3.1.15.20 Work bonus - overview
Introduction
This topic contains information about when the work bonus applies to pensioners of age pension age (except PPS) from 1 July 2019 and what types of income are eligible for the work bonus.
What does the work bonus consist of?
The work bonus consists of 2 elements: a fortnightly concession amount and a work bonus income concession bank (income bank) in which unused amounts of the fortnightly concession accrue. Any credit in the work bonus income concession bank offsets future income that is eligible for the work bonus that would otherwise be assessable.
Day a person becomes eligible for work bonus
A person becomes eligible for work bonus on the day they start receiving their social security pension or in respect of an instalment period that includes 1 July 2011, whichever is the later.
The extension of the work bonus to include self-employment income from gainful work (1.1.G.25) from 1 July 2019 applies in respect of the entire instalment period of a person that includes 1 July 2019.
Act reference: SSAct section 1073AA Work bonus, section 1073AB Unused concession balance
Work bonus income bank balance when first receiving or recommencing qualifying payment
From 1 January 2024, a person commencing on an eligible payment receives an upfront $4,000 starting credit in their work bonus income bank.
Where a person has ceased to receive an eligible payment (that is, are no longer payable, serving an employment income nil rate period, or suspended), and later recommences receiving an eligible payment, they retain the work bonus income bank balance they had when they ceased to receive the payment.
If a person recommences on an eligible payment on or after 1 July 2024:
- and their retained work bonus income bank balance is less than $4,000
- and they have not previously received a $4,000 top-up within 2 years of the date they recommenced receiving the eligible payment
then:
- the person receives a top-up to their income bank balance equal to the difference between their retained balance when recommencing payment and $4,000.
Act reference: SSAct section 1073AB Unused concession balance
What types of income are eligible for the work bonus?
Employment income, and self-employment income from gainful work, is eligible for the work bonus from 1 July 2019. Prior to 1 July 2019, only employment income was eligible for the work bonus.
Employment income is income from remunerative work undertaken by the person as an employee in an employer/employee relationship. This includes but is not limited to salary, wages, commissions and employment related fringe benefits.
Employment income does not include:
- a superannuation payment to the person
- a payment of compensation, or a payment to the person under an insurance scheme, in relation to the person's inability to earn, derive or receive income from that remunerative work
- a payment to the person by a former employer of the person in relation to the termination of the person's employment, or
- a comparable foreign payment.
Note: Income from self-employment is NOT regarded as employment income but may be regarded as gainful work income that is eligible for the work bonus.
Gainful work income that is eligible for the work bonus is income from work for financial gain or reward (other than as an employee), where the work involves personal exertion on the part of the person concerned.
Gainful work income is earned through self-employment, for example operating a business as a plumber, farmer, wedding celebrant or artist. It includes where the business is operated as a sole trader, partnership, or through a private trust or company, or another business structure.
Gainful work income that is eligible for the work bonus does not include:
- Managing or administering financial investments and real property, such as an investment property, owned by the person or their family, including a family company, family group or family trust.
- Work involving domestic, household, gardening or similar tasks at the person's place of residence.
Where a business structure has a mix of gainful work income and income that is not from gainful work, only the assessable income from the gainful work is eligible for the work bonus. For example, a person may work as a self-employed plumber under a business structure that also owns and rents an investment property. Only the gainful work income from the plumbing business would be eligible for the work bonus, not the income from rent.
Act reference: SSAct section 1073AAA Meaning of gainful work, section 8(1)-'employment income'
Policy reference: SS Guide 1.1.E.102 Employment income, 1.1.G.25 Gainful work (work bonus)
Assessment of gainful work income for the work bonus
The work bonus is calculated based on instalment periods whereas self-employment income, including from gainful work, is assessed and recorded on an annual rate of income basis. It is necessary to convert the annual rate of assessed self-employment income from gainful work to an amount of income for each instalment period.
A person's self-employment income from gainful work for an instalment period is the sum of the annual rate of assessed income from self-employment from gainful work divided by 364, for each day of the instalment period.
Also, where a person is eligible for the work bonus, the amount of self-employment income from gainful work that is assessed for an instalment period is spread evenly across the entire instalment period.
Example: 14 day instalment period
A person operates a business as a plumber and has an assessed annual rate of self-employment income from gainful work of $18,200. The person's self-employment income from gainful work for the instalment period is $700 ($18,200 divided by 364 multiplied by 14 days). The $700 that is assessed for the instalment period is spread evenly across the entire instalment period, that is, $50 is assessed for each day of the instalment period ($700 divided by 14 days).
Example: 13 day instalment period
A person operates a business as a plumber and has an assessed annual rate of self-employment income from gainful work of $18,200. Based on a 13 day instalment period, the person's self-employment income from gainful work for the instalment period is $650 ($18,200 divided by 364 multiplied by 13 days). The $650 that is assessed for the instalment period is spread evenly across the entire instalment period, that is, $50 is assessed for each day of the instalment period ($650 divided by 13 days).
Example: Annual assessed rate of income changes during an instalment period
A person operates a business as a plumber and has an assessed annual rate of self-employment income from gainful work of $18,200 for the first 5 days of a 14 day instalment period. The person's annual rate of self-employment income from gainful work is re-assessed as $9,100 with a date of effect of the 6th day of the instalment period. The person's self-employment income from gainful work for the instalment period is $475. ($18,200 divided by 364 multiplied by 5 days ($250) plus $9,100 divided by 364 multiplied by 9 days ($225)). The $475 that is assessed for the instalment period is spread evenly across the entire instalment period, that is, $33.93 is assessed for each day of the instalment period ($475 divided by 14 days).
Transitional arrangements
As the work bonus can affect the calculation of assessable income it can affect whether a person's pension is paid under transitional arrangements. The work bonus is not available to a person paid under the transitional arrangements but may still apply when calculating their partner's income support entitlement.
If a person is eligible for a transitional rate, a comparison is made between their transitional rate (which has no work bonus) to their new rate (which does include the work bonus).