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On 1 July 2019, there were two major changes to the Work Bonus legislation:
- The fortnightly Work Bonus amount increased to $300 (from $250),
- The incentive was extended to self-employed people.
If you are a self-employed person, please read on. You may be missing out on your Work Bonus and therefore a potential $7,800 per year (couples) or $3,900 per year (singles) in additional pension payments.
Before I explain the impacts of these changes, we’ll explore how the scheme works.
Am I eligible?
The Work Bonus is an incentive to keep pensioners in the workforce. A portion of your income that is earned via gainful employment does not count towards Centrelink’s income test.
To be eligible, you must be over Age Pension age and in receipt of a pension payment (Age Pension, Carer Payment or Disability Support Pension).
How does it work?
When you have assessable income (above the income free area), Centrelink will reduce your rate of pension by 50 cents for every $1 of income (25 cents each per member of a couple).
If you earn up to $300 a fortnight (or the amount accumulated within your Work Bonus balance), Centrelink will not count this income towards the income test. This provides a $150 fortnightly boost to your Age Pension if your rate of payment is affected under the income test.
However, not everyone will benefit from the Work Bonus. Centrelink applies an income and assets test to determine your rate of payment. The amount paid is the lower rate of the asset and income test. Depending on your financial situation your pension could be paid under either test. The Work Bonus will only benefit those pensioners paid under the income test.
How can I get the Work Bonus?
When you earn income from work, Centrelink will automatically apply the Work Bonus. This includes employment, paid leave while still employed, directors’ fees and self-employment.
If you are self-employed, you need to let Centrelink know the percentage of income earned from work you actively participated in (eg bookkeeping, lawnmowing).
You must keep Centrelink updated with your income to ensure that you are paid the correct amount.
Unsure if your assessment is correct? Contact Centrelink or visit your local office and get them to check the business details screen. Contained within this screen is a section stating ‘% of income for Work Bonus’. If you are single this should be filled with 100% and if you are a couple (50/50). If it is blank then you are missing out on the Work Bonus incentive.
Take your latest tax return and profit and loss statement to ensure that the figures are correct and the percentage of earnings is correctly applied. The figures above are only a guide and may not relate to your personal situation.
What if my income is lumpy?
The good news for those pensioners who work on an irregular basis (eg exam supervisors, Santa at Christmas time) – your Work Bonus is not lost! The amount of unused Work Bonus accumulates into your Work Bonus balance.
For example: You don’t work for ten consecutive fortnights.
10 fortnights x $300 per fortnight Work Bonus = $3,000 Work Bonus balance accumulation
Should you then earn $3,000 the next fortnight then this would have no impact on your rate of payment.
What’s the catch?
The maximum Work Bonus balance that you can accumulate is $7,800. The balance is never reset so once you reach the maximum it will remain at this level until you start to earn income.
If you start work, Centrelink will use your Work Bonus eligible income to reduce your Work Bonus balance before reducing your pension.
Does investment income count?
No. The only income that can benefit from the Work Bonus incentive is eligible employment income. If deemed income is your only source of income and is affecting your rate of payment there will be no benefit from the Work Bonus changes to you.
Did you say lump sum bonus?
No, unfortunately not. The Work Bonus is not to be confused with the old Pension Bonus Scheme, which was closed back in 2014.
The old scheme rewarded eligible customers with a lump sum bonus for working past pension age and deferring their age pension claim. The new Work Bonus scheme provides a higher ongoing fortnightly pension payment as opposed to a lump sum.
Seek professional advice
The Work Bonus provides an extremely generous incentive to top-up a pensioner’s rate of payment. It is vitally important that you confirm with Centrelink that your assessment is correct. If not, you could be missing out on thousands of dollars in pension payments.
I suggest calling Centrelink’s Financial Information Service on 132300 to speak to an expert. This is a free, independent service that provides an amazing service to all Australians.
The Work Bonus is only one aspect of the social security maze. Everyone’s financial situation is different, so it’s important to seek personal financial advice to achieve your own goals and objectives.
Regan Welburn is the director of My Pension Manager, an administration service specialising in Age Pension applications and dealing with Centrelink. Regan previously worked for Centrelink as a Financial Information Service Officer and has an intricate knowledge of the Social Security system.
For more information
Learn more about the Age Pension in the following SuperGuide articles:
- How to maximise your Age Pension
- Case studies: How is the Age Pension assessed?
- Australian Age Pension rates (September 2019 to March 2020)
- Age Pension calculator: How much could you be eligible for?
- Am I eligible for the Australian Age Pension?
- Age Pension income test rules (September 2019 to March 2020)
- Age Pension assets test rules (September 2019 to March 2020)
- Retirement age calculator: When can you access your super or the Age Pension?
- Deeming rates for the Age Pension income test
- How do I apply for the Australian Age Pension?
- How does superannuation affect the Age Pension?
- What are the Age Pension residency requirements?
The information contained in this article is general in nature.