The Work Bonus allows pensioners to earn more income before it affects their Age Pension entitlements.
Under the Work Bonus, the first $300 of fortnightly income from work is not counted under the pension income test. This bonus is in addition to the pension income free area, which allows a single pensioner to earn up to $204 per fortnight before their pension is affected.
Combined, the bonuses allow a pensioner to earn up to $504 per fortnight and still receive the maximum pension payment.
All Australians over Age Pension age are eligible for the Work Bonus if they have income from work.
This includes not only the Age Pension, but also the Carer Payment and Disability Support Pension recipients, Department of Veterans’ Affairs Service Pensioners and Income Support Supplement recipients over qualifying age.
Income bank
Pensioners over Age Pension age accrue any unused part of the $300 fortnightly Work Bonus exemption amount in a Work Bonus income bank.
The income bank amount offsets future income from work that would otherwise be assessable under the pension income test.
The maximum Work Bonus Income Bank amount that can be accrued is $11,800 per year. This amount is not time limited – meaning if you don’t use it in one year, it can be carried forward.
The $11,800 maximum for the Work Bonus Income Bank was originally slated to revert to $7800 at the end of June 2023. Following the passage of legislation in November 2022, it was extended a further six months to 31 December 2023 and in September 2023, that increase was made permanent.
How the income bank works
Let’s say you do three fortnights of work as a favour for a friend after being retired for a year.
As you haven’t worked in the past 12 months, you would have accumulated the maximum income bank amount of $7800 (or $11,800).
During the three fortnights, you earn $2000 a fortnight, for a total of $6000.
As your income bank amount is more than your income, none of the $6000 is assessed under the income test and you will still receive the maximum rate of Age Pension.
What counts as income for the Work Bonus?
There are two financial streams that count as income for the purposes of the Work Bonus.
The first is employment 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 loadings.
The second type of income is that which comes from income earned through self-employment, so long as the work involves personal exertion on the part of the person concerned.
Some examples include operating a business as a plumber, farmer, wedding celebrant or artist.
How do you apply for the Work Bonus?
You don’t need to apply for the Work Bonus. If you are eligible, it will be credited to you.
If you are a pensioner with income from work, you must keep Services Australia informed of your income. The Work Bonus can only be applied to income that has been reported.
Do you think the Work Bonus needs to be higher? Or should pensioners be able to work as much as they please? Let us know your thoughts in the comments section below.
I retired in 2022, I’m 70 so get a pension and super then decided to go work one day a week assembling machinery $250/day, I want to do two days /wk but only doing one atm. The $11,800 will run out soon so will have to stop work.
There is not enough incentive to continue to work.
I totally agree with Harro, I work one day pw and am in the same boat! Tough when you can only work 6 hours in just one day when shop work is usually 8!
Brad Lockyer. One question I have is. How is this handled by the ATO. The OAP is a taxable income by ATO regulations but is waived if there is no other income etc.
Is this still the case under the “Work Bonus” scheme were the OAP isn’t taken into account by the ATO.
With the OAP for a single now a shade under $28k and $11,880 this gives you a total income of near the $39.5k – $40k mark.
A full explanation on how this works with the ATO would be very appreciated.
I am almost 70, worked on and off for my last employer after retiring.
The ATO looks on it as taxable income. I am facing a $3000 tax bill this year, as the amount of tax I paid during the last financial year wasn’t enough to offset my pension when it was all added together.
I agree with you Jane. The tax office adds you pension, and your wages, together, and taxes accordingly. I avoided this by deliberately earning right on the limit (followed good accountant advice), taking into account the SAPTO rebate. My boss would like me to work an extra day a week, but it’s not on. I will be penalised too much – pension dropped, and then taxed. No way.
Thank you for your most helpful article, Brad.
Could you clarify for me what you have said when you wrote that:
“The maximum Work Bonus Income Bank amount that can be accrued is $7,800 per year”.
You then added the following sentence saying. “This amount is not time limited – meaning if you don’t use it in that year, it carries forward”.
Does this mean for example:
Are you meaning that because I’ve been retired for four years and have not earned any additional money during that time that I will have now accrued the equivalent of $7,800 for each of the past four years?
ie 4 X $7,800 equal to $31,200 of earning capacity without affecting my age pension?
Kind regards Heather
Why can’t we be like NZ – they allow pensioners to work as much as they want with no conditions……paying tax, contributing their many years of experience and knowledge. We have so much knowledge and history to offer. Wake up Government.
I have never understood why the government will not do as NZ!
I agree with Annette. We need to look at the NZ system and allow pensioners to work. If not a full week at least equal to or less than the per fortnight full pension allowance. What will happen if you do that it will increase private medical participation for thousands of pensioners giving the Federal and State governments breathing space in government health costs. It will bring a possible 3% of GDP back into the economy and revive the hospitality industry as families tighten their belts even further next year and finally, it will give pensioners a sense of worth to work when they want to and feel part of this “lucky country” again. It’s a shame too many politicians are unqualified in this country and fail to act when the “street savy” understanding is obvious, economically.
The Australian OAP used to be universal but several decades ago a mean spirited government introduced a means test and all the complications that go with it.
We need a government that is brave enough to reverse that decision.
