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 only half of your first $500 of employment income each fortnight counts 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.
The work bonus operates in the following way: If an Age Pensioner receives income from work (not investment income), then only half of the first $500 of gross fortnightly employment income will count for the Age Pension income test. For example, if you earn $300 in a fortnight then $150 of that $300 is counted as fortnightly income against the Age Pension income test. If you earn $600 in a fortnight, then $350 ($250 +$100) 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.
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 (or $nil) 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.
For more information about the Work Balance, 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 on how the Age Pension works, including the Age Pension income test rules, then check out the following SuperGuide articles:
- Age Pension: September 2016 rates now apply (until March 2017)
- How do I apply for the Australian Age Pension?
- Age Pension: Income test threshold applicable since September 2016 (until March 2017)
- Age Pension: Assets test thresholds applicable since January 2017
- Age Pension age increasing to 67 years (not 70 years)