How older Australians can pocket thousands of dollars and still keep the Age Pension

Oct 09, 2023
Finance expert, Nick Bruining, shares how older Australians can pocket thousands of dollars while keeping the pension and what other changes are coming. Image source: Getty

Fancy being Santa’s helper over Christmas? You could pocket thousands of dollars and still keep your age pension.

Seniors have an opportunity to earn more than $1,000 per week between now and the end of the year and keep their full age pension at the same time. The strategy comes on the back of announced changes to Centrelink means testing where a one-off concession introduced for 2023, has been locked-in as a permanent change from 2024.

In another twist, a person who reaches age pension age, could continue working and receive a Centrelink pension at the same time.

The Work Bonus is an amount of money an age pensioner can earn from employment each fortnight, that does not count towards the normal income free area used to calculate entitlements under the income means test. The current Work Bonus rate is $300 per fortnight per individual.

How much can you earn before you lose the pension?

The normal income free area for a single pensioner is $204 a fortnight which includes deemed income from financial assets, foreign pensions, net rental receipts from real estate and the income from some defined benefit superannuation pensions. For couples, the combined income free area is $360 a fortnight, but that could all be earned by one member of a couple.

These income free areas also include before-tax employment income, but only the amount that exceeds the Work Bonus.

This means that a single person could earn a combined $504 a fortnight made up of employment earnings of $300 and other Centrelink assessable income of $204 before losing any pension. Once these thresholds are exceeded, the pension reduces at the rate of 50 cents per dollar.

Many regard this reduction as a form of tax and a disincentive for seniors to continue working. If the fortnightly Work Bonus is not used, it builds up until it reaches the annual maximum amount of $7,800 per individual. A non-working member of a couple can’t transfer their unused work bonus to their partner.

This “Income Bank” can be drawn down as lump sum. It means for example, a senior with $7,800 accumulated in their income bank could do one month’s work and earn $7,000 without losing any pension under the income test.

What to expect from 1 January 2024

The one off $4,000 credit to the Work Bonus Income Bank announced after the Jobs and Skills Summit last year, will become a permanent fixture and will be credited to a pensioner’s account as soon as their pension is granted.

A pensioner who has not worked at all this year could already have the full $7,800 in their Work Bonus Income Bank plus the $4,000 credit giving them a total of $11,800 to play with. In theory, they could earn $1,072 over the next 11 weeks until the end of the year and not lose any pension – perhaps an extra Santa shift is in order!

In another change expected to apply from January 1 2024, a person who is granted an age pension will see an immediate $4,000 deposited in their income bank. That might see a person who resigns from their job to retire, staying on a little longer and receiving a full or part age pension at the same time.

As a rough guide, a single generating $2,850 of Centrelink assessable income a fortnight, would still qualify for a part age pension. For a retired couple both still working, this figure is about $4,574 a fortnight.

And by the way, Centrelink assessable income doesn’t include withdrawals from super or payments from an account-based pension.

The announced change to the Work Bonus system is subject to the legislation passing through both houses of parliament.

Read more: Understanding how Centrelink assesses income for the income test

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IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

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