Pension Bonus Scheme 

Purpose of Payment/Benefit

The Pension Bonus Scheme (the scheme) was introduced on 1 July 1998. For eligible older Australians who defer claiming Age Pension and instead remain in the workforce, the scheme pays a tax-free lump sum when they eventually claim and receive Age Pension.

Eligibility

A pension bonus can only be paid to people who have not received Age Pension or any other income support payment (other than Carer Payment) since reaching pension age.

People must register to participate in the scheme. To be eligible to register the applicant must have turned pension age and met residential requirements before 20 September 2009.

The scheme will be closed to new registrations from 1 July 2014. People who are already registered in the scheme will not be affected by this change. Those who are eligible can continue to lodge applications to register up until the date of closure. 

People should ensure that they are fully informed and can decide whether or not it is to their advantage to participate in the scheme. Some people may be better off receiving a part-rate pension and the Work Bonus while they continue to work.

People who register within 13 weeks of becoming qualified for Age Pension automatically have their registration backdated to when they first qualify for Age Pension. People who register outside the 13 weeks generally have their registration start from the date they apply unless special circumstances exist.

To receive a pension bonus, a person must work a minimum of 12 months from the date of registration and complete at least 960 hours of paid work in this and any subsequent years. This is an average of 20 hours each week for 48 weeks each year. For couples, only one person need pass the work test. At least 640 hours of the required 960 hours must be performed within Australia.

A pension bonus can be accrued for a maximum of 5 years and cannot be accrued after the age of 75 (but work by a person after age 75 can accrue towards the bonus of a younger partner who has not accrued the maximum of 5 years).

The pension bonus is paid when a person first claims and receives Age Pension. The claim for bonus and Age Pension must be lodged together. Unless special circumstances exist or the person's membership is non-accruing, the bonus must be claimed within 13 weeks of failing to meet the work test.

Rates

The size of the bonus is linked to the rate of Age Pension a person is eligible for at the date of grant of pension, their accrual period and their marital status over the accrual period. Current maximum rates are available from Centrelink. If a person receives a reduced rate of pension, then they would also receive a reduced bonus.

Further information

For further information about the Pension Bonus Scheme, please contact Centrelink on 13 2300 or visit the Pension Bonus Scheme section of the Centrelink website.

Content Updated: 1 April 2014