The Work Bonus allows pensioners to earn more income before it affects their Age Pension entitlements.
Under the Work Bonus, the first $300 of fortnightly income from work is not counted under the pension income test. This bonus is in addition to the pension income free area, which allows a single pensioner to earn up to $204 per fortnight before their pension is affected.
Combined, the bonuses allow a pensioner to earn up to $504 per fortnight and still receive the maximum pension payment.
All Australians over Age Pension age are eligible for the Work Bonus if they have income from work.
This includes not only the Age Pension, but also the Carer Payment and Disability Support Pension recipients, Department of Veterans’ Affairs Service Pensioners and Income Support Supplement recipients over qualifying age.
Income bank
Pensioners over Age Pension age accrue any unused part of the $300 fortnightly Work Bonus exemption amount in a Work Bonus income bank.
The income bank amount offsets future income from work that would otherwise be assessable under the pension income test.
The maximum Work Bonus Income Bank amount that can be accrued is $11,800 per year. This amount is not time limited – meaning if you don’t use it in one year, it can be carried forward.
The $11,800 maximum for the Work Bonus Income Bank was originally slated to revert to $7800 at the end of June 2023. Following the passage of legislation in November 2022, it was extended a further six months to 31 December 2023 and in September 2023, that increase was made permanent.
How the income bank works
Let’s say you do three fortnights of work as a favour for a friend after being retired for a year.
As you haven’t worked in the past 12 months, you would have accumulated the maximum income bank amount of $7800 (or $11,800).
During the three fortnights, you earn $2000 a fortnight, for a total of $6000.
As your income bank amount is more than your income, none of the $6000 is assessed under the income test and you will still receive the maximum rate of Age Pension.
What counts as income for the Work Bonus?
There are two financial streams that count as income for the purposes of the Work Bonus.
The first is employment income from paid work undertaken by the person as an employee in an employer/employee relationship.
This includes but is not limited to salary, wages, leave payments, commissions, employment-related fringe benefits, bonus payments, supported wages and casual loadings.
The second type of income is that which comes from income earned through self-employment, so long as the work involves personal exertion on the part of the person concerned.
Some examples include operating a business as a plumber, farmer, wedding celebrant or artist.
How do you apply for the Work Bonus?
You don’t need to apply for the Work Bonus. If you are eligible, it will be credited to you.
If you are a pensioner with income from work, you must keep Services Australia informed of your income. The Work Bonus can only be applied to income that has been reported.
Do you think the Work Bonus needs to be higher? Or should pensioners be able to work as much as they please? Let us know your thoughts in the comments section below.
Read also: Applying for a credit card on the Age Pension