Also the tax free threshold needs to be raised significantly. That would be a much better option than the big tax cuts for the rich coming next year as it would provide a small tax cut for everyone and simplify things for most pensioners.
one part about the work bonus that has never been addressed is that of a married couple and the OAP.Both my wife & I are on an aged pension. I work 10 hours a week and my wife has not worked for over 20 years. I have a $300 work bonus per f/n as does my wife. My wife has a work bonus of $12,100 built up whilst the higher amount was allowed. This has not changed each f/n. If one partner earns more than the WB then both pensions are reduced because of “excess” income. Until such time as my wife starts working her WB will remain at the maximum allowable. As happened last fortnight I received 3 weeks pay instead of the normal 2, my income exceed my WB we had both our pensions reduced by a total of $120. We were not able to utilise a “couple” Work Bonus. This despite her accumulated WB being such a high amount. If we were separated her pension would not have been reduced.
I heard that retired politicians do not have such restrictions and can work and earn unlimited money without losing their pension. is this correct? if so, may I ask why????
Of even more concern than the income limits is the stupid assets test that punishes responsible living and rewards irresponsibility. A 62 yr old can give millions to their kids and grandkids and get a pension at 67, but don’t you dare presume to use YOUR OWN HARD-EARNED AND CAREFULLY SAVED MONEY to help your kids through a crisis when you are 70 if you need even a part pension to get by.
You can take a world cruise, gamble, dine in fancy restaurants every day, buy a beachside mansion…. and claim a pension. But don’t dare put YOUR OWN HARD-EARNED AND CAREFULLY SAVED MONEY into sensible investments and ask for a helping hand when those investments don’t return quite enough to fund a comfortable lifestyle!
I have friends who gave $3 mil to their kids and bought a $1.5 mil home before turning 60. They get a full pension and the kids pay a lot of their bills! I have other friends who live in a modest $350K home unit, two cars, a caravan, a boat, and a modest savings account, plus $800K in super and they cannot get a pension, even though their income is less than the OAP and they get none of the concessions. Of course, if they upsize their home, they can then put their hands out. How does that make sense?
Couple X spent $200K touring Australia in a lavish caravan and returned to buy a lavish home and claim a pension.
Couple Y delayed their dream trip to spend 12 years caring for an aging and frail parent – saving the government the cost of aged care. They could not claim a pension due to having retained their savings hoping to eventually make that trip, but by the time the parent passed away they had spent those savings on funding their own living expenses. So the lesson there is the govt wants you to abandon loved ones into government care and indulge yourself, then impose more burden on taxpayers. No wonder taxes are high!
The message the government sends is DON’T SAVE, DON’T WORK AFTER PENSION AGE, DON’T HELP OUT LOVED ONES.
As a single retiree with very little superannuation I believe that I should be permitted to earn as much as I am physically able to in order to live without many financial concerns and also retain a full pension as is common in many European nations. I am happy to continue paying income tax which goes to support my country while not being penalised in doing so.
Albanese and his Labor clowns, sit back and let their department heads earn up to $400,000 more than himself.
Albanese “came to power” bleating “I HAVE A PLAN!!”
Turns out, that “Plan” was to rip off EVERY AUSTRALIAN, force them into debt, not only with his “promised $275 less energy costs per year, but 12 severe interest rate hikes and his idiotic waste of $400m on The Voice!
Albanese and Chalmers HAVE NO IDEA about how Australians are struggling, and by allowing pensioners to earn as much as they “are able” to ease their suffering and pain of increased rents, increased supermarket ripoffs, and everything else that is going up, the PENSION ISN’T!!
If we earn more – then we pay tax!! WIN – WIN!!!
I believe in this financial climate it should be higher. We also need to be aware of the tax ramifications. I worked laast financial year as a cleaner, paid tax on my income, strayed under the threshold for pension consequences and got slugged big time by the ATO 🤬
I fail to see the govt’s objection to the NZ system. It can be implemented at no cost to them and in fact generates more tax revenue. I am a retired teacher and can only work one day a week as my gross casual wage is $493/day. What is often forgotton is the pollies retire on a very generous pension even without the lurks & perks and can get well paid positions on top without any penalty to their pension. A further anomaly is that my wife doesn’t work and has a Work Bonus accumulated of $12000. Yet if I work more and my pension is reduced so is hers. Why should her pension be affected when it has no affect on her Work Bonus balance? Centrelink rules are used to rip off the aged care sector. The illegal Robodebt fiasco is a typicl case in point.
I have enormous trade skills and wish to impart my knowledge while I still can. I worked 2 x 7.5hr days a week this year on a meagher $30 pH. Once the wb was exhausted, which was only about 3 months, I was surrendering more than 1 days pay a fortnight. I thought I would try a 3 day a week job next year to see if I am any better off.
It would be a huge benefit if a calculator was made available so we can estimate the effect before committing to employment.
Would also be beneficial for the ‘penalty’ to be calculated after tax.
The above states – “Combined, the bonuses allow a pensioner to earn up to $504 per fortnight and still receive the maximum pension payment.” This is based on the previous amount of $7,800 per year. (being $300 per f/n, plus the $204).
BUT – now that the Work Bonus has been increased to $11,800 – an extra $4,000 per year, making an increase of $153 per fortnight – is this ADDED to the $504? Or another way – $11,800, divide by 26 = $453. PLUS the $204 = $657. So can you earn $657 a week?
Also – every report talks about the amount ‘per year’. Is this ACTUAL year, or financial year?