What would it take to make you want to work again?
Higher wages? Manageable hours? Or a guarantee that your benefits and entitlements would not be jeopardised?
Or maybe all of the above?
In short, what would it take to lure you back into the workforce?
Many of our readers receiving Age Pension payments frequently express frustration at the disincentives they face when looking to earn a few extra dollars.
These disincentives make little sense. Australia is experiencing a labour shortage so encouraging older Australians to either delay retirement, or return to work in some capacity, could benefit everyone. The skills shortage would be reduced, older Australians would have higher incomes and they would most likely spend a little more, thus fuelling the economy.
That’s why we were pleased to hear the recent announcement from Treasurer Jim Chalmers that some of these disincentives would be reduced. In essence, these changes will provide opportunities for older Australians to enjoy a higher level of income in retirement. So what do you need to know about the Work Bonus changes if you are receiving the Age Pension?
If you find a new job…
A new job can mean that you earn too much, and therefore ‘fail’ the income test for Age Pension entitlement. If your job means that you are no longer eligible to receive any Age Pension, you will still be able to retain various supplementary benefits for 24 weeks, up from the current 12 weeks during what is known as the employment nil rate period. Examples of the supplementary benefits impacted include child subsidies, pensioner education supplement and language literacy supplements. This “nil rate” period applies to various payments such as the Age Pension, Jobseeker and the DSP. You can also retain concession cards during this period. Age Pensioners have an even greater advantage as they are able to retain the Pensioners Concession Card for up to 2 years. We reported on this a few weeks ago.
Changes to the Work Bonus
The Work Bonus allows Age Pensioners to earn $300 a fortnight (or $7800 per annum) without any effect on their Age Pension payments. If you earn less than the $300 per fortnight, then the unused amount is credited towards what is known as a Work Bonus Income Bank. The advantage of this ‘Bank’ is that it allows you to earn in excess of $300 if you have any of these ‘credits’ in your ‘Bank’.
The Work Bonus allowance was increased from $7800 to $11,800 during the Covid pandemic. It was due to revert to $7800 on 31 December this year, however it has now been confirmed that the higher amount will remain in force for the foreseeable future.
And there’s more…
From 1 January 2024 the Governement has proposed all people receiving the Age Pension will have a starting balance of $4000 in their Work Bonus Bank. This means you can earn above the $300 a fortnight until your credits have been used up without losing any Age Pension. At the time of writing the legislation was still waiting ot be passed.
So if you are receiving the Age Pension and want to get some supplementary income you can now earn just a bit more without losing any Age Pension.
Retirement Essentials Age Pension Eligibility Calculator factors in the Work Bonus so you can check your entitlements at any time. You may also wish to talk to one of our experienced advisers about other ways to supplement your income or maximise your entitlements.
The rules around the work bonus can be very confusing as you need to be receiving the Age Pension before you can use it. You can book a consultation with one of our advisers to better understand how it can work for you.
How will this change your situation?
Does the higher Work Bonus help?
And is the automatic $4000 credit to your ‘Work Bonus Income Bank’ a positive initiative?
From my experience with the earnings bonus. My bonus bank last year showed $11,800 inc the special $4,000 because of covid.
However differing to your above report Centrelink deducted from this balance only the the amount I earned over the couples allowance of $300 per fortnight.
Please check.
Cheers
Neville
Hi Neville, thanks for kicking off the comments! I apologise in advance if I have misunderstood your point but what you have said is correct. If you earnt $1,000 over the minimum threshold, Centrelink would first deduct that fortnight’s $300 worth of work bonus and then for the remaining $700 they would see if you had that much saved up and if so use it. So as you have said your banked work bonus only reduces by the amount above $300 not the full amount.
work bonus is still showing as 7800,not the increased amount.
Also in a two week period when My earnings precluded any Centrelink payment my work bonus was still reduced although there was no advantage .
Needs ckarification
Hi Patrick, thank you for your comment. As per the article, the payment of $4,000 to Age Pension recipients is applicable from 01/01/2024, so no you will not see an immediate increase to your existing balance. Regarding your work bonus being reduced despite not receiving any pension, yes this is possible.
