Supporting senior Australians to stay in the workforce
Legislation introduced into Parliament today will support older Australians on the age pension to stay connected to the workforce through a new, more generous Work Bonus.
This delivers on our election commitment to help age pensioners who work earn more before their pension is affected.
The new Work Bonus is set to commence on 1 July this year and will encourage older Australians to continue contributing their skills and knowledge by remaining in the workforce.
Under the new rules age pensioners will be able to earn up to $250 a fortnight without it being assessed as income under the income test.
Pensioners will also be able to build up any unused amount of their $250 fortnightly bonus in an ‘income bank’ to a total of $6,500.
The ‘income bank’ can be used to exempt future earnings from the pension income test, so that a pensioner could earn up to $6,500 a year extra without it affecting their pension. This could be from regular work each fortnight or, for example, over a six week period before Christmas.
Any unused amount of the income bank can be carried forward across years.
The new Work Bonus is a win for senior Australians, who will get more incentive to work; it is a win for business, which will find it easier to tap into the skills of older workers; and it is a win for the Australian economy.
These changes further improve the existing Work Bonus, which was introduced as part of the Australian Government’s Secure and Sustainable Pension Reforms on 20 September 2009.
As part of the historic pension reforms in September 2009, the Government delivered significant pension increases and improved indexation. For pensioners on the maximum rate, these reforms have delivered increases of $115 a fortnight for singles and $97 a fortnight for couples combined.
The new Work Bonus will cost $90 million over four years to deliver and has been funded as part of our election commitments, consistent with the Government’s commitment to return the budget to surplus in 2013, three years ahead of schedule.
Bob is an age pensioner working as a school crossing supervisor earning $300 a fortnight. Under current rules, half his employment income is disregarded ($150) by the Work Bonus so only $150 is assessed as income under the pension income test. Under the new Work Bonus, $250 will be disregarded, and only $50 assessed, so Bob will have $100 less income a fortnight counted under the pension income test.
Bob’s pension will increase by $50 a fortnight due to a lower amount of income being assessed under the pension income test.
Maria is an age pensioner who only works for six weeks a year as an accountant at tax time. During the six week tax season she earns $1,500 a fortnight, earning a total of $4,500. As Maria does not work at all in the year between tax seasons, after 12 months under the new Work Bonus she will have accumulated $5,750 (23 fortnights x $250) of Bonus in her ‘income bank’. Therefore during the tax season, the $4,500 she has earned can be offset and will not affect her pension.
Maria will continue to receive the maximum rate of pension as she has no income that is assessed under the pension income test, despite earning $4,500 in the six week period. In addition, Maria would retain $2,000 in her ‘income bank’ to offset future employment earnings.