Can you earn on the pension?

How much income can you earn while on the Age Pension?
You can still receive a certain amount of income and receive an Age Pension. This income can be derived from investments, property rental or as a salary from employment, as well as several other means.

Exceeding the fortnightly income limit will see your pension reduced by 50 cents for every $1 over the limit, until you reach the disqualification limit for a part Age Pension, at which point your Age Pension payment will cease.

For those who have reached the Age Pension age but continue to work, the Work Bonus may mean that you still qualify for a part, or even full Age Pension depending on your income.

What is the Work Bonus scheme?
The Work Bonus is an initiative to help older Australians access the benefits of working while getting a pension. The Work Bonus provides a concession for employment income for all workers who earn money after reaching Age Pension age. This means the first $250 of an individual’s earnings (or $300 from 1 July) will not count as income under the income test. This doubles for couples, where both are working – both parties may have the first $250 per fortnight (or $300 from 1 July) of their own employment income not counted.

This could mean up to an extra $125 of pension income a fortnight (approximately $3250 a year) for those on a single Age Pension and double this amount for a couple where both are working.

Self-employment will also be assessed as part of the Work Bonus.

Only income derived from salary paid in or outside Australia and director’s fees will be disregarded under the Work Bonus.

Income from payments to a principal from sole traders or partnerships, investments and superannuation are not subject to the Work Bonus.

Can you ‘bank’ your Work Bonus?
If your employment is seasonal or sporadic, you can ‘bank’ your Work Bonus allowance, to a maximum of $6500 $7800 from 1 July), which can then be applied when required. This also means that if you have not worked for the whole previous year, you can earn $6500 before your Age Pension is affected. You do not need to apply for the Work Bonus, Centrelink will automatically apply it when your report your income.

You need to report your earnings when you work and not after you have reached the limits. Centrelink will inform you of your reporting requirements.

The accrued amount will change each fortnight to a maximum of $300 a fortnight or $7800 by the end of the financial year.

How does the Work Bonus scheme work?
If you don’t work, Centrelink adds $250 to your Work Bonus balance each fortnight. Centrelink stops adding the Work Bonus once your balance reaches $6500.

If you work and earn less than $250 a fortnight, Centrelink uses some of your $250 work bonus to reduce your employment income to zero and adds the rest of your $250 to your Work Bonus balance.

If you earn exactly $250 a fortnight, Centrelink will use all of your $250 Work Bonus to reduce your employment income to zero and your Work Bonus balance won’t change.

If you earn more than $250 a fortnight, Centrelink will use all of your fortnightly Work Bonus to reduce your employment income by $250 and will reduce the remaining employment income by any Work Bonus balance that you have.

Case study
Alan is on a full Age Pension and hasn’t been working for five years. He has been offered some part-time work behind the bar at his local bowls club. He will earn $150 a fortnight for doing a few hours behind the bar on weekends.

The Work Bonus will be applied, reducing Alan’s employment income to zero, meaning that his pension payment will be unaffected.

Centrelink will continue to increase his Work Bonus balance by $100 per fortnight as he is not using all of his entitlement, so if he wants to increase his hours down the track, he can still do it without affecting his pension.

Changes on the way
The Pension Work Bonus will be expanded from 1 July 2019, with $300 per fortnight to be excluded from the income test instead of $250. And, for the first time, it will be extended to include earnings from self-employment. A pensioner will be able to earn $7800 per year through self-employment without an impact on his or her Age Pension. This is in addition to the income-free area, which is currently $300 a fortnight (combined) for a pensioner couple.

What do the changes mean for the self-employed?
From 1 July 2019, Centrelink will apply the Work Bonus to self-employment income from active participation.

Active participation means that you are doing work that involves effort. This is the opposite of income from passive involvement.

Examples of work involving active participation include:

  • bookkeeping
  • lawn mowing
  • plumbing.

Active participation does not include managing an investment portfolio or rental properties owned by a family trust or a family company.

Case study
William runs a business and earns income from self-employment. From 1 July 2019, Centrelink will apply the Work Bonus to this income.

William’s business income is $32,500 per year. This is $1250 per fortnight. William hasn’t worked as an employee since getting the Age Pension over 12 months ago. Because of this, William has a Work Bonus balance of $6500.

Centrelink applies the Work Bonus accrued to William’s self-employment income until the balance reaches $0. Once the balance reaches $0, Centrelink will apply the Work Bonus to William’s income up to the Work Bonus limit. From July, that will be $300 per fortnight.

For the first six fortnights after 1 July 2019, William’s Age Pension rate will increase. This is because Centrelink won’t include business income in William’s income test until the Work Bonus balance is $0. Then William will have one fortnight when Centrelink will only include $150 in the income test. From 7 October 2019, once William’s balance is $0, Centrelink will include all income over $300 in William’s income test.

So, how much can I earn and still keep the Age Pension?
Limits for the full Age Pension are indexed on 1 July each year and the limits for part Age Pensions are indexed in March, July and September of each year. Details of the current income limits can be found in the table below.

Pension Disqualifying Income Limits from 20 March 2019

Situation

For full pension/allowance (per fortnight)

For part pension(pf)

Single

up to $172

less than $2024.40

Couple (combined)

up to $304

less than $3096.40

Illness separated (couple combined)

up to $304

less than $4008.80

For more information on what constitutes income, visit HumanServices.gov.au.

Written by Ben



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