In this article, we delve into what the Work Bonus Scheme is, how seniors in Australia can apply for it, and the pros and cons of participating in the scheme.
Retirement no longer means leaving the workforce for good. Many seniors in Australia are choosing to continue working in some capacity during their retirement years. To support this trend and provide financial incentives for older Australians, the Australian government introduced the Work Bonus Scheme.
What is the Work Bonus Scheme?
The Work Bonus Scheme (WBS) is a programme offered by Services Australia, the government agency responsible for delivering social security services, including the Age Pension. The Work Bonus allows older Australians who are receiving the Age Pension to continue working without impacting their pension payments negatively.
How It Works
The following details show how the scheme works.
To be eligible for the Work Bonus Scheme, you must meet the following criteria:
- be of Age Pension age (currently at 67 as of 1 July 2023)
- receive the Age Pension or a pension from a partner’s claim
- have work-related income, either through employment or self-employment.
Under the Work Bonus Scheme, there is an income threshold that determines how much you can earn from work before it affects your Age Pension payment. As of 2023, the threshold is set at $300 per fortnight.
The Work Bonus Scheme allows you to earn up to $300 per fortnight from work without affecting your Age Pension payment. This means that the first $250 of your work-related income is exempt and does not count towards the income test for the Age Pension.
Accumulative and Rolling System
If you do not use all of your exempt income in one fortnight, it accumulates and rolls over to the next. This means that you can build up your unused exempt income over time, allowing you to work more during certain periods without affecting your pension.
You are required to report your work-related income to Services Australia, even if it falls below the income threshold. This reporting ensures that your pension payment is correctly calculated based on your total income.
There is also an annual limit on the amount of unused exempt income you can accumulate. Once you reach this limit, any additional unused income will not be exempt and will affect your pension payment.
However, the government announced that between 1 December 2022 to 31 December 2023, each member’s Work Bonus account will have a one-off credit of $4,000 added, giving the annual limit a boost of $11,800. That max limit will revert on 1 January 2024 to $7,800.
Applying for the Work Bonus Scheme is a straightforward process. Here’s how you can do it:
- Age Pension Application. First and foremost, you need to apply for the Age Pension if you haven’t already. You can do this through Services Australia’s website, over the phone, or by visiting a local service center.
- Inform Services Australia of Your Work. Once you’re receiving the Age Pension, inform Services Australia of your work or self-employment income. This is typically done through the regular reporting process. You will need to provide details about your income and working hours.
- Calculate Your Exempt Income. Services Australia will calculate your exempt income based on the income threshold and the income you report. Any income below the threshold will be exempt and not affect your pension payment.
- Monitor Your Accumulated Exempt Income. If you have any unused exempt income that accumulates, keep track of it to ensure you don’t exceed the annual limit of $6,500.
- Regular Reporting. Continue to report your work-related income to Services Australia regularly. This helps ensure that your pension payment remains accurate and reflects your current financial situation.
How is the Work Bonus applied to single pensioners?
Example 1: Michael, an age pensioner, works as a school crossing supervisor, earning $400 per fortnight with no other income. Under the Work Bonus, the initial $300 of Michael’s employment income is exempted from assessment, and only $100 is considered in the pension income evaluation. This amount falls below the pension income free area of $204 per fortnight for a single pensioner, ensuring Michael receives the maximum Age Pension rate.
Example 2: Angela, also an age pensioner, works as an accountant for three fortnights without any additional income. Having not worked in the past year, Angela has amassed the maximum Work Bonus income bank of $11,800 (accumulated through 26 fortnights at $300, plus a one-time credit of $4,000 received on December 1, 2022). Across these three fortnights, Angela earns $2,000 each, totaling $6,000. As Angela’s income bank surpasses her earnings, none of the $6,000 is factored into the income test, ensuring she still qualifies for the maximum Age Pension rate.
Moreover, Angela retains $6,700 in her income bank to offset potential future work earnings ($11,800 – $6,000 earnings + $300 Work Bonus concession for each of the three fortnights that Angela works).
How is the Work Bonus applied to couples?
The Work Bonus is designed for individual pensioners and cannot be used jointly by a couple receiving the pension.
Example: Pam and Jim, a couple both receiving the Age Pension, have specific income sources. Pam earns $700 per fortnight from work, while Jim generates $220 per fortnight through self-employment, with no additional income streams.
With the Work Bonus, the initial $300 of an individual’s work income remains unassessed. Consequently, $400 per fortnight is considered as Pam’s income, and Jim’s income isn’t assessed at all. As per the pension income test, pensions decrease by 50 cents for every $1 of income over the income test threshold. The combined assessed income of $400 per fortnight for Pam and Jim surpasses the income free area for a couple by $40 ($360 a fortnight), resulting in a reduction of their combined pensions by $20 per fortnight ($10 each).
If either Pam or Jim were below the Age Pension age, they wouldn’t qualify for the Work Bonus, and their work-related income would be evaluated under the standard income test guidelines.
The A.S.A.G. Reverse Mortgage
The Work Bonus Scheme empowers seniors to make choices that best suit their individual circumstances, allowing them to embrace their golden years with financial confidence and independence.
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DISCLAIMER: This article is for informational purposes only and does not constitute official employment advice. The Australian Seniors Advisory Group has no working relationships with any government agency and has no interests in any government pension scheme.