For example, if a single person earnt $3,500 in one fortnight (max threshold is $2,397) and they only had $600 in their Work Bonus balance, Centrelink would take off that fortnight’s $300 allowance and then the $600 saved up meaning a $900 reduction. This is to try and get the recipient as much of a payment as possible, however in this scenario the $3,500 minus $900 in Work Bonus credits only comes down to $2,600 which is still above the max threshold for that fortnight and so no pension payment would be received.
If you believe Centrelink have erred in the calculation of your payments/work bonus then you would need to call them on 132 300 and I suggest you do so at 8am local time when the call centre first opens for the best chance of success.
pensioners are allowed to work. Those working pensioners pay tax on their wages plus 50c is deducted per dollar from the pension and above all have to pay tax on total pension received at the end of the financial year. Pensioners are paying more tax. How does that work?.
Yes that is so true, we just got a shock tax bill, you dont get to keep much of your money
As a taxpayer I am stunned a 50% tax is levied on pensioners who earn money over a modest threshold. No wonder the cash economy exists ? A standard say 25% tax would seem fairer ? But I do think multi million dollar homes should be accounted for ? Maybe a $ 1m max house threshold is fairer to all ?
Hi – I just wanted to say thanks to you Retirement Essentials for this valuable role you play – explaining things and updating us as you do. It’s also good to read the replys.
Regards Leanne
Hi Leanne, thank you for your feedback! Glad you are enjoying the content and we look forward to helping you in the future 🙂
I regarding work bonus with age pension ,i am a sole trader trying to earn a little extra but this financial year ran as a loss a I was buying stock in preference to selling . So was a negative in profit and loss
Hi Rikilee,
Buying stock is considerd an asset also considered as a profit, your creative accounting is wrong
I am only getting $300 per week work bonus at the moment, once the previous $4000 cut out it reverted back to $300
Why does this topic need to be hard? As an aged pensioner I currently cost the govt $829 per fortnight to sit at home. If I was allowed to work full time and earn let’s say $2200 per fortnight. I would be paying the govt about $300 in tax. Continue paying me $829 per fortnight but it’s now only costing the govt $529.
Multiply by 1000 happy pensioners and the govt is $300000. better off and those pensioners have more disposable income which you can assume will be spent to make their lives more enjoyable.
This added retail expenditure would help boost the economy thereby benefiting the govt coffers yet again.
It must be rocket science as these clowns running the country have no clue
Absolutely spot on , the simplicity of it is just that -simple . Yet stupid Govt bureaucrats who control these areas don’t seem to be able to get it thru their thick heads it is a win win for all .
I am eligible for the pension but have continued to work 2-3 days a week and therefore pay tax. I have just applied for the AP on the advice of Centrelink. I probably won’t get it but I’m told, it opens the doors for other benefits. I agree with the previous comments, working improves wellbeing, health and has its obvious financial pluses. It is also saving the government money. I think there should be more recognition and more incentives to encourage our very valuable experience and work ethic.
The age pension is taxable, so your example gross income of $78,754 p.a. ($3,029/fortnight) would attract income tax of $617/fortnight before deductions and rebates, plus the Medicare levy. This adds weight to your argument.
However, what you actually propose is to remove the income test from the age pension, which means the age pension is not just a safety net for the aged and frail (as intended) but a universal income restricted to old people other than self-funded retirees failing the assets test. (This would be nearly as generous and costly as the New Zealand Super pension paid universally to all its citizens from age 65.) Your proposal may be simple, but it’s unfair to taxpayers under 67 years old (the current threshold for the age pension) funding the proposed broadened liability, unfair to aged people failing the assets test because they saved and invested rather spent during their working life, and unfair to other welfare recipients (e.g. Newstart allowance) whose allowance quickly degrades with any paid work. Robodebt anyone?
Social policy is hard – to be fair to citizens, ensure value for public expense, and actually solve a problem within a government’s remit without creating another one. Answers usually are not simple.
Mark, I missed the bit where you factored in the huge cost to govt (ie taxpayers) of administering a means tested AP. A universal aged pension is just that – not unfair to anyone – it’s universal. And as it’s taxed – the govt wins yet again if aged people dare to earn wages as well.
