The Work Bonus provides an incentive for pensioners over Age Pension age to work by allowing them to keep more of their pension when they have income from work.
How does the Work Bonus affect pension rates?
The Work Bonus increases the amount an eligible pensioner can earn from work before it affects their pension rate. The first $300 of fortnightly income from work is not counted under the pension income test.
The Work Bonus operates in addition to the pension income free area. From 1 July 2022, for single pensioners, the pension income free area is $190 a fortnight and for couples combined, it is $336 a fortnight. This means a single pensioner over Age Pension age with no other private income could earn up to $490 a fortnight from work and still receive the maximum rate of pension.
Work Bonus Income Bank
Pensioners over Age Pension age accrue any unused part of the $300 fortnightly Work Bonus concession amount in a Work Bonus income bank. The maximum Work Bonus income bank amount that can be accrued is $7,800. The income bank amount offsets future income from work that would otherwise be assessable under the pension income test. The income bank amount is not time limited; if unused, it carries forward, even across years.
The Work Bonus income bank is useful for pensioners who wish to work, particularly those who undertake intermittent or occasional work.
Note: from 1 December 2022 to 31 December 2023, a one-off, temporary credit of $4,000 applies to Work Bonus income bank balances. The maximum income bank balance increases to $11,800 over this period. On 1 January 2024, the maximum income bank balance will automatically reset to $7,800.
How does the Work Bonus operate for single pensioners?
Example 1: Bob is an age pensioner working as a school crossing supervisor, earning $400 a fortnight. He has no other income. Under the Work Bonus, the first $300 of Bob’s employment income is not assessed, and only $100 is counted under the pension income test. This amount is less than the pension income free area of $190 a fortnight for a single pensioner, so Bob will still receive the maximum rate of Age Pension.
Example 2: Maria is an age pensioner who works for three fortnights as an accountant. She has no other income. As Maria has not worked in the previous 12 months, she has accumulated the maximum Work Bonus income bank amount of $7,800 (26 fortnights x $300). During the three fortnights that she works, Maria earns $2,000 a fortnight - a total of $6,000. As Maria’s income bank amount is more than her income, none of the $6,000 is assessed under the income test and she will still receive the maximum rate of Age Pension.
In addition, Maria will retain $2,700 in her income bank to offset any future earnings from work ($7,800 - $6,000 earnings + $300 Work Bonus concession for each of the three fortnights that Maria works).
How does the Work Bonus operate for couples?
The Work Bonus applies to individual pensioners. It cannot be shared by a pensioner couple.
Example: Mary and Jim are a couple who both receive the Age Pension. Mary has work income of $700 a fortnight and Jim has self-employment income of $220 a fortnight. They have no other income.
Under the Work Bonus, the first $300 of an individual’s income from work is not assessed. Only $400 a fortnight is assessed as income for Mary and nothing is assessed as income for Jim. Under the pension income test, pensions are reduced by 50 cents for every $1 of income over the income test area. Mary and Jim’s combined assessed income of $400 a fortnight is $64 higher than the income free area ($336 a fortnight for a couple) so their combined pensions are reduced by $32 a fortnight ($16 a fortnight each).
If either Mary or Jim were below Age Pension age, they would not be eligible for the Work Bonus, and their income from work would be assessed under the normal income test arrangements.
Who is eligible for the Work Bonus?
All pensioners over Age Pension age are eligible for the Work Bonus. This includes: Age Pension, Carer Payment and Disability Support Pension recipients. Department of Veterans’ Affairs Service Pensioners and Income Support Supplement recipients over qualifying age are also eligible.
What income is eligible for the Work Bonus?
The following income is eligible to be assessed under the Work Bonus:
- Employment income from paid work undertaken by the person as an employee in an employer/employee relationship. This includes, but is not limited to, salary, wages, leave payments, commissions, employment-related fringe benefits, bonus payments, supported wages and casual loadings.
- Gainful work income earned through self-employment so long as the work involves personal exertion on the part of the person concerned. Examples include operating a business as a plumber, farmer, wedding celebrant or artist.
Income that is NOT eligible for the Work Bonus includes work associated with managing or administering financial investments or investment properties owned by the person or their family and work involving domestic, household, gardening or similar tasks at the person's place of residence.
Application for the Work Bonus
Pensioners do not need to apply for the Work Bonus. If you are a pensioner with income from work, you must keep Services Australia (Centrelink) informed of your income. Pensioners can report income from work by contacting Services Australia. This can be done in person at a Services Australia (Centrelink) office, by calling 13 2300 (including Voice Recognition), or via the internet (Services Australia).
For more information
For more information about the Work Bonus, Services Australia can be contacted by visiting a Centrelink office in person, by phoning 13 2300 or online at Services Australia.