible for $400 per fortnight according to the assets test, and $500 per fortnight through the income test, then the $400 per fortnight test will apply.
Dave is an Age Pensioner who lives alone. He still works part-time and earns $600 a fortnight. He has other income sources of $400 per fortnight, so he actually earns $1,000 per fortnight.
For the purposes of the Age Pension income test, the $300 work bonus will be subtracted from his income. He will be considered to be earning $700 per fortnight instead of $1,000 per fortnight.
Single pensioners can currently earn up to $2,026.40 per fortnight and still be eligible for a part Age Pension. Under the current single Age Pension rates, Dave’s Age Pension rate will be reduced by 50 cents for each fortnightly dollar that he earns over $174. His Age Pension will therefore be reduced by $263. This is calculated as follows:
50% x ($700 – $174) = $263.
Karen and Rob both receive the Age Pension and still work part-time. Karen earns $400 a fortnight and Rob earns $200. They have no other income sources. Between them, they therefore actually earn a fortnightly income of $600.
However, the $300 work bonus will be applied to both of their incomes as part of the Age Pension income test.
Karen’s income will be calculated as $100 on the test (i.e. $400 – $300).
Rob will have no income under the provisions of the test, because he earns $100 less than the currently allowable fortnightly work bonus. He will also be able to carry his unused work bonus balance of $100 each fortnight indefinitely up to the current threshold limit of $7,800, so he can use it to offset any increased fortnightly income that he may earn in the future.
Karen and Rob’s combined fortnightly income under the provisions of the income test is therefore $100, not the $600 that they actually receive.
Couples can currently earn a combined income of $308 per fortnight and still be eligible for the maximum pension rate. Karen and Rob are therefore both eligible to receive the maximum pension rate available for couples.
Julie is a single Age Pensioner who does some contract work for eight weeks (i.e. four fortnights) and earns no other income. She earns $1,400 per fortnight (i.e. $5,600 in total over the eight weeks).
In the previous financial year, Julie earned no income at all, so she has the maximum unused work bonus threshold of $7,800 available to offset her contract income against.
By doing this, none of the contract income will be assessed as part of her Age Pension income test. Julie’s income for the purposes of the test will be zero. She will therefore still be entitled to receive the maximum Age Pension rate for a single person. Julie will also have an unused work bonus balance of $2,200 (i.e. $7,800 – $5,600) that she can carry forward to offset against any future work earnings if necessary.
Our Age Pension calculator automatically applies the work bonus to estimate how much Age Pension you might be eligible for.
The work bonus helps you to earn money from working while you’re receiving the Age Pension. Depending on how much you earn, it’s possible that your Age Pension rate won’t be affected by the income you’ve earned (or at the very least, your pension rate won’t be reduced by as much as it would have otherwise).
There are limits to how much you can earn under work bonus provisions, and any unused work bonus balances in any one year can be transferred indefinitely to future years.
For more information
Learn more about the Age Pension in the following SuperGuide articles:
- Retirement age calculator: When can you access your super or the Age Pension?
- How to maximise your Age Pension
- Case studies: How is the Age Pension assessed?
- Deeming rates for the Age Pension income test
- Age Pension calculator: How much could you be eligible for?
- How do I apply for the Australian Age Pension?
- Australian Age Pension rates (March 2019 to September 2019)
- How superannuation affects the Age Pension
- Am I eligible for the Australian Age Pension?
- Age Pension income test rules (July to September 2019)
- Age Pension assets test rules (July to September 2019)
- What are the Age Pension residency requirements?