Why can’t the age pensioners earn more as there is a shortage of workers as it is more productive to do so it would be a better outcome for every on.
totally agree. how many skilled retired would love to do extra work. sharing there skills and experience but would be penalised for doing so
This is only helpful for a short time, it doesn’t take long for the bonus to run out and then you loose your pension or part of and another thing we found out the hard way is you are taxed heaps on on it because the aged pension is considered a taxable incomes now we have not only lost part of our pension but we have a large tax bill we have to try and pay because of working a couple of days a week
Yes, I agree Susan Bates, and having the Low Income Tax levy removed didn’t help either. I too have been stung with a large taxation bill for the very first time in my life and will find it hard to pay. I am disappointed that the government sees fit to tax pensioners in this way when we have worked all our lives and paid our fair share of taxes, and because we choose not to be a burden and keep working whilst we can to help our minds and bodies stay active – we are then penalised!
Hi, if you haven’t used up your current work bonus amount before the 31st of December 2023, will this amount carry over into 2024?
Hi Antony, thank you for reaching out! This is correct, you will retain your balance moving forward and anyone who has already used it will receive a ‘top up’.
Is the age pension tax free or at tax time does you total income include what you have earn t plus the age pension to combine one total then you will get a tax bill if so this will not help the situation
No Robert it is a taxable pension, it would help a little if it was
I am happy to be able to be useful, work some, earn some dollars a d still retain a few entitlements.
I have just a 2 bedroom flat, saved hard to make some super, and wish to be allowed a few govt benefits in my old age…..78 years.
I like working and contributing and the increased limits are helpful. thank you.
Well I think it’s not fair, I am an older Australian on the aged pension and work casually in the disability sector. Some weeks I earn over $600 and some weeks I earn over $400 irrespective I should not be penalised and have some of my pension reduced as I sometimes bring in a wage of over $1000 a fortnight
In some countries they are so short of workers you can work an average of 30. Hours a week and income generated won’t affect the pension. That is what the Govt needs to do here in Australia.
Absolutely, I agree, I am only working 2 days a week and we both lose some pension because of it, a few weeks ago I did an extra 2 days and was penalised for the whole amount bar $34, there is no incentive to do more than the minimum.
I earned $15k and $18k in a part pension. I am now required to pay tax on my total income of $33k…..is this correct
The work bonus is very misleading. Yes you can earn $11800 pa and you will still get your full pension.
What is not openly disclosed when the govt gives itself a big Pat on the back is that your assets are deemed, and that is part of your work bonus.
Eg if you have $300,000 in assets you are allready deemed to be earning $4746 pa. And remember it’s not just cash in the bank, but vehicles, house contents, super balances and even money you are carrying in you wallet that are deemed. Plus anything else of value. For the life of me I can’t see my energy provider being too thrilled if I took my latest power bill and offer to pay it with my lounge.
Hi Andrew, thank you for shining a light to help your fellow readers! I just want to clarify a couple of things though. Firstly, the work bonus is not impacted by deemed income. If you earnt no employment income in a fortnight then the full $300 worth of would be ‘banked’ for future use, deemed income does not eat into it at all. Secondly, not all assets are deemed as you have said, only financial assets are. Things like bank accounts, superannuation, shares etc. which earn you a return on the investment have deeming applied however non-financial assets such as cars and personal contents do not have deeming applied to them as they earn you no income from them.
I wonder why my pension amount is cut as my husband, also on the aged pension earns above the income allowed threshold in a part time job. I have a substantial work bonus accumulated but this isn’t taken into account.
Hi Margaret thanks for cquerying one of the lesser known rules with the Work Bonus! Each member of a couple has their own work bonus that is used to offset their own income only. You cannot use your work bonus to offset your husband’s income.
I am currently enjoying a $12000.00 work Bonus. Will that be eroded by the change as indicated in the paragraph headed “And there’s more ” to a $4000.00
Hi Anthony, thanks for your query! No your balance will not be eroded, that paragraph was clarifying that those who don’t have any work bonus banked up like you do will receive a bonus credit. Those who have their balance already will not be impacted.
These supposed increases are so out of date with the working world, value wise, they are an insult to pension Labour.
