Having successfully applied for a full or part Age Pension, your fortnightly payment may be further adjusted by applying the Pension Work Bonus.
This week we define the Pension Work Bonus and explain how it works.
Originally introduced in 2009 as an incentive for older Australians to stay in the workforce longer, the bonus allows those on a full or Part Pension to earn more than the money stated in the income thresholds which are used when you apply.
The first important point to note is that the work bonus only applies to those who have already qualified for a full or part Age Pension – it cannot be used to reduce your income during the application process.
The bonus allowed is $300 per fortnight up to a maximum of $7,800.
The good news is that this allowance works in the form of a credit. If you do not use it, it can be carried forward to a time when you do wish to use it. The work bonus applies to part-time, casual and seasonal work – even self-employment. You cannot use it to offset non-employment income and it’s not money you can draw on. Both members of a couple can receive the work bonus if they are both of age and working.
Here’s the Pension Work Bonus in action.
When you earn less than the Pension Work Bonus
Stephanie earns income of $200 a fortnight. Because her income is less than the available Work Bonus of $300 for the fortnight, Centrelink applies $200 of the Work Bonus to her eligible income. This means that Stephanie’s income won’t reduce her payment in that fortnight. Her Work bonus balance is also increased by $100.
When you earn exactly $300 a fortnight
If Stephanie’s eligible income is $300 a fortnight, her $300 Work Bonus amount is used to reduce her Work Bonus eligible income to zero. Her income won’t reduce her pension payment amount or change her Work Bonus balance.
When your Work Bonus eligible income is more than $300 a fortnight,
If Stephanie’s Work Bonus eligible income is $400 a fortnight, Centrelink will apply the $300 Work Bonus amount to her eligible income. This leaves Stephanie with $100 of assessable income. If her Work Bonus balance is greater than $100, that amount can be used to reduce her employment income to zero. This means there will be no Work Bonus eligible income to assess for the income test.
If, however, Stephanie has no Work Bonus balance, Centrelink will apply the income test to the remaining $100 of her assessable income. Depending on her circumstances, this may see a reduction in her pension this fortnight.
The Pension Work Bonus as its name implies is not relevant for those seeking a Commonwealth Seniors Health Card (CSHC) where income must be below the relevant threshold, no bonuses allowed.
Pension Work Bonus Q&A
The Customer Service team at Retirement Essentials receives many questions about the work bonus.
Here’s a frequent one about the way the ‘maximum’ bonus works:
Q. Dorothy: I have heard there is a lifetime maximum. What does this actually mean? What happens if this runs out?
A. Steven Sadler, Head of Customer Service:
Hi Dorothy, I sympathise with how confusing this can sound. By ‘lifetime maximum’, it means that you cannot have any more than $7,800 accrued at a time. So if someone did not work for five years, they would not be able to accrue five years’ worth of work bonus, it will stop at $7,800. In that same scenario, if you returned to work after five years and began using some or all of that $7,800 then it will begin to accrue again back up to that maximum amount.
Therefore, should you earn more employment income than you have available in your accrued work bonus, it is possible that your pension may be affected. However the work bonus does replenish itself back up to the $7,800 maximum during periods where you are not earning any employment income.
We also hear from members with concerns about how to apply a Pension Work Bonus when it comes to couples’ earnings. This can be very complex. The good news is that we are here to help.
If you need more assistance to better understand how this useful adjustment to your income assessment might be made, you can (if already on a pension) retest your sums using our free Age Pension calculator.
Or book a consultation with our helpful customer service team.