The Work Bonus provides an incentive for pensioners over Age Pension age to participate in the workforce by allowing them to keep more of their pension when they have earnings from working.
How does the Work Bonus affect pension rates?
The Work Bonus increases the amount an eligible pensioner can earn from employment before it affects their pension rate. The first $250 of fortnightly employment income is not assessed and is not counted under the pension income test.
The Work Bonus operates in addition to the pension income test free area. From 1 July 2018, for single pensioners, the pension income test free area is $172 a fortnight and for couples combined, it is $304 a fortnight. For example, this means a single pensioner over Age Pension age with no other private income could earn up to $422 a fortnight from employment and still receive the maximum rate of pension.
Work Bonus Income Bank
Pensioners over Age Pension age accrue any unused part of the $250 fortnightly Work Bonus exemption amount in a Work Bonus income bank, up to a maximum of $6,500. The income bank amount offsets future employment income from 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.
How does the new Work Bonus work for single pensioners?
Example 1: Bob is an age pensioner working as a school crossing supervisor, earning $300 a fortnight. He has no income other than the Age Pension. Under the Work Bonus, the first $250 of Bob’s employment income is not assessed, and only $50 is counted under the pension income test. This is less than the pension income test free area of $172 a fortnight for a single pensioner, and 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 income bank amount of $6,500 (26 fortnights x $250). 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 employment 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 $1,250 in her income bank to offset any future employment earnings ($6,500 - $6,000 earnings + $250 Work Bonus concession for each of the three fortnights that Maria works).
How does the Work Bonus affect the employment income of your partner?
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 employment income of $650 a fortnight and Jim has employment income of $220 a fortnight. They have no other income.
Under the Work Bonus, the first $250 of an individual’s employment income 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, pension is reduced by 50c for every $1 of income over the income test free area. Mary and Jim’s combined assessed income of $400 a fortnight is $96 higher than the income test free area ($304 a fortnight for a couple) and their combined pensions are reduced by $48 a fortnight ($24 a fortnight each).
If either Mary or Jim were under pension age, they would not be eligible for the Work Bonus, and their earnings would be assessed as income.
Who is eligible for the Work Bonus?
All pensioners over Age Pension age are eligible for the Work Bonus if they have employment income. This includes: Age Pension, Carer Payment, Bereavement Allowance, Disability Support Pension, Widow B Pension and Wife Pension recipients.
Employment income is 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 loading.
Employment income does not include income from self-employment or business income. Pensioners who are self-employed or running a business are not entitled to the Work Bonus, but are able to make business deductions from their income.
1 July 2019 Changes to the Work Bonus
From 1 July 2019, both employed and self-employed social security pensioners over pension age will be eligible for the Work Bonus, and able to earn up to $300 per fortnight from work before this income is assessed under the pension income test. Additionally, the Work Bonus maximum accrual amount will increase to $7,800.
Application for the Work Bonus
Pensioners do not need to apply for the Work Bonus. If you are a pensioner with variable fortnightly employment income, you must keep Centrelink informed of your income. The Work Bonus can only be applied to employment income that has been reported. Pensioners can report over the phone (including Voice Recognition), in person at a Centrelink office or by using the internet.
For more information
For more information about the Work Bonus, contact the Department of Human Services (DHS) on 13 2300 or visit the DHS website.