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Centrelink – Work Bonus

Written by Ivan Fletcher

I am often asked by retirees whether a retired or partially retired person can still earn some income without impacting their Centrelink aged-based pension.

There are always two assessments made by Centrelink – the ASSETS test and the INCOME test.  It is the harsher of the two tests in any individual circumstance that is applied.  For example, if you have assets over and above the assets threshold this would result in nil support via the Age Pension and therefore the income test would be redundant, so it would not matter how much income you earn.

If it is the INCOME TEST that is the harsher of the 2 in your circumstance.  It is, in this circumstance that the Work Bonus comes into play.

What is the Work Bonus?

The work bonus is an incentive to encourage people who are able, to continue working after they reach qualifying/pension age. Under the work bonus rules, the first $300 of wages earned per fortnight will be excluded from the income test.

What is Work Bonus income?

The following are all considered to be work bonus income if they are earned or received as a result of your work:

  • Salary or wages
  • commissions
  • employment related fringe benefits
  • self-employed income

If you own your own business and draw wages from the company, your wages are work bonus income.

Self-employment income will be eligible for the work bonus if the work involves active participation. This is work that involves effort, such as bookkeeping or plumbing. Active participation does not include managing an investment portfolio or an investment property.

How does the Work Bonus apply to couples?

For members of a couple, your combined assessable income affects both of you. Therefore, if one person is eligible for the Work Bonus, you will both benefit from the reduced assessable income.

If both members of a couple receive work bonus income and you are both eligible for the bonus, you will both receive the bonus (i.e. up to $300 per fortnight each).

However, if the working partner is under the required age, the work bonus does not apply and all of the earnings will be treated as ordinary income for Centrelink assessment.  For example,  if Margaret is retired and age 68 she potentially qualifies for the age pension.  If her husband Mark is age 64 and still doing part-time work, Mark will not qualify for the work bonus and all of his income will be factored into the INCOME test calculations for Margaret.

How is the Work Bonus calculated?

If you qualify for the work bonus, the first $300 of eligible fortnightly work bonus income will be excluded from your income test.

Example 1: Harry receives the age pension and works for 10 hours per fortnight, earning $350.00. When his income is assessed only $50.00 ($350.00 – $300.00) will be counted as income.

Example 2: Beryl receives a partner service pension and is over qualifying age. She works 40 hours per fortnight, earning $1,000. When her income is assessed only $700.00 ($1,000 – $300) will be counted.

Example 3: David& Margaret receive a service pension and are both over qualifying age. David works 30 hours per fortnight, earning $700. Margaret works 5 hours a fortnight and earns $100. The way their income is assessed is:

David $700 – $300.00 = $400.00
Margaret $100.00 – $100.00 = $0.00
Combined $400.00 + $0.00 = $400.00

Their combined assessable employment income is $400.00 per fortnight.

What is the Work Bonus Bank?
The Work Bonus Bank allows you to save up unused work bonus credits (up to $7,800) and apply them to your income when you do work.  This can be quite beneficial if you are doing seasonal work or choose to only work a few months a year at rates well above $7,800 per fortnight.

How Does it Work?
If you have no earnings, or earn less than $300 income per fortnight, you can accrue the unused amount of the work bonus income concession in a work bonus bank. The difference between $300 and the gross work bonus income each fortnight is credited to your work bonus bank to a maximum of $7,800. The balance in your work bonus bank can then offset your employment income in the future that would otherwise be assessable.

Example 1: Accrual to Work Bonus Bank

Harry receives the age pension and works for 10 hours per fortnight, earning $200.00. When his income is assessed only $200.00 of his work bonus will be used to discount his income. The remaining work bonus of $100.00 will be credited to the work bonus bank.

Example 2: Accrual to Work Bonus Bank

David & Margaret receive a service pension and are both over qualifying age. David works 20 hours per fortnight, earning $700. Margaret works 5 hours a fortnight and earns $100.

David:

Assessable income is $400.00 ($700.00 – $300.00)
Work bonus accrual = $0.00; ($300.00 – $300.00)

Margaret:

Assessable income is $0.00 ($100.00 – $100.00)
Work bonus accrual = $200.00; ($300.00 – $100.00)

Example 3: Depletion of Work Bonus Bank

John has accrued $1,500 in his work bonus bank. He starts part-time work earning employment income of $400 per fortnight.

Step 1 $400.00 – $300.00 = $100.00 (work bonus discount)
Step 2 $100.00 – $100.00 = $0.00 (work bonus bank depletion)
Assessable income is $0.00

Remaining work bonus bank = $1400.00 ($1,500 – $100)

As John continues with this employment and his income remains at the same level, his work bonus bank credit will gradually reduce. Once his work bonus bank credit runs out after 15 fortnights ($1,500 depleting at $100 per fortnight), John will still have access to the fortnightly $300 work bonus income concession amount. At this point, his assessable employment income will increase from $0 to $100 per fortnight ($400 less $300 income concession amount).

How do I apply for the Work Bonus?
You do not need to apply for the work bonus. It will be calculated automatically when your pension is assessed.

Obligations
You do need to make sure that if you have employment earnings they are correctly recorded with Centrelink/DVA.  You have a responsibility to keep Centrelink informed of changes that may affect the amount of pension and pension supplement you receive.

ADDITIONAL INFORMATION

What is the Required Age for the Work Bonus for Service Pensioners and ISS Recipients?

For a service pensioner or ISS recipient to be eligible for the work bonus, you must be over qualifying age.  Qualifying age is currently 60 years.

For an age based pensioner to be eligible for the work bonus, you must be over age pension age. as per the table set out below:

If your date of birth is on or between: Then your pension age is:
Before 1 July 1952 65 years
1 July 1952 to 31 December 1953 65 years and 6 months
1 January 1952 to 30 June 1955 66 years
1 July 1955 to 31 December 1956 66 years and 6 months
On or after 1 January 1957 67 years

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