There’s an interesting crossover between rising prices and rising job vacancies that may have a major impact on your retirement savings. In the USA the inflation rate is over 6% – the highest rate for many years. Australia is not immune from such increases with many economists tipping inflationary trends next year. The need to cover increased household expenditure means that many older retired Australians may consider dipping their toes in the water again, with part time employment.
This is a very real trend, with the Australian Bureau of Statistics (ABS) reporting a 12% increase in employment of those aged over 65.
It’s true that there are plenty of instances where age discrimination has kept older adults out of the workplace. But a 12% increase year-on-year is proof that older workers are being hired. And this trend is likely to increase even further as the current skills shortages forces employers to recognise the value older workers can bring.
At the time of writing, there were 12,000 unfilled vacancies in general administration. So there is work in this sector if you have the inclination to apply. But what will this mean if you have technically ‘retired’ from the workplace?
First up, if you are self-funded (about 30% of retirees) then you can come and go and earn as much as you please, as long as you pay the tax.
If you are on a full or part Age Pension, the sums are more complex and any extra work could have major ramifications.
Let’s start with the good news.
The work bonus is a Government incentive for pensioners to remain in the workforce. Under the work bonus Centrelink will deduct $300 a fortnight off your employment income and only assess you on your remaining earnings. The even better news is that if you don’t use all the $300 in a fortnight the unused portion accrues up to a maximum balance of $7,800. This balance can be used in fortnights where you earn more than $300. This means on top of the minimum income threshold you could earn an additional $7,800 in employment income in a year before your age pension entitlements start to become impacted.
So for example if Sue has a work bonus accrued balance of $6,000 and earns $1,000 in a fortnight it wouldn’t impact her age pension entitlements. What would happen instead is that she would receive her usual $300 a fortnight allowance and her work bonus balance would drop by $700 to $5,300 to account for the extra income earned that fortnight. If she continues to earn more than $300 her balance will progressively reduce and if she earns less her balance would increase back up to the maximum of $7,800. 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.
Of course if the income you will earn is likely to exceed the minimum income threshold and the work bonus limits the decision to go back to work can be complicated by the ‘penalty’ applied to earning too much in the eyes of Centrelink.
Yet the workplace can offer so much more than money. It means a break in isolation for some, a sense of purpose for others, the chance to do interesting projects, and the opportunity to upgrade your skills. All of these aspects of work can deliver positive mental and physical health benefits.
Before you jump in and accept a role, it may help to use our free calculator to check out to what extent the expected extra income will affect your current pension. Or to speak to a qualified adviser if any aspect of the net financial gain from returning to work is unclear.
Due to the pandemic, I’ve had to go on the couple aged pension, but my wife is to young to qualify for her part of the pension and I am the sole income earner as she is unemployable. I am now working 2 days on a split shift which brings in $478 per f/n this goes up to $530 if I have to do driver training. I’m a school bus driver. Do I have to report to Centrelink?
Hi Pierre, thank you for reaching out for assistance. In general you must report any/all income earnt to Centrelink if you are receiving any Age Pension, even if you are earning below the allowed amounts meaning they will not reduce your pension. This is so Centrelink know how much you are are currently earning should there be any increase or lump sum payments you receive that need to be backdated but also in case the allowable amount was to reduce, Centrelink need to know who is impacted so they can contact you. To discuss your situation in detail it would be best to do so in a more confidential forum so we will send you an email separate to this comment with details on how we can potentially assist further.
I am 75 and work physically part time as an arborist.
I have been receiving the full single aged pension since March 2020 and have made use of the Work Bonus Scheme since then.
I find it worrying that you say the annual bonus of $7800 is a lifetime bonus.
Does this mean that once this threshold is reached any subsequent income from working as an arborist will reduce my pension which is $967.50 per fortnight.
Hi Bob, thank you for reaching out for clarity and we apologise for the wording used. We will be editing the article to avoid further misunderstandings. What we were referring to by “lifetime maximum” is that you cannot have anymore than $7,800 accrued at a time. So if someone did not work for 5 years, they would not be able to accrue 5 years worth of work bonus, it will stop at $7,800. In that same scenario, if you returned to work after 5 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 in a scenario such as yours where you have been using some or all of your work bonus since March 2020, you are not in danger of hitting a limit and having additional income potentially impact your pension. For you the situation will be that you only have a small amount of work bonus (if any) accrued for you to use at a later date because you’ve been drawing on it as you go.
