work bonus credit Age Pension

Do you, too, find the Work Bonus credit as clear as mud? We suspect this may be the case because of the volume of questions we receive on this topic. It seems that many Retirement Essentials’ members are simply bamboozled by what should be a straightforward calculation.

The following explainer of the Work Bonus is possible because our Head of Customer Services, Steven Sadler, has taken the time to step us patiently through the rules. Again! Someone send this man some chocolates now!

So here is an overview of the Work Bonus which includes:

  • A brief definition
  • A summary of the main rules, and
  • Steven’s explanation of how these rules work.

A brief definition

The work bonus is a credit which reduces the amount of eligible income that is included in the Age Pension income test. It is applied to:

  • Work performed in and outside Australia
  • paid leave while still employed
  • director’s fees
  • self-employment, that involves active participation

The main rules

  • The Work Bonus is available to those who are of Age Pension age and over and receive either an Age Pension, Carer Payment or Disability Support Pension. (Different rules apply to the latter two)
  • It reduces the amount of eligible income that is included in the Age Pension Income Test
  • Eligible recipients do not need to apply for it, it is automatically included in your income assessment.
  • Your Work Bonus balance can be checked by viewing your Centrelink account, linked to your MyGov account.
  • Since 1 January 2024, the maximum Work Bonus has been $11,800 ($7800 plus a $4000 bonus).

How the rules work:

Steven explains
How much can singles earn?

Q. How much can a single full Age Pensioner earn (ALL UP) per annum before moving to a part-Age Pension?

In the first year a single can earn up to $17,104:

  • Firstly, there is an income-free threshold for the Age Pension. This is $204 per fortnight or $5304.
  • Because you are eligible for the Age Pension you are allowed a Work Bonus credit of $300 per fortnight or $7800 across the year.
  • And then there is the bonus $4000.

HOWEVER from Year Two onward, it is only $13,104 because you only get the $4000 bonus once. After that has been used, you are only entitled to $300 per fortnight, which is $7,800 per year (plus the above income free amount of $5304). 

What about couples?

Q. How much can a couple who are full Age Pensioners earn (ALL UP) per annum before moving to a part Age Pension?

In the first year a couple (presuming both are Age Pension age and earning income) can earn $32,960:

  • Couples have a higher income-free threshold of $360 per fortnight or $9,360 combined
  • Presuming both are eligible for the age pension then you are each allowed a Work Bonus credit of $300 per fortnight or $7800 across the year.
  • And then there is the bonus $4,000 each.

For couples, it is important to note that although the income-free threshold is combined between the two, the work bonus is applicable to each member of the couple specifically. If your partner is not of pension age then they will not earn any work bonus of their own and you cannot use your work bonus to offset their earnings. The other scenario is that both of you are pension age but only one of you is earning income, you will both accrue your own work bonus balance and cannot combine them to offset the one income.

We hope that this helps to clarify this important aspect of Age Pension.

But if you believe that your situation is different and you still have a niggling concern, please feel free to share your question and we’ll load up with chocolate and go back to Guru Steven.

Some further information from Services Australia

If you would like to check your own Age Pension entitlements (including work income allowances), using our Age Pension Entitlements Calculator is quick and easy.

You may also wish to explore a consultation where you can discuss maximising your entitlements with a qualified adviser.