By the time you read this newsletter new Work Bonus rules will be in place.
Will you benefit from this? And if so what does this mean for your entitlements?
Today we have a handy facts sheet on rules about income limits including employment earnings. The way the means test works can be a little confusing; it’s a two-step process when you add on the Work Bonus. Here’s a plain-English explainer.
Age Pension eligibility
The first step to receive the Work Bonus is to qualify for an Age Pension. The two main conditions of the Work Bonus for Age Pensioners are that you are of Age Pension age or over, and that you have already qualified for the Age Pension.
The income limits for the Age Pension are as follows:
| You will receive the FULL Age Pension if your income is equal to or less than | You are not entitled to ANY Age Pension when your income exceeds | |
| Single | $204 per fortnight / $5,304 per annum | $2,397.40 per fortnight / $62,332.40 per annum |
| Couple(combined) | $360 per fortnight / $9,360 per annum | $3,666.80 per fortnight /$95,336.80 per annum |
What is classed as income?
There are two main elements of income that Centrelink includes. These are work income (i.e. income from paid employment) and investment income. Investment income can include things such as rental income from property as well as deemed income on financial assets. Proof of all forms of income is required, usually by the provision of tax returns, pay slips or profit and loss statements.
Work Bonus permanent increase
On January 1 the Work Bonus increase to $11,800 per annum became permanent
The Social Security and Other Legislation Amendment (Supporting the Transition to Work) Act 2023 received Royal Assent on 28 November 2023.
As a result of the measures in this legislation, from 1 January 2024 all new pensioners over Age Pension age and eligible veterans will receive a $4,000 starting balance in their Work Bonus income bank. The maximum income bank balance will also be permanently increased to $11,800. The change to the Work Bonus was a response to skills shortages in the workforce post the Covid Pandemic, but also a way to keep older Australians engaged and purposeful. The extra benefit is that those on the Age Pension can continue to work and contribute without being financially penalised.
Should you apply for this extra allowance?
The good news is that you do not need to separately apply for any part of the Work Bonus. As with your other Age Pension obligations, you simply need to declare your income. You can see your Work Bonus balance online at any time through the myGov/Centrelink portal.
How does it work?
The work Bonus applies to individuals – it is the same for a single Age Pensioner and each of member or a couple.
If you don’t work you still accrue the Work Bonus. If you do work the new Work Bonus limits will be automatically applied.
The $11,800 can be understood in two parts.
$7800 per annum or $300 per fortnight allowance, plus a credit of $4000.
Work Bonus eligible income is more than $300 in a fortnight
Centrelink will use your Work Bonus to reduce your eligible income by $300. It will then reduce the remaining eligible income by any Work Bonus balance you have. After this is used up, it will apply the income test to your remaining income amount.
How it works for John
John’s Work Bonus eligible income is $400 a fortnight. First the $300 Work Bonus amount is applied to his eligible income. This leaves John with $100 of assessable income.
If John’s Work Bonus balance is greater than $100 (remember he gets the $4000 credit) his balance can be used to reduce his eligible income to zero. This means John has no eligible income to assess for the income test.
If John had no Work Bonus balance, the income test will be applied to the remaining $100 of his assessable income. Depending on his circumstances, this could reduce his pension payment.
Further detail on the Work Bonus is available from Services Australia.
The work bonus and its impact on your entitlements can be tricky to understand. If you want to review how it could work for you and your your entitlements you might consider booking a Maximising your entitlements consultation with one of our advisers. Or if you are not quite ready for that you could book a free 10 minute meeting to better understand how our advisers might be able to help you.
I found this article very interesting and helpful. I am close to receiving a full pension and currently earning around $400 to $1,000 per month so this extra income is coming to be in very helpful. A lot of the work is country based and the extra income helps pay for the fuel and Caravan Park sites, all while we are having a holiday.
Can you advise is the $4000 credit to the work bonus a once of or an annual top up?
Hi Peter, thanks for your query on the Work Bonus! The $4,000 credit is a once off that is paid upon approval for ‘new’ pensioners approved from 01/01/24. If you were already on the Age Pension prior to 01/01/24 then you would have already received your lump sum credit and it will not be paid again. Aside from the one off lump sum, this increase means that you can now ‘bank’ a higher balance of unused work bonus credits then before.
