2018 Federal Budget alert! From 1 July 2019, the Work Bonus will increase to $300 per fortnight, rather than the current $250 a fortnight. The first $300 of fortnightly income from employment will not count towards the Age Pension income test. For example, on current thresholds, a single person could earn $468 a fortnight without losing any Age Pension. The Work Bonus will be extended to Age Pensioners who are self-employed, although there will be a ‘personal exertion’ test to prove an individual was involved in gainful employment.
If you choose to work while receiving the Age Pension, then you will be entitled to a Work Bonus. The Work Bonus operates so that the first $250 of employment income each fortnight is not counted towards the Age Pension income test. The Age Pension income test is one of 2 tests used to decide if you’re eligible for a FULL or PART Age Pension, or whether you have no entitlement at all.
In addition, if you earn no income, or less than $250 a fortnight, Centrelink will create a Work Bonus balance for you, which accumulates the unutilised Work Bonus credits (up to $6,500), to be used when you do earn employment income.
Note: The Work Bonus does not apply to self-employed income.
The Work Bonus operates in the following way: If an Age Pensioner receives income from work (not investment income or self-employed income), then the first $250 of gross fortnightly employment income will not count for the Age Pension income test. For example, if you earn $300 in a fortnight then only $50 of that $300 is counted as fortnightly income against the Age Pension income test. If you earn $600 in a fortnight, then only $350 is counted towards the income test.
Centrelink automatically applies the Work Bonus to your disclosed income. You don’t have to apply for the Work Bonus, but you do need to let Centrelink know if your earnings change throughout the year.
Note: The Work Bonus measure is in addition to the normal income threshold for full Age Pension eligibility (for information about the Age Pension income test, see SuperGuide article Age Pension: Income test thresholds applicable since September 2018).
How does the Work Bonus operate?
The Work Bonus operates in the following way: If you earn more than $250 in a fortnight from employment income, then your assessable employment income for the purposes of the Age Pension income test will be reduced by $250 a fortnight. If you earn exactly $250 a fortnight, then your assessable employment income is zero. If you earn less than $250 a fortnight, then part of your Work Bonus will be used to reduce your assessable employment income to zero, and part will be used to accumulate a Work Bonus balance (up to $6,500), that can be used to reduce future assessable employment income. If you earn $nil for the fortnight, then the $250 Work Bonus will be credited to your Work Bonus balance, to be used in the future.
For more information about the Work Bonus, visit the Centrelink website, or specifically this link.
Background: The Work Bonus was introduced in September 2009, and the former ALP government claimed the new Work Bonus was replacing the Age Pension Bonus scheme. The Pension Bonus Scheme (PBS) and the Work Bonus are totally different so don’t believe this political spin. The decision to kill the PBS was a budgetary decision and the Work Bonus was a policy softener to distract Australians from the fact that the Government had made the income test tougher for those claiming a part-Age Pension from September 2009 (losing 50 cents of Age Pension for every $1 above the FULL Age Pension threshold, compared with losing 40 cents of Age Pension for every $1 above the threshold prior to 20 September 2009). I explain the Age Pension Bonus in the SuperGuide article Age Pension Bonus: Still available for registered Australians.
Seeking more information about the Age Pension rules?
If you’re interested in how the Age Pension works, including the Age Pension income test rules, then check out the following SuperGuide articles:
- Retirement Age Reckoner: Discover your preservation age and Age Pension age
- Australian Age Pension: 10 important facts you should know
- Age Pension changes: More Australians entitled to payments since September 2018
- Latest Age Pension rates (since September 2018)
- Australian Age Pension: Am I eligible and how do I apply?
- Age Pension: Income test thresholds applicable since September 2018
- Age Pension: Assets test thresholds applicable since September 2018
- Age Pension age increasing to 67 years (not 70 years)
- Age Pension income test: Deeming rates and deeming thresholds
- Age Pension: Does my superannuation lump sum count for income test?
- Age Pension: Is my super benefit counted towards the assets test, or income test?
- Less Age Pension, and paid to fewer Australians since January 2017