On 1 July 2011 a more generous Work Bonus for pensioners over Age Pension age was introduced, including a Work Bonus Income Bank.
Why provide a Work Bonus?
The Work Bonus provides a generous incentive for eligible pensioners to participate in the workforce, should they choose to do so, by allowing them to keep more of their pension when they have earnings from working.
How does the Work Bonus affect your rate of pension?
The Work Bonus increases the amount an eligible pensioner can earn from employment before it affects their pension rate. From 1 July 2011, the first $250 of fortnightly employment income is not assessed and is not counted under the pension income test.
The Work Bonus operates in addition to the pension income test free area. From 1 July 2012, for single pensioners, the pension income test free area is $152 a fortnight and for couples combined, it is $268 a fortnight. This means that single rate pensioners over Age Pension age with no other private income can earn up to $402 a fortnight from employment and still receive the maximum rate of pension.
Work Bonus Income Bank
From 1 July 2011, pensioners over Age Pension age accrue any unused amount of the $250 fortnightly exemption in a ‘’Work Bonus Income Bank’ up to a maximum of $6,500. The income bank amount offsets future employment income from the pension income test. The income bank amount is not time limited; if unused, it carries forward, even across years.
The Work Bonus income bank is a generous incentive for pensioners who wish to work, particularly those who undertake intermittent or occasional work.
How does the new Work Bonus work for single pensioners?
Bob is an age pensioner working as a school crossing supervisor, earning $300 a fortnight.
Under the Work Bonus, $250 will be disregarded, and only $50 assessed under the pension income test.
Maria is an age pensioner who accepts work for six weeks as an accountant at tax time. She has no other private income. As Maria has not worked in the previous 12 months, she has accumulated an income bank of $6,500 (26 fortnights x $250). During the six-week tax season, Maria earns $2,000 a fortnight, a total of $6,000. As Maria’s income bank exceeds her income, none of the $6,000 is assessed under the income test and she continues to receive the maximum rate of Age Pension.
In addition, Maria would retain $1,250 in her income bank to offset future employment earnings.
How does the Work Bonus affect the employment income of your partner?
Your partner’s employment income will attract the Work Bonus only if they are over Age Pension age and in receipt of one of the eligible payments.
For example, Mary and Jim are a couple. Mary receives the Age Pension but Jim is under Age Pension age and is not eligible for the Age Pension. Mary receives employment income of $500 a fortnight working in retail and Jim also has employment income of $500 a fortnight for working as a cleaner. Mary and Jim have no other private income.
After application of the new Work Bonus, only $250 a fortnight is counted as income for Mary. This is combined with Jim’s income of $500, giving a total combined assessable income of $750 a fortnight. Under the pension income test, $375 is treated as assessable income for Mary to work out Mary’s Age Pension rate.
If Jim was over pension age and receiving the Age Pension, he would also get the Work Bonus. This would mean that both of their $500 of fortnightly employment income amounts would have the $250 Work Bonus applied, leaving each with $250 of assessable income. In this case, Jim and Mary would have $500 of combined assessable income, with half ($250) being assessable against each of them under the pension income test.
All pensioners over Age Pension age are eligible for the Work Bonus if they have employment income. This includes: Age Pension, Carer Payment, Bereavement Allowance, Disability Support Pension, Widow B Pension and Wife Pension recipients.
Employment income is income from paid work undertaken by the person as an employee in an employer/employee relationship. This includes but is not limited to salary, wages, leave payments, commissions, employment-related fringe benefits, bonus payments, supported wages and casual loading.
Employment income does not include income from self employment or business income.
Application for the Work Bonus
You do not need to apply for the Work Bonus. If you are a pensioner with variable fortnightly employment income, you must keep Centrelink informed of your income. The Work Bonus can only be applied to employment income that has been reported. Pensioners can report over the phone (including Voice Recognition), in person at a Centrelink office or by using the internet.
For more information
For more information about the Work Bonus, contact the Department of Human Services (DHS) on 132300 or visit the DHS website.