Work places will pay for experience always have. Anyone called on to use that experience in the work force is not going to work for the suggested amount per fortnight.
The pension system needs a massive overhaul as does the super Scheme all the Government is doing is wasting money and valued experience leaving the work force.
Absolutely, I agree, I am only working 2 days a week and we both lose some pension because of it, a few weeks ago I did an extra 2 days and was penalised for the whole amount bar $34, there is no incentive to do more than the minimum.
My husband and I, 70+ continue to run our micro business helping people resolve longterm anxiety and childhood trauma. My husband also teaches counsellors and psychologists how to use the technique he uses. It is an essential service. What a nightmare it is for us as pensioners! We have very little in super, but we fluctuate between asset and income testing on a part pension seesaw! It is insane the hoops we jump through to submit tax and income details and then wait for years for it to be assessed. Even the people at Centrelink can work out how we are assessed but we are supposed to make sure we don’t get paid too much! This current ‘increase income allowed’ might mean we can actually ‘relax’ for a little while. A wage of $200 a week would be a ‘lotto’ win at the moment!
I worked one day on the referendum, earnings maybe $300 to $400. I get a full pension, no other earnings this year. My earnings will be tax free. At this stage not aware that I’ll be doing any other paid work this year and if so would never get anywhere the $11,800. Do I need to tell Centrelink ?
Hi Dave, thanks for sharing your situation! Although the amount you earn will most likely be covered in full by your work bonus balance (meaning no impact to your Age Pension payment), you should still tell Centrelink so that they know and can record it on file for future reference.
Why Can’t people just work, pensions left Alone ‘ and they pay tax on their earnings, use the KISS Method, keep it Simple Stupid’
Hi
I work in aged care am now having to cut back to maybe 2 days a week as I got a huge tax bill
When I went on the pension no one explained to me that the pension was classed as another wage
I love my job & working where I work
If I did say 3 6.5 hr days p/w would that impact much on my pension
Hi Wendy, thank you for reaching out. It sounds like we could best assist you in our General Advice Consultations. In these we will explain the interactions of employment income and Age Pension entitlements and also provide you with some different ways you could manage or maximise them. You are able to book one of these consultations here. We look forward to meeting with you. Thanks, Megan
Hi,
my wife and i are on the pension and I work casually(30 hours /fortnight) so both our pensions are reduced? At the end of the financial year when I put in my tax I shudder as because I am working casually my wife and my part pension is classified as income and is added onto my casual wages then taxed. Very anxious at tax time.
I am part pension plus superannuation drawdown. My wife is too young for a pension and does not work.
As all our income and assets are combined to determine my part pension amount, can my wife work and the work bonus be applied to my pension?
Hi Jeff, thank you for your query! Unfortunately it won’t work that way because only you will earn the work bonus in the first place (as you are the one getting a pension, not your wife) and you cannot use your work bonus to offset your partner’s income. If she continues to work once she is of Age Pension age then she will become eligible for her own Work Bonus and would begin having her income offset by it.
it looks like they make sure pensioners will struggle . This is something many people can not believe. Why pensioners cannot work and pay taxes like in other countries?
Is the $11800 work bonus added to earnings and therefore taxed?
Hi Glenda thank you for your comment! The work bonus reduces the amount of income Centrelink assess you as having earnt for the purpose of calculating your Age Pension payment. It has no bearing on your taxable income or the ATO’s assessment.
If you don’t take a wage but any income earned is directed to super how is this viewed by centre link
Hi George, thanks for your question! Centrelink assess income the same, that is based on the gross amount, regardless of where you have the money sent to. The key thing is how much is being earnt, not where it is paid to.
I work 20 hrs per week and pay tax but have just done my tax and the bill was $2800 jeez I was gobsmacked the gov gives with one hand and takes it with the other
Gee reading these comments, I wonder if people just want something for nothing.
Due to circumstances I lost everything at age 64. I am talking house and business. I am now 77 and work full time on $60K pa and my wife and I are very grateful that with rent allowance we get a net $824 PF as a couple, after an additional $132 in tax, part pension. My wife does not work. I am working as I do not want to live in poverty when I retire, thereby extending the life of my meagre super. Everybody’s circumstances are different but my suggestion is get out there and work if you are able.