Advantages of the expanded age pension work bonus scheme
Many senior Australians want to continue working beyond their Age Pension age. Being active in the paid workforce beyond this point can be good for both your financial position and your mental health.
The government supports age pensioners’ ongoing workforce participation with the Age Pension Work Bonus scheme. For those working under the scheme, the first $300 per fortnight of earnings is ‘disregarded’ for the income test.
This work bonus can be saved for later use, but you’re not allowed to have more than $7,800 of saved work bonus—one year’s worth. In fact, the government is so keen for you to spend it that they will take it away from you if you don’t. You will forfeit any saved work bonus in excess of 26 fortnights.
How it works
Once you’ve provided your tax file number to Centrelink as part of your Age Pension claim, there’s no need to report employment earnings to Centrelink.
Your earnings as an employee are now reported directly to the Australian Taxation Office (ATO) by your employer. The ‘single touch payroll’ reporting became compulsory for all employers from July 2019.
The single touch payroll system reports the details of each payment to an employee directly to the ATO as it happens.
This includes such things as employer superannuation and voluntary superannuation contributions deducted from an employees’ pay. Once the system is fully operational, the ATO will inform Centrelink of your recent wages and salary payments.
That means your Age Pension will be adjusted by Centrelink after allowing for your work bonus.
The ATO will also inform Centrelink of your partner’s employment income. Your Age Pension payment rate could be adjusted promptly to allow for any change in your partner’s earnings even if your partner is too young for an Age Pension.
As from July 2019, you’re also able to claim the work bonus for earnings from work with a family business, partnership or as a sole trader.
The importance of personal effort
Initially, the work bonus scheme applied only to wages, salary and fringe benefits from employment with an unrelated business. Now, acceptable types of work eligible for the work bonus include the Age Pensioner’s earnings from self-employment. Keep in mind, though, that the work bonus can only be used for earnings from actual work that involved personal effort.
Centrelink is likely to ask you to verify that you actually put ‘personal effort’ into earning your work income. For example, you might take on a lawn mowing round to keep yourself active. You could expand your wood-turning hobby into a small business that sells at local craft markets.
You should expect Centrelink to check that you do put in effort to earn the money clients pay you. Income earned from managing your investments, superannuation funds and family trusts are not allowable for the work bonus.
For assessing your Age Pension Work Bonus, Centrelink might accept the business accounts you maintain for income-tax purposes as evidence of your business expenses and net income.
This is part of a continuing series about Centrelink by Christine Hopper who talks to Centrelink as a customer and on behalf of clients. She understands the range of Department of Veteran Affairs and Centrelink income support benefits, their relevant means tests and eligibility conditions. She’s an actuary who also holds a Bachelor of Science, a Diploma of Financial Planning and a Certificate of Theology.
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