Pension Work Bonus

There are also some proposed changes to the Pension Bonus Scheme that could give some pensioners an opportunity to earn some extra money on the pension.
Proposed changes to the Work Bonus mean that working pensioners will have the opportunity to earn more money before the Age Pension is affected.

In September 2009 the Pension Bonus Scheme was closed to new entrants and a new program, the Work Bonus, was introduced. What is it and how will it affect your retirement plans?

Centrelink assesses eligibility for an Age Pension on your income and assets.
The income test and the assets test are applied and can reduce the maximum pension rate if you are above a set threshold.

The Work Bonus provides a concession for employment income for all workers who earn money after turning Age Pension age (currently 65 for men and 64 for women).

This means the first half of an individual’s employment earnings up to $500 per fortnight will not count as income under the income test. This doubles for couples where both are working – both parties may have the first half of $500 of their own employment income not counted. An individual’s assessable income may be reduced by up to $250 a fortnight, while couples may have up to $500 excluded.

This could mean up to an extra $125 of pension income a fortnight (approximately $3,250 a year) for single pensioners and double this amount for a couple where both are working.

Is the Work Bonus fair?

Under the Federal Government’s Secure and Sustainable Pension Reforms, the Work Bonus was designed to make it more financially beneficial for those over Age Pension age to continue working. As seasonal workers are finding out, it may not be a bonus at all.

What is the Work Bonus?

Under the Work Bonus, half of the first $500 of fortnightly employment income is not counted towards the income test. Therefore, a maximum of $250 can be disregarded in addition to the normal allowable income-free area.

Do I need to claim for the Work Bonus?

Centrelink automatically applies the Work Bonus when you report your fortnightly earnings.

What income is disregarded under the Work Bonus?

Only income derived from salary paid in Australia and 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.

Are my seasonal earning averaged over a full calendar year?

No. Earnings are assessed on a fortnightly basis and will affect any benefits paid within that reporting period.
This is where the problem lies. Under previous rules, one-off earnings could in some circumstances be averaged over 12 months, meaning that seasonal income may not have affected a person’s pension. Under the new rules, the fortnightly assessment means that those on the Age Pension who undertake seasonal work may lose part of their pension.

Changes to the Work Bonus

The Government has announced two changes to the Work Bonus which, if legislated, will be implemented in July 2011. The first is to make the Work Bonus $250 per fortnight as opposed to half of $500, so pensioners earning less than $500 will get a bigger Work Bonus. For example, an age pensioner who works and earns $250 a fortnight under the new arrangements will have no income assessed under the income test, whereas currently $125 per fortnight would be assessed.

The second change is that pensioners will be able to accrue any unused amount of the $250 fortnightly exemption in an ‘income bank’, up to a maximum of $6,500. This income bank amount can be used to exempt further income from the pension income test. The income bank amount can carry forward across financial years.

One effect of this is that pensioners who do seasonal one-off work such as fruit-picking, exam marking, working as Santa in a department store, or as an electoral officer, can build up a balance when they are not working and then earn a substantial amount (up to $6,500 per year once the balance has been accumulated) before any wages are counted in the income test.

Written by YourLifeChoices Writers

YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.

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