Campaign to change
the Aged Pension work bonus system and encourage Pensioners to rejoin the Workforce
IThe current ‘Work Bonus’ system discourages Aged Pensioners from returning to the Workforce. Anything EARNED from physical work (not investments etc) over $300 per fortnight ($150 per week) reduces their pension by 50 cents in every dollar, 50%. Pension deduction distribution for couples also results in an inflated taxable amount for the worker.
We need to:
Increase the Work Bonus Threshold to at least $500
Index the Work Bonus Threshold
Rectify Income Tax Anomalies
Information
The Work Bonus threshold is currently $300 per fortnight ($150 per week). The Pension is reduced by 50 cents in every dollar for any amount earned above $300 per fortnight, before tax. The Work Bonus is a threshold allowing Aged Pensioners to Earn through gainful employment (Work), excluding investments etc. without affecting their Pension. The $300 threshold is NOT indexed and has not changed since July 2019.
Jim Chalmers Media release September 2022 “…..permanently enhancing the Work Bonus for pensioners over the Age Pension….” https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/getting-more-australians-back-work 25th September 2023
- This $4000 has an actual ONE OFF benefit of $2000, as $2000 would have been received from paid work anyway.
- The $4000 Work Bonus increase does NOT increase the $300 per fortnightly work income threshold as widely reported
- The $4,000 increase to the ‘Work Bonus’ accrued balance in 2023 also applies to ‘new’ Pensioners, i.e. their ‘Work Bonus’ bank started with a balance of $4000 and increasing the accrual cap from $7800 to $11,800.
- The Work Bonus is NOT indexed and has not increased since 2019
- Work Bonus introduction 20th September 2009
- Average Wage increase 2009/10 – 2024 64.6%
- Inflation June 2009 to December 2024 50.1%
- Work Bonus Threshold History
| Sep 2009 to June 2011 | 50% of the first $500 | Assessed | $250 |
| July 2011 to July 2019 | 100% of the first $250 | Not assessed | $250 |
| July 2019 to Current | 100% of the first $300 | Not assessed | $300 |
- Work Bonus Bank accrual cap
| Sep 2009 to June 2011 | |
| July 2011 to July 2019 | $6,500 |
| July 2019 to Dec 2022 | $7,800 |
| Dec 2022 to Dec 2023 | $11,800 ($4,000 increase to accrual) |
| Jan 2024 | $11,800 ($4,000 starting bank for new Pensioners) |
- Indexation to the income free threshold for investments etc is irrelevant in this context as this is available to all Pensioners and provides no incentive for Pensioners to return to work. Income from investments etc is subject to unpredictable deeming rates set by the Government, not actual returns on investment. Deeming rates are exposed to domestic and international financial factors, political cycles and Government whims, they are outside the control of the Pensioner and have no bearing on actual investment returns
- Restoring pre-covid participation rates has the potential to save $200,000,000 every year through taxation and additional GST due to increased spending. Base on estimated Pensioner gross earnings from gainful employment of $30,720 per annum;
| Current | Proposed | |
| Annual Gross Income | $30,720.00 | $30,720.00 |
| Fortnightly Gross Income | $ 1,177.49 | $ 1,177.49 |
| Weekly Gross Income | $588.75 | $588.75 |
| Work Bonus Threshold | $300.00 | $500.00 |
| Fortnightly Assessable Income | $877.49 | $677.49 |
| Pension reduction | 50% | 50% |
