The Work Bonus allows eligible pensioners to earn more from work before their pension is reduced under the Income test. Up to $300 of eligible work income each fortnight is not counted, and unused amounts can build up in a Work Bonus balance that offsets work income in later fortnights.
This guide explains who is eligible, how the $300 fortnightly concession and Work Bonus balance work, and how the rules apply if you are employed or self-employed, with worked examples.
Am I eligible for the Work Bonus?
You may be eligible for the Work Bonus if you:
- have reached Age Pension age
- receive the Age Pension or another qualifying pension payment, but not at the transitional rate
- have income from employment or from self-employment that involves your own work.
You do not need to apply for the Work Bonus. Services Australia applies it automatically once you are eligible.
How does the Work Bonus work?
The Work Bonus has three important features:
- The $300 fortnightly concession. Up to $300 of eligible work income each fortnight is not counted under the Income test.
- The Work Bonus balance. If you earn less than $300 from work in a fortnight, the unused amount is added to your balance. Your balance can build up to a maximum of $11,800 and is used to offset work income above $300 in later fortnights.
- A $4,000 starting balance. When you first become eligible for the Work Bonus, you generally receive a $4,000 starting balance. This means you can immediately offset eligible work income above the $300 fortnightly concession without having to build up a balance first.
If your pension stops and later starts again, you keep the balance you had when it stopped. If that balance is under $4,000, it may be topped up to $4,000, but generally no more than once every two years.
Your Work Bonus balance is not money you can withdraw or spend. It is a record of how much additional eligible work income can be excluded from the Income test. You may also see it called the Work Bonus income bank.
The Work Bonus sits on top of the income free area. A single person’s income free area is $226 a fortnight, so a single pensioner whose only income is from work can earn $526 a fortnight ($300 plus $226) without their work income reducing their pension under the Income test, even with no Work Bonus balance.
To see how this works, take John, a single pensioner who has started work as a part-time delivery driver and has no other income.
Earning under $300 a fortnight
John earns $200 a fortnight. The fortnightly concession covers all of it, so none of his work income is counted. He has used only $200 of the $300 concession, so the remaining $100 is added to his Work Bonus balance.
Earning $300 a fortnight
John picks up an extra half day and now earns $300 a fortnight. The concession covers all of it, so again none of his work income is counted. He has used the full $300, so nothing is added to his balance.
Earning over $300 a fortnight
John takes on extra days and now earns $590 a fortnight. The first $300 is covered by the fortnightly concession, leaving $290.
- If John has a Work Bonus balance of $290 or more, the remaining $290 comes off his balance and none of his work income is counted under the Income test.
- If John has no Work Bonus balance, the remaining $290 is counted as income. That is $64 over the $226 income free area, so his pension is reduced by $32 a fortnight under the Income test (50 cents for each dollar over the income free area).
The Work Bonus balance is used whenever eligible work income exceeds the $300 fortnightly concession, even when the income free area would otherwise have covered the remaining income. For example, if John earned $400 and had at least $100 in his Work Bonus balance, $100 would be deducted from the balance even though $100 on its own would be below his $226 income free area.
Does self-employment qualify for the Work Bonus?
Yes, provided you are actively involved in the work. Services Australia refers to this as gainful work. You need to earn the income through your own effort, rather than simply receiving income from an investment.
For example, you could run a business as a plumber, farmer, wedding celebrant or artist. This applies whether you operate as a sole trader, in a partnership, or through a private company or trust.
For self-employment, Services Australia generally assesses the income generated by your business after allowable business expenses, rather than simply using the amount you are paid in a particular fortnight. The income is generally worked out as an annual amount and converted to a fortnightly figure. The Work Bonus is then applied in the same way as it is to employment income.
If your self-employment income changes, tell Services Australia because it can change the amount of income assessed and how quickly your Work Bonus balance is used.
What income does not qualify for the Work Bonus?
The Work Bonus applies to income from employment and active self-employment. It does not apply simply because you receive other income.
Income that generally does not qualify includes:
- interest, dividends and other investment income
- deemed income from financial investments
- superannuation payments
- termination payments from a former employer, and compensation or insurance payments for being unable to work
- income from managing investments or property that you or your family own, including through a family trust or company
- payment for domestic, household or gardening work at your own home.
The important distinction is whether the income is earned through your own work. Simply owning or managing an investment does not make the income eligible for the Work Bonus. If a business earns both, such as a plumbing business that also owns a rental property, only the income from the plumbing work qualifies.
Can I use my Work Bonus for my partner’s income?
No. If your partner is also eligible for the Work Bonus, they have their own $300 fortnightly concession and their own Work Bonus balance. You cannot share or combine your Work Bonus balances.
However, because the Age Pension Income test assesses a couple’s combined income, one partner’s work income can still affect the pension paid to both partners after any Work Bonus that applies to that income has been taken into account.
Summary
The Work Bonus means up to $300 of eligible work income each fortnight is not counted under the Income test. When you first become eligible, you generally receive a $4,000 Work Bonus balance, and unused fortnightly concessions can build that balance up to a maximum of $11,800.
Your balance is used to offset eligible work income above $300 in later fortnights. The Work Bonus is applied automatically, and each eligible member of a couple has their own concession and balance.
The information in this guide is general in nature.