Calls to allow older Australians to work more without it affecting their Age Pension entitlements are growing louder as worker shortages continue to bite.
Many businesses are finding it difficult to fill positions with the unemployment rate historically low and migration not yet recovered to pre-pandemic levels.
At the same time, thousands of older Australians are keen to return to work or continue working past Age Pension age for financial and personal reasons.
It would seem logical then, to allow capable older Aussies to fill those positions, without penalty. But there’s a problem.
Under current Age Pension rules, a recipient can earn only $490 before his/her pension payment is cut. In today’s job market, that would equate to one, possibly two days of work a week at most.
And the payment cut is serious. Every dollar earnt above $490 reduces the Age Pension by 50 cents in the dollar, or effectively a 50 per cent tax rate.
Pensioners are able to bank a certain amount of income in their Work Bonus balance, which can be used to offset income received at a later date, effectively increasing the amount a pensioner can earn.
That amount is usually $7800, but has been extended by $4000 to $11,800 until 31 December 2023. Now, seniors advocates are calling for the extension to be made permanent – and the amount increased.
Ian Henschke, chief advocate for National Seniors Australia, told Nine that permanently increasing the Work Bonus amount and introducing further reforms would help address the labour shortage while at the same time giving older Australians the chance to work if they wanted to.
“I think we need to recognise that we’ve got a jobs crisis in Australia with 450,000-plus jobs going … and we’ve got 4.5 million Australians over 65,” he said.
“We need workers desperately in aged care, childcare, home care, disability care and agriculture and tourism and hospitality.
“It will be a win for the industry, a win for the pensioner and a win for the economy.”
The worker shortage has certainly been exacerbated by the pandemic, but the root cause in some sectors is an ageing population.
Demographer Simon Kuestenmacher wrote in the New Daily that in the past decades, a generation retiring was more or less replaced by a new one.
“Over the last decade we … grew our population aged 85+ by 157,000 people,” he said.
“That shouldn’t be a big problem, right? People always retired, and a new generation entered the workforce in their place. This time around, a huge generation retires as a small generation enters the workforce.”
Margaret Anderson, 78, told 9Now that her life wouldn’t be the same without her job at a restaurant.
She is part of a multifaceted team that ranges from 15 to 78-year-olds. “I love the people I’m working with, I love the people I meet,” she said.
“I’ll do this for as long as I can. I love it.”
Mr Henschke believes Australia should adopt a similar approach to New Zealand’s.
“New Zealand’s got a simple system – you work, you pay income tax and they just get on with it,” he said.
Should pensioners be able to work and still get the full pension? Or is that double-dipping? Let us know what you think in the comments section below.
Also read: March 2023 Age Pension increase tipped to deliver spending boost
New Zealand has the best idea of all in that the pension is not means tested. This is what Australia should do since the removal of all the various levels of government bureaucracies involved in controlling the minutiae of pensions would go far towards paying the extra cost of government having to pay pensions to all. It would also give the government a huge efficiency dividend for so many years that it could then make sure that there is enough money for schools, hospitals,etc.
I am 73 and still work in mental health but I only do 1 day a week otherwise I am paid at a 50 per cent discount after my pension is adjusted. I am appreciated by my peers as the sector is so short of staff. Could work many more hours but it is just not viable. I always get a tax bill as pension and wages are counted as annual income
What a ridiculous situation – we have a national shortage of labour, older age Australians with the skills wanting to work, and the government doing everything possible to sabotage the process. For the sake of sanity, allow older Australians on an aged pension to work a day or two per week, pocket the money without penalty, and everyone is a winner, including the ATO.
If that works, we could extend it to the unemployed and those on DSP.
Not to the unemployed! They can get a full-time job and get off welfare altogether. Those on DSP may be, depending on what their disability actually is. I suspect there are many on DSP simply because it pays more than other types of welfare payments but who could actually do a full or part-time job even those with no skills particularly in the current environment.