| Fortnightly Pension reduction $ | $438.75 | $338.75 |
| Maximum Couple Pension (each) as at March 2025 | $866.10 | $866.10 |
| Taxable fortnightly income | $1,604.85 | $1,704.85 |
| Fortnightly Tax (if applicable) | $144.78 | $160.78 |
| Medicare contribution 2% | $23.55 | $23.55 |
| Fortnightly total net income | $1,436.52 | $1,520.52 |
According to DSS Benefit and Payment Recipient Demographics – quarterly data https://data.gov.au/data/dataset/dss-payment-demographic-data
June 2019 4.29% of Aged Pensioners reported Earnings
March 2025 3.48% of Aged Pensioners reported Earnings
March 2025 Total number of Aged Pensioners 2,654,725
Restoring June 2019 participation rate would see 113,888 reporting earnings, an increase of 21,623 over the current 92,265 as at March 2025
| Indexing the Work Bonus Threshold and immediatley increasing it from $300 to at least $500 could generate $200,000,000 in Government revenue if 2019 participation rates were restored. | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Based on the following scenario | 16 Average hours p/week | 48 Average weeks per year | $40.00 p/hr | $30,750.00 Annual Gross | ||||||||||||||||
| Individual in a Couple | Single | |||||||||||||||||||
| Current | Proposed | Current | Proposed | |||||||||||||||||
| Pension deducted - both | $ 11,447 | $ 8,838 | Pension deducted | $ 11,447 | $ 8,838 | |||||||||||||||
| Tax Payable* | $ 4,391 | $ 4,809 | Tax Payable* | $ 6,801 | $ 8,001 | |||||||||||||||
| Total Individual contribution | $ 15,838 | $ 13,647 | Total Individual contribution | $ 18,248 | $ 16,839 | |||||||||||||||
| No. of Working Pensioners | 92,265 | 113,888 | No. of Working Pensioners | 92,265 | 113,888 | |||||||||||||||
| Pension deduction & Tax | $1461.30 M | $1554.18 M | $92.88 M | Pension deduction & Tax | $1683.62 M | $1917.73 M | $234.12 M | |||||||||||||
| GST Revenue | $125.28 M | $177.25 M | $51.97 M | GST Revenue | $105.14 M | $144.31 M | $39.18 M | |||||||||||||
| Total contribution | $1586.58 M | $1731.43 M | $144.85 M | Total contribution | $1788.76 M | $2062.05 M | $273.29 M | |||||||||||||
| Payment by marital status March 2005, Partnered 51.2%, Single 48.8% - Say 50/50 | ||||||||||||||||||||
| $209,070,557.19 | ||||||||||||||||||||
| * Tax payable is subject to deductions if applicable, PAYG payments calculated with Pension deduction included, not on Gross as treated in reality | ||||||||||||||||||||
| * Tax payable does not allow for inflated Tax Payable for Couples having the 'non worker's' pension reduced | ||||||||||||||||||||
| Individual in a Couple | Current | Proposed | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual Gross Income | $ 30,720.00 | $ 30,720.00 | |||||||||||||||||||
| Fortnightly Gross Income | $ 1,177.49 | $ 1,177.49 | |||||||||||||||||||
| Weekly Gross Income | $ 588.75 | $ 588.75 | |||||||||||||||||||
| Threshold | $ 300.00 | $ 500.00 | |||||||||||||||||||
| F/nightly Assessable Income (Centrelink) | $ 877.49 | $ 677.49 | |||||||||||||||||||
| Pension reduction @ | 50% | 50% | |||||||||||||||||||
| F/nightly Pension reduction $ | $ 438.75 | $ 338.75 | |||||||||||||||||||
| Max Couple Pension (Each) as at March 2025 | $ 866.10 | $ 866.10 | |||||||||||||||||||
| Taxable fortnightly income | $ 1,604.85 | $ 1,704.85 | |||||||||||||||||||
| F/n Tax | $ 144.78 | $ 160.78 | |||||||||||||||||||
| Medicare | 2% | $ 23.55 | $ 23.55 | ||||||||||||||||||
| Total Net | $ 1,436.52 | $ 1,520.52 | |||||||||||||||||||
