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
|$204 per fortnight / $5,304 per annum
|$2,397.40 per fortnight / $62,332.40 per annum
|$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.
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.