Pensioner Work Bonus Increase

Recently there has been much lobbying of the Government to allow retirees to work and keep their age pensions. Businesses say they are desperately needed to fill the gaps in the workforce caused by the lack of international workers, backpackers and students.

In early September the Prime Minister announced that the Work Bonus would be increased by $4,000 per annum from $7,800 to $11,800. The Work Bonus is an amount of employment income that Centrelink disregards when calculating a retiree’s pension entitlement.

Countries such as Great Britain and New Zealand, pay pensions to all people eligible by age (though they may have to pay some tax on the benefit). In Australia retirees have always been subject to means tests with pensions only paid to the less well off.

Many retirees could work at least part-time with little or no effect on their pensions. Retirees must pass two tests to get an age pension – an Assets Test and an Income Test. The one that produces the lowest entitlement applies.

The Work Bonus, the work income that Centrelink disregards, was $300 per fortnight. That has now been increased to $453.85 per fortnight.

Under the Income Test, all single pensioners can also earn $190 per fortnight, meaning they could have total income of $643.85 fortnightly with no effect on their pension. That could be an enjoyable part-time job.

The income test for couples allows $336 per fortnight before their pensions start to reduce. So if one person works they could earn $789.85 per fortnight and still get full pensions. If both work, earning at least $453.85, they could have $1243.70 per fortnight income without pension reduction.

Pensioners’ savings and investments are deemed to generate some income, which does need to be allowed for. Depending on the level of savings, this may not be large.

Many part-pensioners could also earn extra work income without reducing their pensions. This is because the Assets Test is much more severe than the Income Test. The Assets Test reduces most people’s pensions the most. So they could earn at least some extra income without any effect on their entitlements. 

If part-pensioners are Income Test limited, they can only earn the $453.85 Work Bonus without affecting their benefits. More will reduce their pensions, but only by fifty cents per dollar earned. They will still be better off working.

Also, if the work is seasonal and the pensioner only works part of the year, Centrelink has a “savings” provision. This allows a part-pension payment if income is over the limit temporarily after being below it earlier in the year.