| Earnings reduced by | $ 607.07 | 52% | $ 523.07 | 44% | |||||||||||||||||
| * Additional tax reduction may be available depending on individual circumstances - Taxation anomolies also not considered | |||||||||||||||||||||
| Current - Available spend from Working | $ 14,936.10 | Proposed - Available spend from Working | $ 17,120.10 | ||||||||||||||||||
| Nett Hourly rate | $ 19.45 | Proposed - Available spend from Working | $ 22.29 | ||||||||||||||||||
| Individual in a Couple | |||||||||||||||||||||
| Current Threshold | $300 | Proposed Threshold | $500 | ||||||||||||||||||
| Pension reduction rate | 50% | Pension reduction rate | 50% | ||||||||||||||||||
| Earning Pensioners as at March 2025 | 92,265 | Earning Pensioners restoring June 2019 participation | 113,888 | ||||||||||||||||||
| Centrelink Deduction per Fornight Individual | Annual Centrelink Deduction | Annual Taxation Individual | Individual Pension deduction and Tax | Annual Pension Reduction & Tax Revenue | Centrelink Deduction per Fornight Individual | Annual Centrelink Deduction | Annual Taxation Individual | Individual Pension deduction and Tax | Annual Pension Reduction & Tax Revenue | Government Expense / Savings | |||||||||||
| $ 439 | $ 11,447 | $ 4,391 | $ 15,838 | $1461.30 M | $ 339 | $ 8,838 | $ 4,809 | $ 13,647 | $1554.18 M | $92.88 M | |||||||||||
| Potential GST Revenue | |||||||||||||||||||||
| Pensioners with Gainfull Earnings | 92265 | 113888 | |||||||||||||||||||
| Retained Pensioner Income $300 threshold | Total Available Pensioner Spending | GST Revenue | Retained Pensioner Income $500 threshold | Total Retained Pensioner Income | GST Revenue | Additional GST Revenue | |||||||||||||||
| $ 14,936 | $1378.08 M | $125.28 M | $ 17,120 | $1949.77 M | $177.25 M | $51.97 M | |||||||||||||||
| TOTAL POTENTIAL ADDITIONAL REVENUE TO GOVERNMENT | $144.85 M | ||||||||||||||||||||
| Single | Current | Proposed | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Annual Gross Income | $ 30,720.00 | $ 30,720.00 | ||||||||||||||||||
| Fortnightly Gross Income | $ 1,177.49 | $ 1,177.49 | ||||||||||||||||||
| Weekly Gross Income | $ 588.75 | $ 588.75 | ||||||||||||||||||
| Threshold | $ 300.00 | $ 500.00 | ||||||||||||||||||
| F/nightly Assessable Income | $ 877.49 | $ 677.49 | ||||||||||||||||||
| Pension reduction @ | 50% | 50% | ||||||||||||||||||
| F/nightly Pension reduction $ | $ 438.75 | $ 338.75 | ||||||||||||||||||
| Single Pension as at March 2025 | $ 1,149.00 | $ 1,149.00 | ||||||||||||||||||
| Taxable fortnightly income | $ 1,887.75 | $ 1,987.75 | ||||||||||||||||||
| F/n Tax | $ 237.13 | $ 283.13 | ||||||||||||||||||
| Medicare | 2% | $ 23.55 | $ 23.55 | |||||||||||||||||
| Total Net | $ 1,627.06 | $ 1,681.06 | ||||||||||||||||||
| Earnings reduced by | $ 699.43 | 59% | $ 645.43 | 55% | ||||||||||||||||
| * Additional tax reduction may be available depending on individual circumstances - Taxation anomolies also not considered | ||||||||||||||||||||
| Current Available spending from Working | $ 12,534.81 | Proposed Available spending from Working | $ 13,938.81 | |||||||||||||||||
| Nett Hourly rate | $ 16.32 | Nett Hourly rate | $ 18.15 | |||||||||||||||||
| Single | Current Threshold | $300 | Proposed Threshold | $500 | ||||||||||||||||
| Pension reduction rate | 50% | Pension reduction rate | 50% | |||||||||||||||||
| Earning Pensioners as at March 2025 | 92,265 | Earning Pensioners restoring June 2019 participation | 113,888 | |||||||||||||||||