I am confused with the work bonus , I am single with full pension, I started to work part time , I will earn 1100 per fortnight how do they calculate the additional that is taken off the bonus after the $300
Hi Ray, Centrelink will first deduct that fortnight’s $300 amount meaning your income would be reduced to $800 initially. Then Centrelink then check if you have any work bonus accrued from previously unused credits and if so use any/all accrued balance you have available to offset it. So if you had $1,500 in work bonus balance then the $1,100 pay would be reduced initially by $300 and then the remaining $800 would be offset by your accrued work bonus balance meaning $0 in assessable income but a remaining work bonus balance of $700.
So the govt is full of it.
you can only get 7800 work bonus a year, once the one off 4000 for new pensioners is used up.
Hi Peter, thank you for sharing your concern, this is not quite correct though. Technically yes, if you did not use any work bonus credits at all for 1 whole year then you will have accrued a balance of only $7,800. However, the change that has come in is that you will now continue to accrue your fortnightly credits beyond that $7,800 total until you hit $11,800. So you will not stop accruing credits at the 1 year mark simply because a year has passed, you will only stop once you hit the new limit which (if starting at $0) would take 39-40 fortnights.
I cannot see on the Centrelink App how to see my Work Bonus balance! Please help’
hi there I am on the pension not working because method heath do I get 4000 dollars in my account
So I am more confused than ever…. I thought that when I retire later this year I would be able to earn $450 a fortnight for ever more… but it seems like this $11800 is only for the first year you are on the pension. Is it correct that it then goes back to $7800 a year after that which means only $300 pf?
Hi Vikki, thank you for reaching out with your query! It is correct that the fortnightly credit is remaining the same at $300, what is changing is how much you can accrue if you do not use that fortnightly amount.
So, what will happen when you used all your Work Bonus bank of $11800 and continue to work?
As I understand, for a couple, if only one member of the couple continue to work, to get
Full Pension, this member can have fortnightly income up to $480 ($300 of fortnightly credit
plus $180 as a half of combined free income zone for a couple which is $360), or yearly income will be 480 x 26 = $12480. But then couple’s deemed income will be subtracted from
this amount ($12480), the value of deemed income depends on the couple’s financial assets. For example for $500000 financial assets deemed income equals $9246, so in reality you could earn only $124 fortnightly to have Full Pension.
Is it correct?
Hi Ross, thanks for seeking further clarity! Your understanding is a little off but you are close and thinking along the right lines. The work bonus credits can only be used to offset employment income. Deemed income, foreign pensions, rental income etc. cannot be offset by the work bonus. So when you said $12,480 – deemed income, that is incorrect as you are using the work bonus to cover the deemed income. The other thing is that the couple’s income threshold is not split 50/50. One person could be the sole income earner and earn the full $360 p/fn ($95,336 p/yr) themselves.
So the math is $360 x 26 = $9,360. $9,360 – deemed income ($9,246 in your example) = $114. $114 / 26 (to get back to a fortnightly figure) = $4. $4 + $300 fortnightly work bonus credit means you could earn $304 per fortnight in employment income and not have it impact your Age Pension payment.
I would like to stress that this is a very specific scenario. The reality is that most seniors have their pension calculated based on the value of their assets and could actually earn more than $304 per fortnight with no impact. The best way to be sure is to use an online calculator such as ours HERE, and keep increasing the amount of income until you see your pension amount start to fall.
Does the increase in work bonus apply to all pensioners or only ‘new’ pensioners
Hi Kevin, thanks for reaching out! It applies to all pensioners however those already on the pension will have already received the increased threshold and $4,000 credit when it was first brought in some time ago. This announcement is just setting that change in stone as permanent because it was originally only going to be temporary.
So basically its useless unless you dont work for most of the year and it can accrue? I thought the whole point was to let us earn more per fortnight, not for some mythical accrual thats only of value if you work only a few weeks a year. Seems to me thats not how it was advertised. Very disappointing!
So. If you have been receiving the aged pension for over a year do you only get the $7800 work bonus per annum? Or do you get $11,800 work bonus per annum?
Hi Jan, thanks for your query, it seems this is a trickier topic to cover then we first thought. The change is that you can now accrue up to $11,800 in total if you are not actively using your work bonus credits + you will receive a one off credit of $4,000 when you first get approved for the Age Pension. Once you have used that one off credit of $4,000 the ongoing fortnightly amount remains only $300. So effectively for the first year after you receive your $4,000 credit you can earn ~$453 per fortnight and it will all be covered by the work bonus. After that first year/$4,000 is used though, you could only continue to earn $300 as the ongoing fortnightly credit remains the same.