I am 73 and have been working for the last 5 years in the aged care and disability services sector on a permanent part time basis working 24 -30 hours a fortnight and earning between $1500 and $2000 per fortnight. I can tell you there is absolutely no incentive to go back to work. My wife and I are both on the old age pension and she does not work. Under the current rules and work bonus arrangements, once I earn over $620 per fortnight both our combined old age pension entitlements are reduced by 50 cents in the dollar for every dollar that I earn above that that $620. If I did not work our combined fortnightly aged pension entitlement as a couple would be $1547.60 or $773.80 each. If I earn S2,000 in a fortnight, under the income test rules our combined pension entitlements drop a whopping $690 to $857.60 or $428.80 each. The tax on $2,000 is $324 leaving a net employment income of $1676 so our combined income after tax is $2533.60. That means that after 30 hours of work a fortnight that I am only $986 better off than if I didn’t work at all. On top of that I lose more tax at the end of the year because I must add my pension Income to my employment income and the gross amount is my assessable taxable income. Double whammy and the ATO collect again. Apparently only 3% of old age pensioners report a work income which suggests these punitive arrangements do nothing to encourage older persons to re-enter the work force and contribute to community and society. These arrangements and government policy are aged discrimination in their worst form and aged persons need a Second Voice much more than our indigenous peoples do, in order to drive this message home to our politicians and policy makers.
If the age pension was changed to be like that of New Zealand, many pensioners would fill many of the vacancies, without the current harsh penalties. This would improve the economy in four ways. Firstly, by reducing the number of vacancies. Secondly, causing many businesses to improve their bottom line. And thirdly, I wonder what those pensioners with a few more dollars in their pocket would do with those dollars – more than likely spend them. Plus, happy pensioners suffer less mental health issues, saving the government even more money. Wow that’s a win-win-win-win situation. Stop the age discrimination now.
Being a single on the pension, it is doubly hard. At age 70, I have just returned to work 10 hours a week, to try & help with the escalating costs of simply surviving. I now look back and thank heavens I worked my butt off doing 3 jobs instead of going overseas, or going out allot, to own my meagre little 2BR home. But if the Work Bonus is decreased back to it’s previous level, I will have to leave the job, it simply will not be of any benefit. The 11,800 work bonus should not be decreased – it should actually be increased. When the pension is reduced by 50c in the dollar, and the remainder having to be taxed, there is little incentive.
Its a no brainer. When I was a franchisee with Bakers Delight and operating 4 bakeries, I always chose senior people as they were more reliable. Experienced employees have a lot to offer providing they do not work long hours. They have worked hard and paid taxes all their life, so they deserve their pension and have the choice to work a few hours for extra cash.
I am on a disability pension and due to my disability I am unable to work full time. I am at that stage where I want to fulfil my life and be able to save some money for a holiday and not have to scrounge for every dollar which I am currently doing on just the pension I want to work a few hours or days a week and feel human again but with the penalty of only being able to earn such a small amount does not make you enthusiastic about doing so. If I would have to travel to get to work I would have to cover my fuel etc. Us pensioners should not have to be penalised for wanting to play a paid part in our community to give us an interest and provide our skills to those in need. I agree that the government should recognise New Zealand rules and Policies and do the same for Australia.
What about the younger partners of aged pensioners (predominantly women)???
My husband is 74 and unable to work due to health issues. I am 63 and work in the short staffed industry of childcare. I do work 2 days a week and am often asked to work an extra day or two per week due to staffing shortages which I do to help them out but financially it is definitely not worth doing so. Anything I earn over $300 per fortnight, fifty cents in the dollar is then deducted from my husbands pension.
There is no work bonus for below pension age partners (PREDOMINANTLY WOMEN)
Sooner or later I’ll be gritting my teeth and refusing to work extra hours!
It’s absolutely infuriating the government reduces my husbands pension because I work.
Hi Lynley,
I agree. Throughout your working life, everyone in Australia is taxed and treated as an individual. Then one person retires. Privacy laws disappear – the retired person has to detail everything the partner has. And they are accused of dishonesty if they miss something. Everyone should get an individual pension. Why does the non-working person become penalised because the partner keeps working? There is nothing to say the worked-for income is shared – no law to say it must be.
The whole aged system should be overhauled – but then the younger generation will do that and already they ‘think’ the oldies are bludgers and stealing money to live a grand life. So we need to be very careful what we wish for. The outcome could well be worse for all pensioners.
Working while on the pension is a nightmare. We have a small business. We usually breakeven ATO wise but always seem to have this mysterious income as far as Centrelink is concerned. For example, depreciation is added back as profit. If we withdraw from our home mortgage to add cashflow to our business (ie during covid we had to) that is seen as an asset as the business owes us money (of course the interest we pay extra in our home loan isn’t counted) and is deemed to have income.
We have a saying in our business: KISS – keep it simple stupid! The Australian Govt has not heard this saying. Make it easy for people to keep working. This will lower the mental and physical health drain on the Medical system, plus make life easier and more enjoyable for those who want to work longer but not full time, so need some income support. We work in the mental health arena – an area desperate for practitioners, but it is just getting too hard.