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.

Note: On 1 December 2022, all individuals with a pre-existing work bonus balance received a one-off work bonus income bank credit of $4,000, up to a maximum total balance of $11,800. From 1 December 2022 to 31 December 2023, all new pension recipients over age pension age also received a $4,000 starting credit in their work bonus income bank. From 1 January 2024, the increased maximum balance of $11,800 and the $4,000 starting credit for new eligible recipients were made permanent.

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 taken to have been paid in a 14 day instalment period, 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 and $300 accrues in the pensioner's work bonus income concession bank up to a maximum of $11,800.
  • 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, that is, 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.

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).

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.