3.1.15.30 Work bonus - application

Introduction

This topic contains information about how the work bonus is applied to pensioners of age pension age (except PPS) from 1 July 2019.

Application of the work bonus

The work bonus is used to reduce the assessable income from employment, or from self employment from gainful work (1.1.G.25), in an instalment period. An instalment period is a period of a maximum of 14 days.

The work bonus comprises 2 elements:

  • employment income concession
    • The first $300 of income from employment, or from self-employment from gainful work, earned in a 14 day instalment period is excluded from the income test.
    • Any income from employment, or from self-employment from gainful work, over $300 is assessed under the income test subject to the application of the work bonus income concession bank (see next point).
  • work bonus income concession bank
    • If the total of a person's income from employment and from self-employment from gainful work, for a 14 day instalment period is less than $300, the difference between the amount earned and $300 accrues in the pensioner's work bonus income concession bank up to a maximum of $7,800.
    • Any credit in the work bonus income concession bank offsets future income from employment, or from self-employment from gainful work, that would otherwise be assessable. Where a credit is used to reduce the amount of assessable income the balance remaining in the work bonus income concession bank reduces by the credit amount used to reduce otherwise assessable income. Where a person receives no pension payment in an instalment period there can be no accrual or depletion to a work bonus income concession bank balance. The work bonus income concession bank credit carries across financial years and does not expire, i.e. it remains until the eligible pensioner dies. If a pensioner goes off payment, any credit balance is retained and is reactivated if they come back on to pension.

Treatment of partners

The work bonus applies individually to each member of a couple with each member of the couple maintaining a separate work bonus income concession bank. After the work bonus rules are applied, the remaining assessable income of both partners is combined as per the usual application of the pension rate calculation process.

Act reference: SSAct section 8(1)-'employment income', section 1073AA Work bonus

Application of work bonus for instalment period of less than 14 days

A proportional rule will apply to instalment periods of less than 14 days.

The amount of work bonus used to calculate the reduction of income from employment, or from self-employment from gainful work, that is assessed under the income test is worked out using the following formula:

  • Work bonus equals $300 multiplied by (number of days in the instalment period divided by 14).

Example: A person has income from employment, or from self-employment from gainful work, of $700 in an 8 day instalment period. They have no other income. As their instalment period is 8 days, the $300 concession amount is pro rata as outlined:

  • Step 1 Pro rata concession: $300 × 8 ÷ 14 = $171
  • Step 2 Applying work bonus: $700 − $171 = $529
  • Step 3 Assessable employment income = $529

Note: Example assumes there is no balance in the work bonus income concession bank.

Act reference: SSAct section 1073AA Work bonus

Instalment periods spanning across 1 July 2011 or 1 July 2019

Instalment periods may span over a period before and after 1 July 2011, when the current design of the work bonus was implemented.

Where this occurs, the post 1 July 2011 work bonus rules apply for the entire instalment period that includes 1 July 2011.

Instalment periods may also span over a period before and after 1 July 2019, when the work bonus amount and maximum income concession bank balance was increased and the work bonus was extended to include self-employment income from gainful work. Where this occurs, the increased amounts and extension apply for the entire instalment period that includes 1 July 2019.

Act reference: SS(Admin)Act section 43 Payment by instalments

Last reviewed: 6 May 2019