What is the Pension Bonus Scheme?

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The Pension Bonus Scheme is a tax-free lump sum payment available to people who meet its eligibility requirements. The Scheme has not accepted any new registrations since 1 July 2014. It was designed to reward people for delaying their receipt of the Age Pension by continuing to work.

How could you be eligible?

To be eligible for the Pension Bonus Scheme, you must have:

• registered for the Scheme prior to 1 July 2014,
• have been eligible at the time of your registration to receive the Age Pension but elected to delay receiving it,
• have not received any government income support since you became eligible for the Age Pension (except the Carer Payment or Carer Service Pension), and
• have passed the work test for at least 12 months from the date of your registration for the Scheme, as well as completed 960 hours of paid work in each subsequent year (which equates to at least 20 hours per week for 48 weeks of the year).

If you’re in a couple relationship and are both registered for the Scheme, only one of you needs to pass the work test to satisfy the Pension Bonus Scheme work test eligibility requirement. If you’re over 75, you can also work to meet this requirement for a younger partner, and vice versa. However, if you both still work, you can’t combine your hours together to meet the work test requirement.

How does it work?

Eligible people who registered for the Scheme prior to 1 July 2014 will still receive their lump sum payment once they first claim and receive the Age Pension, provided that they:

• do so before 1 July 2019 and haven’t been accruing their Pension Bonus for longer than five years,
• are aged under 75 (as the Pension Bonus cannot be accrued after that age),
• have been an Australian resident for at least 10 years (including 5 unbroken years), and
• are currently living in Australia.

The Pension Bonus should be claimed:

• within 13 weeks of you or your partner failing to meet the work test, and
• at the same time an application is made to receive the Age Pension.

What are the Pension Bonus rates?

If you’re eligible, your Pension Bonus amount depends on:

• how long you have been a member of the Scheme,
• your marital status over the Bonus accrual period, and
• the Age Pension rate you’re eligible for when you first start receiving the Age Pension. If you’re only eligible for a part-pension, you’ll also receive a reduced Pension Bonus.

The table below lists the maximum Pension Bonus payments currently available.

Source: Department of Human Services

The bottom line

The Pension Bonus Scheme has been gradually phased out in Australia since 1 July 2014, though existing members of the Scheme can still receive tax-free lump sum payments for a limited time, provided that they meet the eligibility requirements.

The information contained in this article is general in nature.