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This section contains a description of the ordinary income test as it applies to pensions and the additional income free area for dependent children.
Part of the Budget 2009-10 (12 May 2009) the Secure and Sustainable Pension Reform Package includes measures to better target pension payments to those who most need support. From 20 September 2009, the higher income test threshold for pensioners with dependent children will be abolished to align the pension income test with the allowance and family payments income tests.
From 20 September 2009, the rate at which extra income above the threshold affects the pension will change from 40 cents to 50 cents in the dollar for singles. For couples, the rate will change from 20 cents to 25 cents in the dollar for each member of a couple.
A transitional safety net will apply for the existing pensioners who would otherwise have their payments reduced by the new income test rules. These pensioners will continue to receive their existing payment based on the current 40 cent withdrawal rate and the additional free area for dependent children, until they are better off under the new rules, including the 50 cent withdrawal rate.
From 20 September 2009 a work bonus is used to reduce the assessable employment income in an instalment period. An instalment period is a period of a maximum of 14 days. Only 50 per cent of the first $500 of employment income earned in a 14-day instalment period will be assessed under the income test. Any employment income over $500 is then added to this reduced amount and it is this total of employment income for that instalment period that will be assessed under the income test. If a person's employment income for a 14-day instalment period is less than $500, only 50 per cent of the person's total employment income for that instalment period will be assessed under the income test.
Work bonus applies to recipients who are:
PPS recipients will remain receiving their payment based on the current 40 cent withdrawal rate and the additional free area for dependent children. Work bonus will not apply to PPS recipients.
Act reference: SSAct section 1073AA Work bonus, section 1064 Rate of age, disability support, wife pensions and carer payment and of disability wage supplement (people who are not blind), section 1066 Rate of bereavement allowance and widow B pension, section 1072 General meaning of ordinary income
Policy reference: SS Guide 3.1.14 Work Bonus, 5.1.8.40 Pension Reform - Transitional Arrangements
This section contains the following topics:
4.2.1.10 Pensions Income Test & Limits
4.2.1.20 Additional Free Area for Dependent Children
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Last reviewed: 21 September 2009
