If you’re on a part-Age Pension because your assets are above the lower threshold, you may be in a stronger position to earn extra income than you realise – even beyond the Work Bonus.
Here’s why.
The Age Pension is reduced under two separate tests:
- The income test, which reduces your fortnightly payment by 50 cents for every dollar of income over the threshold
- The assets test, which reduces your payments by $3 per fortnight (or $78 per year) for every $1,000 of assets over the threshold
You can see the current income and assets test thresholds here.
When you are being assessed, Centrelink will apply both tests, but you’ll receive the lower fortnightly amount determined by whichever test reduces it more. So, if your Age Pension is already being cut because of your assets, any extra money you earn from work (even beyond the Work Bonus) might not affect your payment further. This continues until your income becomes the main reason for your fortnightly payment reduction.
How this works in practice:
Imagine you’re John, a single homeowner with $525,000 in assessable assets and currently 67, receiving a part Age Pension of $14,000 reduced under the assets test.
You take on some casual work earning $30,000 a year, or $1,153 per fortnight. But when it comes to the income test, less than that will be counted because:
- Work bonus: Each fortnight you will have an ongoing Work Bonus which is a $300 per fortnight allowance, of income not counted under the income test. This means only $853 per fortnight (which is above the $300 allowance) will count – This amounts to $22,178 over a year.. (You can read more about the Work Bonus and how it’s worked out here)
- Deemed income from financial assets: The deemed income from the $500,000 of your assets which are financial assets (like cash and shares in the bank) are counted as income of $9,998.
- Income test threshold: For a single person, the lower income limit is $5,668 per year. If your counted income goes over this amount, your Age Pension is reduced by 50 cents for every dollar over the limit. Your total counted income will be $32,176 ($22,178 from work + $9,998 from deemed assets). Since $26,508 of this is over the threshold ($32,176 – $5,668), your Age Pension would be reduced by $13,254 under the income test.
But your Age Pension is already being reduced more under the assets test. With $525,000 in assets and the lower asset limit for a single homeowner set at $321,500, your assets are $203,500 over the threshold. At $3 per fortnight for every $1,000 over, that’s a reduction of $610.50 per fortnight, or $15,873 per year.
Since the assets test results in a larger reduction than the income test, Centrelink applies the assets test to calculate your payment. So even with $30,000 annually in earnings, your Age Pension isn’t reduced any further – for now.
If your income increases significantly, or assets drop, the income test could eventually become the one that applies. That’s why it’s important to review your situation regularly – especially if your work or investments change.
In summary:
Centrelink uses the test that results in the lower Age Pension. In this case, it’s the assets test – which means your additional income from working doesn’t reduce your payment any further.
This shows that, depending on your assets, you might be able to earn much more than the Work Bonus amount and still keep your current pension.
What to do next
If you’re considering taking on work or already doing so, it helps to understand which test is currently affecting your Age Pension. By understanding this detail, you’ll know how much income you can earn without losing your benefits.
Retirement Essentials advisers can help you check which test applies to you and show you different scenarios in real-time. It’s a smart way to maximise both your Age Pension and your ability to earn income.
To get started, you could try our free Age Pension Eligibility Calculator. It’s helpful whether you’re approaching Age Pension age or updating your income due to a change in work.
Need help working it out?
Consider booking a Retirement Advice Consultation with one of our experienced retirement advisers. We’ll help you understand how extra income could affect your payments – and how to get the balance right.
What about you?
Are you wondering if you can continue part-time work after 67 and still receive Age Pension support?
Have you been surprised that your work income didn’t affect your fortnightly Age Pension payments?
