Pension work bonus allows extra $77 a week before payments hit

Older Australians can work more hours this financial year before losing pension income, but it’s wise to crunch the numbers first.

An incentive allowing seniors to earn an extra $4000 this financial year before impacting their age pension should be studied carefully before taking on extra work.

Retirement specialists say the change is welcome, but warn that seniors who work too much face losing 50c of every dollar they earn above the expanded threshold.

Before the federal government announced the change this month, pensioners could earn $7800 annually before their payment was reduced by 50c for every extra dollar earned. This has expanded to $11,800 for 2022-23.

The increase is $77 a week, which based on Australians’ average hourly wage of $34.68 equates to just 2.2 hours of work. Someone working an extra eight hours would potentially lose $104 of their $277 gross wage – or 38 per cent of that shift’s income.

Later Life Advice founder Brendan Ryan says seniors should understand how their work affects their pension entitlements.

Ryan says he knows a 71-year-old woman who was working three shifts a week to finish paying off her mortgage, but discovered her third shift was losing her 50c of every dollar earned because of the impact of the Centrelink income test.

Brenton Miegel says it would be smart to extend the work bonus scheme.

“If you get a shift, you don’t want to be doing it for half price,” he says.

However, Ryan supports the expanded scheme, which he says is “quite targeted” and “essentially a tax break for older people”.

“It might encourage some people to take on short-term work or ad hoc jobs,” he says.

“It’s a step in the right direction. It helps, but it’s not life-changing.”

Goldsborough Financial Services director Brenton Miegel says seniors must report their income to Centrelink, “mostly on a monthly basis”.

“Any change that’s made to the work bonus scheme to encourage people to earn a bit more without impacting their pension is a good thing,” he says.

It would help businesses cover worker shortages and help seniors keep more of their pensions, Miegel says.

“There are people who would be feeling the cost-of-living pressure and would want to earn a bit more to help them out – what they don’t want to do is have a negative impact on their age pension,” he says.

The Centrelink income test does not apply to everyone, because more people lose pension through the “harsher” assets test.

Miegel says extending the current $4000 bonus beyond the 2022-23 financial year “would be very smart in the current economic climate”.

Originally published as Pension work bonus allows extra $77 a week before payments hit