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.
I undertand that amounts you earn above $300 per fortnight are used to reduce any accrued work bonus you already have. Is this the case even if your pension is being reduced by the assets test and your income isn’t actually affecting your pension anyway?
Hi Jim, you are correct. If you have $5,000 in work bonus accrued then get paid $2,000, your work bonus pool would be reduced down to $3,000 even if the amount of pension your receive is being calculated based on your assets and not income.
Hi, If over a period of time, one engages in enough work per fortnight to exceed the $300.00 per fortnight and also exceed the $7,800.00 per year, are they able to go off the pension for a year or so, then reapply for the pension when they decide to finish working?
Hi Maureen, you absolutely can go off the pension if you have too much in income or assets and then re-apply once you are back under. The key thing to note is that you do need to re-apply, with all forms and supporting documents etc. it’s not just a matter of letting Centrelink know you are back under the threshold and getting the pension switched back on.
Hi,
I am currently on a aged pension and receive the work bonus but I haven’t used it much. I am returning to work part time 2 days per week this will give me $544 per week. How much will this reduce my pension by. Also I was recently paid $550 in one fortnight as sick pay, when I reported this to Centrelink they said it would not affect my pension as it was back pay and calculated over 12 months.
How will these 2 items affect my work bonus and pension
Kind regards
Hi Jeff, if you or anyone else reading would like to talk about your situation in detail, we offer 30min consultations at a cost of $75. We can clarify how Centrelink will assess you specifically and help guide you on any related matters that might impact your Age Pension. If you wish to proceed please CLICK HERE to book the best suitable time available.
Hello, do you need to apply for the work bonus, or is it automatic when you are on the age pension?
Hi Janette, thanks for reaching out! The work bonus automatically accrues whilst not working and is automatically applied to any employment income you earn in future so nothing for you to do except declare the income you earn.
Hi Steve, I retired 18 months ago and have not worked in any capacity since. I am looking at a job that pays $480 gross per fortnight. Is the work bonus calculated on gross or net. If I am allowed to earn $300 p.f , is the remaining $180 taken from by bonus credit, or is it the full $480. Thanking you for your reply.
Hi Mark, thank you for reading our article! As per the third example explained in the article, Centrelink will apply the $300 Work Bonus amount to your gross fortnightly income. This would leave you with $180 of assessable income.
Presuming you are already receiving an Age pension payment, your Work Bonus balance would be greater than $180 (because it has been accruing each fortnight whilst you were not working). This means that the banked amount can be used to reduce your employment income to zero so there would be no eligible income to assess for the income test.
If/when you have have no Work Bonus balance banked, Centrelink will apply the income test to the remaining $180 of your assessable income. Depending on your circumstances, this may cause a reduction in your pension.
With a work bonus of say 10000 accrued is there a threshold amount you can earn in a fortnight with cancels out the age pension for that forthright, say e.g. $3000, regardless of the bonus accrued. Thankyou.
Hi Richard, thanks for joining the conversation! Any/All Work Bonus you have accrued will be used to offset any/all income you earn until it is depleted. Therefore in the scenario you have proposed, earning $3,000 in one fortnight would not impact you pension in any way because the entire amount would be taken out of your accrued Work Bonus leaving you with $7,000 remaining.
As an “immigrant” from NZ my personal situation is that my age pension is funded approximately 50/50 by Australia (which has income restrictions) and New Zealand (which has no restrictions).
When, as seems likely to happen, I exhaust my work bonus will Centrelink apply any reduction to the NZ component of my pension or will just the Australian component be affected?
Hi Pete, thanks for reaching out! Centrelink has no authority over your NZ pension so they will not increase or decrease it regardless of how your financial situation changes. They will only increase/decrease your Australian Age Pension.
Hello, I am on an age pension, but every time I go to Centrelink to check what the work bonus amount is, it just stays on $300, it doesnt seem to be accruing, should the accrued amount increase by $300 every fortnight and be shown when I log in to my Centrelink account?
Hi Martin, thanks for your question.
Yes the Work Bonus does accrue if it is not used, and can be carried forward to future fortnights to be used when employment income is received.
The Work Bonus reduces the amount of your eligible income included in the income test.
The Services Australia website says that if you don’t work, you still accrue $300 to your Work Bonus balance each fortnight.
From 1 December 2022 to 31 December 2023, your maximum Work Bonus balance limit increases from $7,800 to $11,800. This will reset to $7,800 on 1 January 2024.
You’ll also get a one-off increase of $4,000 to your Work Bonus balance during this period.
Example
If your Work Bonus balance is $6,900 on 1 December 2022, we’ll add $4,000 to it. Your new Work Bonus balance is now $10,900. If you don’t have any eligible income, we’ll keep adding $300 to your balance each fortnight until it reaches the new maximum amount of $11,800.
Services Australia also confirms that you can use your Centrelink online account through myGov to see what is available to you. You can also check your current balance.
Great information. My question is, Does the work bonus include interest income on term deposits?.
Hi Colin, thanks for reaching out! The work bonus offsets employment income only. It cannot be used to offset rental income from an investment property, deemed income from financial assets or any other income source such as defined benefits or foreign pensions.
I read on Centrelink website that the Work Bonus accrued limit will reset to $7800 from 1 January 2024. If an age pensioner has accrued amount of $12000, will the reset mean that he/she losses the $4,200 on 1 January 2024? Thank you.
Hi Monica, great question! Technically yes, Centrelink have stated that any excess balance will be removed as of 01/01/24 HOWEVER, parliament are considering making the $11,800 increase a permanent one in which case you will not lose anything. So watch this space and we will keep you posted as soon as we know more!
why can’t you take the pension money of the working partner i give my wife back what she loses in the pension out of my working pay she is an individual what if i did not give her $200 back each fortnight all so why can’t you spread my work bonus out over 12 month instead of running out and you would like older people to work but just doing my 40 hours a fortnight and pension i lose $400 a fortnight and have to give my wife $200 to make up her money what if i told her go away you’re not getting it he or she is in an individual with rights just because married or live with someone this is not right