Backbencher support adds to push to alter Work Bonus scheme

The push to allow retirees to work without affecting their pension has gained support from federal backbenchers.

Work Bonus allows people on the Age Pension to earn up to $300 fortnightly and it is not assessed under the pension income test.

Work Bonus operates in addition to the pension income test free area. The pension income test free area is $180 a fortnight for singles and $320 for couples.

Combining the two means an Age Pensioner could earn up to $480 a fortnight and still receive the maximum Age Pension. However, after $480, the pension is cut by 50 cents in every dollar in income which is effectively a marginal tax rate of 50 per cent.

Read: Proposal to boost the Age Pension

This heavy tax burden is being cited for the tinynumber of pensioners who work. According to Department of Social Services (DSS) data there are about 2.6 million pensioners in Australia but only 3.4 per cent of those have an employment income.

The issue has gone to the Expenditure Review Committee, a subcommittee of the Cabinet that meets before the Budget to review policy and recommend proposals.

A backbencher involved, who spoke to the Sydney Morning Herald on the condition of anonymity, and said raising the Work Bonus threshold would deal with cost of living expenses and the labour shortage in one fell swoop.

“Current tax arrangements are a huge disincentive to older Australians,” they said.

“Small businesses are seeking immediate solutions to day-to-day economic challenges and this would provide welcome relief to business owners across Australia.”

Read: Can Centrelink check your bank records?

The push to allow pensioners to work has gained some serious backers in the past year.

The Australian Chamber of Commerce and Industry (ACCI) has also called on the Federal Treasurer Josh Frydenberg to allow Age Pensioners to earn more without impacting their pension.

“There is an army of older workers, ready and willing to return to the workplace. However, skilled aged pension recipients have very little incentive to re-enter the workplace,” said ACCI chief executive Andrew McKellar.

“In raising the Work Bonus threshold, pensioners would be allowed the opportunity to earn more, while businesses who are struggling to find staff would have access to workers, filling thousands of job vacancies.”

The ACCI said getting older skilled workers into the labour force would be the: “key to Australia’s economic recovery”.

Read: Will my mother lose her pension?

Lobby group National Seniors also supports changing the Work Bonus threshold. 

“National Seniors is calling for an exemption to the income test for pensioners with limited savings,” chief advocate Ian Henschke said.

“A targeted exemption will encourage the thousands of retirees who have little additional income to get back into the workforce to boost the economy and their own incomes.

“This should be done as a two-year trial while we lack workers from overseas to test how effective it is.

“We have a grey army out there to work if the right incentives are offered to them.”

National Seniors said sectors struggling to attract workers including health and age care, tourism, agriculture and hospitality would be ideal for a targeted approach to raising the threshold.

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Written by Jan Fisher