Senior Australians will now be able to work more hours without facing financial penalties to their pension payments, following the Albanese government’s changes to age pension rules.

Currently, pensioners can only earn $7800 a year before their payments are affected.

Under the new changes, age and veterans pensioners will now be able to earn an additional $4000 over this financial year without losing any of their pension.

However, the “one-off income credit designed to give older Australians the option to work and keep more of their money” is only temporary with Prime Minister Anthony Albanese stating that the changes “will be available until June 30, 2023, subject to the passage of legislation”.

“These changes will give older Australians the option to take up work if they wish to do so,” Albanese said.

“This is an important measure to ensure older Australians have the option to remain in the workforce if they wish to without losing access to their pension and benefits.

“It will mean if they wish to work for short periods of time they can also, broadening their choices.”

The legislation will also ensure pensioners won’t have their Centrelink payments cancelled if they exceed the income limit for 12 straight weeks.

The changes are designed to address the crippling labour shortage the nation is currently facing while also encouraging workforce participation among older Australians.

“In order to get more older Australian workers into the workforce, we need to make that easier by relaxing the various work tests,” Treasurer Jim Chalmers said during his closing remarks at the summit.

The changes come after calls began to grow for changes to the age pension rules that would allow older Australians to work without being subject to financial penalties.

Political figures such as New South Wales Treasurer Matt Kean called on the Federal Government to change income thresholds for seniors.

“We have a grey army of workers who want to get out there and they want to work, but there is no incentive to do so,” he told the Australian Financial Review.

“It’s a win for our pensioners who would benefit from the extra work and socialisation, and also for businesses who would be able to plug some of their vacancies.”

Victorian Premier Dan Andrews supported Kean’s calls for seniors to return to work, claiming that “the notion that we’re penalising people, or keeping them out of the workforce, while every industry is begging for staff, it just doesn’t make any sense to me”.

“I don’t reckon we can afford the luxury of saying, ‘No, you can’t work, we’ll lock you out’, while we’ve got such post-COVID skill shortages in every single industry,” he said.

Opposition Leader Peter Dutton recently called to double the amount age pensioners can earn before their pensions are reduced in an effort to fix current staff shortages.

The $145 million proposal will see the pension income limit raised from the current amount of $300 to $600 a fortnight and still be able to receive the maximum age pension of $987.60 for singles and $1488.80 for couples.

In a statement released by Dutton, the Coalition leader said the policy would “help relieve pressure on a very tight labour market” as well as “put downward pressure on inflation and interest rates”.

“Employers can’t find staff – thousands of jobs across hospitality, agriculture, tourism and retail remain open. This policy ensures that pensioners and veterans, who want to work, are not financially penalised. It puts more money into their pocket,” Dutton said.

“There are around 80,000 age pensioners and veterans who are choosing to work who will likely benefit from this change.”