| Centrelink Deduction per Fornight Individual | Annual Centrelink Deduction Individual | Annual Taxation Individual | Individual Pension deduction and Tax | Annual Pension Reduction & Tax Revenue | Centrelink Deduction per Fornight Individual | Annual Centrelink Deduction Individual | Annual Taxation Individual | Individual Pension deduction and Tax | Annual Pension Reduction & Tax Revenue | Government Expense / Savings | ||||||||||
| $ 439 | $ 11,447 | $ 6,801 | $ 18,248 | $1683.62 M | $ 339 | $ 8,838 | $ 8,001 | $ 16,839 | $1917.73 M | $234.12 M | ||||||||||
| Potential GST Revenue | ||||||||||||||||||||
| Pensioners with Gainfull Earnings | 92265 | 113888 | ||||||||||||||||||
| Retained Pensioner Income $300 threshold | Total Available Pensioner Spending | GST Revenue | Retained Pensioner Income $500 threshold | Total Retained Pensioner Income | GST Revenue | Additional GST Revenue | ||||||||||||||
| $ 12,535 | $1156.52 M | $105.14 M | $ 13,939 | $1587.46 M | $144.31 M | $39.18 M | ||||||||||||||
| TOTAL POTENTIAL ADDITIONAL REVENUE TO GOVERNMENT | $273.29 M | |||||||||||||||||||
| Payment recipients by payment type by state and territory by marital status, March 2025 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| https://data.gov.au/data/dataset/cff2ae8a-55e4-47db-a66d-e177fe0ac6a0/resource/6de5b023-01b3-4562-b4a7-d7a4cc93df75/download/dss-demographics-march-2025-final.xlsx | ||||||||||
| Australia | ||||||||||
| Payment type | Partnered | Not partnered | Total | |||||||
| Age Pension | 1,358,025 | 51.2% | 1,296,695 | 48.8% | 2,654,725 | |||||
A majority of Age Pensioners commenced their working life in different times with different expectations and attitudes. A time when Homosexuality was illegal[1], we still had the remnants of the White Australia Policy[2] in place, Indigenous Australians were not included in the Australian census[3], there was no Super Guarantee[4], Compulsory National Service[5] subjected male youth to a ‘birthday ballot’, if drawn you were in the Army and possibly fighting in Vietnam, refusal resulted in gaol, St. Kilda won a Grand Final and the list goes on. I’m not suggesting these attitudes were correct or times were better or worse, just different.
The Pension was expected in retirement by many. The introduction of Guaranteed Superannuation may change this expectation, or already have changed some attitudes regarding future Age Pensions however it is understandable why current Pensioners could believe they have earned their Pension over their working life.
I haven’t heard any Politician say they don’t want Age Pensioners to re-enter the Workforce, however this is in total contradiction to the current Centrelink and ATO structure.
“The fair go is synonymous with the Australian way of life. It is sometimes used as an empty slogan, but for me it is much more than that. It embodies what I believe to be a truly Australian ethos……” Hon Amanda Rishworth MP, First Speech, February 18, 2008
[1] https://www.moadoph.gov.au/explore/stories/history/8-hard-won-rights-for-lgbti-australians#:~:text=The%20Human%20Rights%20(Sexual%20Conduct,of%20human%20rights%20and%20discrimination.
[2] https://www.nma.gov.au/defining-moments/resources/white-australia-policy
[3] https://www.nma.gov.au/defining-moments/resources/first-nations-peoples-census#:~:text=In%201967%20Australians%20voted%20to,included%20in%20the%20population%20count.