I don’t think many people are aware of the taxation implications regarding earning a pension and working. Both my wife and I work 3 days a fortnight for different organizations and were quite happy to receive the extra income to cover the absorbent increases in the cost of living. We could not survive on the full pension alone. Much to my shock we had our tax done for 2022/2023 and have ended up with a combined tax bill of nearly $4,000 for the year. This with the reduced pension amounts over time has ended up taking over 50% of any monies earned outside the pension. So, is it really worth working? We certainly were not aware that the pension is treated as assessable income come tax time. As we have very little money in the bank, we will have to draw on the very little amounts we have in super to pay the tax bills. When we retired, we took all our super to pay the mortgage off.
I’m usually right on top of fact and figure but by crikey this one has got me stumped, I think it’s safer not to work in retirement at all, that is if you don’t have to
Myself and wife are planning to retire this June
I have a full time job earning 960per week
If i continue to work will it affect my pension
Or will my wife get her pension
Please let me know
Hi William, thanks for reaching out! Centrelink will factor in any income either of you earn when calculating how much pension you (as a couple) are eligible for. To see how this might impact how much Age Pension you can receive please use our free, online calculator HERE.
Hi,
So if you are not a new pensioner the amount per year you can earn is $11,800 ?
And this can still only be at $300/ fortnight?
Does this renew each calendar year or tax year ?
Thank you
Hi Robyn, thank you for your query but We have covered off this topic quite thoroughly in both the original article and my multiple replies to other comments. Please read through the content to get the understanding you seek.
it is just not worth working if you get the age pension, $300 per fortnight = about 1day per fortnight of work,then centrelink take 50% of any other income of your pension + you have paid tax on your earnings, how does this encourage people to work more?
I was going to continue to work and earn around the $400 pf mark but I am starting to be concerned about the tax implications. I already receive $1100 pf def benefit and believe I will receive circa $600 pf aged pension top up. I only have $50000in an accumulation fund and own my own home…..if I work 4 hours a week and pick up $440 a fn then it looks like I will lose half of it because my pension will be taxed half that amount according to a commenter above… sadly not much incentive and hard to predict tax on earnings before the ATO slugs you with the bill….it would be great to know the situation with how much tax one would pay prior to making the decision to work or not…I was hoping to fund some holidays…….
I’m on aged pension and found it boring and decided to do part time work earning approx
$ 1200 per fortnight , how does this affect my pension . I have an ABN and will be doing a tax return soon .
Hi Paul, this new income you are earning will potentially impact how much pension you can earn moving forward. Once you complete your tax return and receive your notice of assessment from the ATO, we recommend you provide copies of both documents to Centrelink so they can factor in the income earnings.
Thank you . So another question . If I have say for work bonus off $ 6,000 bonus and I earn $400 per Fortnite . The first $ 300 is free so the $ 100 is broken down 50 cents for each $ 1 from my pension . So $ 50 is taken from my pension . My fortnightly pension is $ 1,200 is my pension going to drop to $ 1150 . So how much is my work bonus going to drop . Is it $ 100 or $50
Hi Paul, I apologise if I have misunderstood but believe you are asking how your work bonus will be impacted by your new income? If so then the answer is that whatever work bonus you already have banked ($6,000?) then this will be used to offset any/all income you earn. So if you earnt $1,000 in one fortnight that entire $1,000 would be covered by your work bonus with $300 coming from that fortnight’s instalment and the other $700 coming from your banked balance.
Hi,
I am single, receive Australian age pension $1.108 but also a monthly foreign pension of $510
And I have a work bonus of $8092
Seems as my pension gets lightly reduced. But why? Doesn’t my foreign pension count against the work bonus?
Thanks for explanation.
Hi Tina, thank you for your query. The Work Bonus only offsets employment income, other forms of income such as deemed income from your financial assets, rental income (if applicable) and/or foreign pensions do not get the work bonus applied to them.
Annmaree
I am more confused than ever. I went on the age pension in March and earn approx $500 a fortnight.
My work bonus is going down faster than I can speak and can’t understand how it works as Centrelink don’t have the patience to explain it properly.
So when my work bonus balance ($4000) reaches $0 do I start loosing part of my pension?
I don’t have any assets and little $ in the bank, no super as it was used with health problems for a couple of years.
What happens when I reach $11800 – is that a once off amount and we don’t get it again?