Introduction
The Work Bonus means Age Pensioners can receive a pension while continuing to work.
If you’re one of the many Australians that have continued working into your mid-sixties, then you may be wondering how your employment could affect the Age Pension. You might be pleasantly surprised to learn that the Work Bonus can help you continue earning income from working without reducing how much pension you get. Of course, there are some ins and outs, but we have laid out all the relevant information on eligibility and how it works below. We’ve also provided some examples to give you a better idea of how this incentivised program could benefit you.
Am I eligible?
To meet the Work Bonus eligibility requirements, you must be able to tick all of these boxes, as set out by Services Australia:
- You’ve reached your Age Pension eligibility age.
- You’re receiving income from employment or are actively involved in self-employment.
- You’re receiving a pension that isn’t the transitional rate of pension.
Of course, the type of pensions that Services Australia is referring to does include the Age Pension. So you are eligible for the Work Bonus if you’ve reached Age Pension age, are receiving the Age Pension (just not the Transitional Rate pension) and have income from employment, including if you’re self-employed. Technically, you become eligible from the first day of receiving your pension.
What does ‘active participation’ mean?
For the Work Bonus, Services Australia requires you to either be employed or have what they call ‘active participation’ in self-employment. Active Participation just means that you are doing work that involves physical effort. As an example, you could be a tradesperson, running a business, provide ironing services or be an office assistant.
What isn’t counted as Active Participation are things like managing investment portfolios or rental properties owned by a family trust or a family company. That type of activity is considered to be Passive Involvement; even though you may still earn income from it, it won’t count for the Work Bonus.
How do I apply?
You don’t need to! If you’ve already eligible through the income test, Services Australia will automatically apply the Work Bonus to your income test if you meet all the eligibility criteria — now that’s a bonus!
How does the Work Bonus work?
Services Australia creates what’s called a Work Bonus balance for you. You might see this referred to as the Income Concession Bank. Think of this as a pool of funds (even though it’s just on paper). If you don’t work, they’ll add a concession of $300 per fortnight to your balance until it reaches $11,800. If you start working, Services Australia will effectively use the pool of funds — your Work Bonus balance — to offset any potential reduction in your pension as a result of you working. If you don’t use all of the concession in a fortnight, whatever is left over will go towards your balance to use in the future.
As an example, consider a man called John, who is Age Pension age, receiving the Age Pension and has started working as a part-time mail delivery driver:
Earning under $300 per fortnight
John starts out slow and is earning $200 a fortnight. Services Australia will apply $200 of his Work Bonus balance to make his eligible income $0. This means his pension won’t be reduced because of his employment income. Also, he hasn’t used all the full $300 concession amount, only $200. Therefore, the remaining $100 will go to his balance to use in the future.
Earning $300 per fortnight
John has picked up an extra half a day’s work and now earns $300 a fortnight. Similar to above, Services Australia will apply $300 per fortnight concessional to his eligible income which reduces it to $0. John has used the full $300 fortnightly concession, and no more will be added to his Work Bonus balance this fortnight.
Thanks to the Work Bonus, you are able to earn up to $300 per fortnight from work before your pension rate is impacted. This is in addition to your fortnightly income limit under the income test, which means a single pensioner with the limit of $204 can earn $504 and still get the maximum rate of pension.
Earning over $300 per fortnight
John is really enjoying his work and has decided to take on extra days; as a result, he’s now earning $400 per fortnight. Again, Services Australia will apply the fortnightly concession of $300 to his employment income. But what happens to the extra $100?
Well, depending on your personal circumstances, you get a fortnightly income limit under the income test. A single pensioner has a limit of $204 which means they can earn up to $504 per fortnight without their rate of pension being affected. Had John made over $504 — let’s say he earned $590 — he would have $86 of assessable income which could impact his pension payment. If John’s Work Bonus balance is over $86, it will be used to bring his assessable income down to $0. If John doesn’t have any Work Bonus balance, then $86 will be included in his assessable income.
$590 Employment Income
minus $300 Fortnightly Concession
minus $204 income limit
= $86 Assessable Income
Work Bonus if you’re self-employed
If John was a self-employed mail delivery driver, there is a different way to calculate his income, Work Bonus balance and apply his concession. John’s self-employed income would be assessed and recorded on an annual rate of income — rather than fortnightly. His annual rate of assessed self-employment income would be converted to instalment periods — similar to figuring out how much his yearly pay equates to per fortnight and then applying the Work Bonus balance from there.
Just as they do for employed people, Services Australia will apply the Work Bonus accrued to John’s self-employment income of $300 plus any unused balance.
Because of the different way that self-employed income is calculated, there could be fluctuations in John’s Age Pension rate across the course of a year. This is due to his self-employed income not being included in the income test until his Work Bonus balance is $0.
It’s important to remember that the $300 Work Bonus is in addition to your income limit. We have excluded the income limits for the sake of simplicity in the examples, but keep in mind that you may be able to earn more money depending on the limit relevant to your living arrangements.
Can I use my Work Bonus for my partner’s income?
If your partner is also of Age Pension age, receiving a pension and working, they will have their own Work Bonus balance. You can’t share the Work Bonus with each other.
Summary
Continuing to work into your sixties and beyond does not need to be at the expense of your Age Pension. In fact, by considering your options carefully, not only could you continue working for as long as you feel comfortable to, you can also make your employment work for you!
The information in this article is general in nature.