September 18, 2019
The Work Bonus lets eligible pensioners earn more income from working without reducing their pension. Until recently, the Work Bonus only applied to employment income, but from 1 July 2019 it was extended to include income from self-employment. However, the bonus can only be used to offset income derived from the physical exertion of the pensioner, it does not include income from passive investments such as rent or investment income.
What does it mean for self-employed?
The recent changes improve the consistency and equity of the Work Bonus. The changes mean that employment and self-employment income are now treated similarly. As a result, self-employed pensioners are now allowed to earn a higher amount before it affects their pension rate.
How does it work?
The Work Bonus is not an additional payment. Rather, it effectively provides an ‘income free area’ in respect of eligible income. There is no need to apply for the Work Bonus, as it is automatically applied by Centrelink. The Work Bonus is currently $300 per fortnight per pensioner. This means that a couple combined have a total of $600 per fortnight in Work Bonus available. Due to the bonus, a single working pensioner can earn about $60,000 per year and still potentially get some Age Pension. Similarly, a working pensioner couple can make some $95,000 per year before their Age Pension is cut off, assuming maximum bonus.
As the Work Bonus is applied on an individual basis, any unused bonus cannot be transferred between spouses. Instead, the unused bonus is credited to an ‘income bank’ that can be used to offset future eligible income. A maximum of $7,800 can be accrued in the income bank and the credits accrued do not expire (except on death). The work bonus applies individually to each member of a couple with each member of the couple maintaining a separate income bank.
How this may work in practice
Take a retired handyman Greg, as an example, who is a single Age Pensioner. He has a balance of $2,400 in his ‘income bank’. Greg takes an opportunity to do some paining work and earns $3,000 in a given fortnight. Under the Work Bonus scheme, Greg is entitled to disregard the first $300 of his income, leaving a remainder amount of $2,700. Greg then uses the available balance of $2,400 in his income bank in full, resulting in only $300 of income being assessable in that fortnight.