A FINANCIAL MOMENT

Making the Work Bonus work for you

Hank Jongen General Manager, Services Australia

HI everyone.

The Federal Government has just introduced changes to Services Australia’s Work Bonus. The Work Bonus increases the amount an eligible pensioner can earn from work – either wages or eligible self-employment income – before it effects their pension.

The Work Bonus automatically exempts the first $300 per fortnight you earn from work if you receive Age Pension. Carer Payment and Disability Support Pension customers who are over Age Pension age and working may also benefit from the Work Bonus, subject to normal work rules for those payments.

Every fortnight you aren’t working, or have been paid less than $300 from work, you are contributing to your Work Bonus balance. This balance can grow until it reaches the maximum of $7,800.

From 1 December, the maximum Work Bonus balance has increased. The government has given it a $4,000 top-up, taking the total possible balance from $7,800 to $11,800. The top up will stay until 31 December 2023.

This means that pensioners over Age Pension age can earn an additional $4,000 in income from work without it having an impact on their rate of pension.

Any Work Bonus eligible income over $300 will reduce any Work Bonus balance you may have before the income starts to reduce your pension. The excess income won’t affect your pension rate until your Work Bonus balance is used up.

The $4,000 will be added to your existing Work Bonus balance. This means that if you start work you can have an additional $4,000 in Work Bonus eligible income before you see a change in your rate of pension.

If you’re already working and have used up all your Work Bonus balance, the additional $4,000 will mean that you may see an increase in your fortnightly pension from 1 December until you use up the $4,000 Work Bonus top-up.

The Work Bonus operates in addition to the pension income test-free area of $190 per fortnight for singles and $336 per fortnight combined for couples.

For more information on the Work Bonus and pension income test, check our website servicesaustralia.gov.au/ workbonus.

Until next time,

Hank Jongen

Getting more from your Age Pension

THE Age Pension plays a vital role for many Australians in helping them meet their income needs in retirement. Making sure you are getting the maximum Age Pension entitlement can put you ahead by thousands of dollars over your retirement.

Here we will discuss several strategies that can help boost the rate of Age Pension you receive.

Gifting

Centrelink allow you to gift assets valued up to $10,000 per financial year or up to $30,000 over five years (not exceeding $10,000 in a single financial year) before there is any impact on your Age Pension.

Gifts made above these limits are considered deprived assets and are counted towards your asset test. They are and subject to deeming under the income test for a period of five years from the date of the gift.

Renovating your home

The value of your primary residence is exempt under the Centrelink asset test. If you have surplus cash, spending money on home improvements can increase the value of your home and reduce the value of your assessable assets, thereby boosting your Age Pension.

The work bonus

If you decide to go back to work, you can take advantage of the Work Bonus incentive. Centrelink will allow you to earn up to $300 per fortnight which will not be assessed under the income test.

If your work is sporadic, Centrelink will add $300 to your Work Bonus balance each fortnight which will be compounded until it reaches $7,800. This amount excludes the one-off work bonus credit of $4,000 outlined in the October 2022 Federal Budget.

Update the value of your personal assets

The value of personal assets (vehicles, caravans and boats etc) should be based on re-sale value, not insured value. It is common for people to mistakenly overvalue their personal assets with Centrelink.

Reduce your debt

It is a common belief that Centrelink will reduce the value of your assets by the level of debt you have. While this is true for investment debt, such as a rental property mortgage, it is not true for personal debt.

If you have a personal loan, car loan, credit card, home mortgage or any other personal debt, Centrelink do not reduce the value of your assets. By paying down your personal debt you not only save money on interest, but also increase your age pension by using the money in your bank (an assessable asset) to pay off the loan.

Use your younger spouse

If one member of a couple is under Age Pension age, money may be contributed to a super accumulation account in the younger spouse’s name where the money is exempt from the asset test. This requires the older member of the couple withdrawing funds from their super and contributing the proceeds into their younger spouse’s account (provided contribution eligibility criteria is satisfied).

Funeral bond or prepay funeral

Purchasing a funeral bond or pre-paying your funeral can be an effective way to reduce your assets. Centrelink allow you contribute up to $13,500 into a funeral bond which then becomes exempt from the asset test. This could potentially increase your Age Pension by $1,033 per year. There is no limit on the amount you can pre-pay for your funeral.

These are only some of many strategies available to help you get more from your Age Pension. While there are benefits to each, there are also risks and consequences. Prior to adopting any of these strategies you should seek professional advice.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information.