Thank you Steven for your reply re Centrelink Work Bonus.
I can be a bit pedantic.
Regards Bob Russell.
Thanks for the info but can you please confirm or clarify the comment that the $7,800 is a lifetime maximum?
My understanding is that the $300 Work Bonus is applied for any periods you work (forever) and the $7,800 figure is only the maximum that can be carried forward as an unused “income bank” (even across years) during periods you do not work.
This would imply (or is it wishful thinking?) that if, say, someone stopped working for a while and had $1,000 unused in the income bank, then started working again two years later, they would be entitled to the $300 per fortnight, plus the $1,000 brought forward.
If it really is a lifetime maximum could you please provide a link to a source, as I’ve not been able to find the info on the Centrelink site.
Many thanks.
Hi Chris, thank you for reaching out for clarity and we apologise for the wording used. We will be editing the article to avoid further misunderstandings. Your understanding of how the work bonus works is correct. What we were referring to by “lifetime maximum” is that you cannot have anymore than $7,800 accrued in your “income bank” at any time.
Started back to work, old employer threw me a lifeline,
I have tried to access an age pension for two years.
I am 75, and worked most of my life north of the 26th parallel.
The work is offshore machinist, each of the three weeks swings, will after tax net me, 15K. there are two.
I have just had my paperwork accepted for consideration by centrelink.
So after all the effort of providing more and more paperwork, I will probably recieve a very small amount.
I think in this day and age the celing limit could be raised, so people who have worked hard all their life are Rewarded Not Punished. If the ceiling were lifted to say $15000 so people could afford to pay the ever rising costs of Utililities,services,food etc. And Why should we be kept oppressed,when the people We Elect and Pay them so handsomely are Not Subjected to the Same Rules ! ? Imagine if polotitions were Subjected to Productive pay rises, they would still have the Same Wage as 30 years Ago ! Time for Change !!!
DITTO! DITTO! HERE! HERE! From me.
I agree completely in some countries in Europe there is no limit you have earned your pension for life after working most of your adult life you can earn as much as you are able without it effecting your pension and these countries have triple the population of Australia take a leaf out of their books or every single person gets the equal treatment whether they are the rule makers or a trades person
Hi
I am 69 and on the age pension, my wife is 64 and retired , she looks after our Grand daughter for 20 hours a week and relies on super to get by. I am set to inherit $80000
Will this effect my pension and if so what is my best option.
Regards
Harry
Hi Harry, great question! It would be best to discuss your situation and the potential impacts to your pension from the inheritance in a more confidential forum. We will send you an email separate to this comment with details on how we can potentially assist.
What happens when the $7800 runs out. Are you penalised.
Hi Elizabeth, thank you for reaching out for clarity and we apologise for the wording used. We have edited the article to avoid further misunderstandings. What we were referring to by “lifetime maximum” is that you cannot have anymore than $7,800 accrued at a time. So if someone did not work for 5 years, they would not be able to accrue 5 years worth of work bonus, it will stop at $7,800. In that same scenario, if you returned to work after 5 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 impacted. However the work bonus does replenish itself back up to the $7,800 maximum during periods where you are not earning any employment income.
I’m going to work on Election day and will get $450
How is this money affecting my age pension
Hi Lucy, to find out specifically if that small payment will impact your pension you would need to contact Centrelink directly on 132 300 as they can tell you how much work bonus you have accrued, if any. For example you may have $3,000 already accrued, you still need to declare the income (so Centrelink can deduct it from your work bonus balance) but there would not be any impact on your pension payment.
I am aged under 65 and am a self funded retiree (public sector super pension, private super pension, and small investment income). I would like to earn some extra money by undertaking share trading in order to boost my superannuation which is well short of the ceiling. Does this count as self-employment? I am keen to top up an accumulation super account not yet rolled into pension phase while I am able.
Hi Bernadette, thanks for reaching out for assistance! The share trading as you have worded it would not be considered self employment as you are simply managing your own assets, the same as you may move money from one bank account to another to earn a better return. Self employment would involve you being paid by others to manage their shares and under an ABN. Regarding your situation and other plans it would be great to discuss this with you in a more confidential forum so we can potentially help you further. We’ll send you an email separate to this comment with further details.