[4] https://www.apra.gov.au/superannuation-australia-a-timeline
[5] https://www.awm.gov.au/articles/encyclopedia/conscription/vietnam
Petition EN6227 with 109 signatures to change the Work Bonus was submitted 12th May 2024, the petition was considered by the Petitions Committee and presented to the House of Representatives on 1st July 2024. A response from the Minister for Social Services was presented to the House 19th August 2024 rejecting the proposal.
It seems the rejection was an automatic response with little or no effort to digest or try to understand the proposal as a number of the paragraphs are identical to previous responses, word for word, merely a cut & paste response in the hope I’ll go away – not happening.
Following
- Response from the Minister for Social Services, The Hon Amanda Rishworth MP, and my comments in black print
- Original Petition submission with comments
The following document has been converted from PDF to word, original PDF available on request.
The Hon Amanda Rishworth MP
Minister for Social Services
Ref: MC24-007684
Ms Susan Templeman MP Chair
Standing Committee on Petitions
PO Box 6021
Parliament House CANBERRA
ACT
Dear Ms Templeman
Thank you for your email dated 1 July 2024, concerning the Age Pension and the Work Bonus.
Australia’s social security system is a non-contributory, means tested, residence-based system, designed to provide income support to people who, for reasons such as age, unemployment or ill health, are unable to support themselves. The Age Pension is funded by taxpayers, and targeted through the means test to those who need it most.
Pensioners who are Age Pension age (67 years and above) may also access the Work Bonus, which operates in addition to the income free area. Under the Work Bonus the first $300 of work income a fortnight is not counted in the pension income test. This would allow, for example, a single age pensioner with no other income, to earn up to $512 a fortnight from work and still receive the maximum rate of the Age Pension.
This assumes no Super or other investments, the income free area is irrelevant to incentivising Pensioners to return to work
Pensioners are able to build up any unused amount of the $300 fortnightly exemption in a Work Bonus income bank up to a maximum amount. This amount can be used to exempt future earnings from the pension income test, so a pensioner could earn up to this amount a year extra without it affecting their pension. The income bank amount is not time-limited – if unused it carries forward, even across years.
The “Income Bank” will only build if a Pensioner is not working. Work Bonus accumulation is irrelevant for those working regularly
From 1 December 2022 pensioners who are Age Pension age (67 years and above) have also received a $4,000 up-front credit in their Work Bonus income bank, and the maximum income bank balance has increased from $7,800 to $11,800, until 31 December 2023. This means every age pensioner will be able to have an extra $4,000 of employment income disregarded from the income test from the start, rather than accumulating these credits over time.
Comment: The $4000 credit is actually a one off benefit of $2,000 as 50% would have been received anyway. It has been incorrectly reported as an ongoing increase to the threshold, the threshold remaims at $300 per fornight and has not changed since July 2019
From 1 January 2024, all new pension entrants of Age Pension age (67 years and above) will receive a $4,000 Work Bonus starting balance, and the $11,800 maximum balance will be retained for all new and existing recipients.
Comment: Irrelevant – $2000 will not entice Pensioners to return to the workforce
The operation of the Work Bonus, pension income free area and taper rate means that pensioners are better off while they (or their partner) are earning income in addition to their pension payments. The design of the Work Bonus in particular recognises the substantial benefits for older Australians, and the broader community, of continuing to work.
Comment: NOTE: “..recognises the substantial benefits for older Australians, and the broader community, of continuing work” They must believe the current situation encourages working pensioners to continue working????? So why has there been a drop in Pensioners reporting legitimate earnings through gainfull employment?
I note that the petition mentions an increase to the fortnightly Work Bonus amount as well as indexation of that amount in line with the Age Pension. The current settings under the Work Bonus already provide a substantial incentive for pensioners over pension age to undertake paid employment. The incentives have also increased with the recent changes the Government has implemented, as outlined above.
Comment: “Substantial Incentive”??? The Work Bonus does not provide substantial incentive for Pensioners to undertake paid employment – that’s the entire point
Recent incentive is a one off benefit of $2,000????
Additionally, the petition advocates for the combining of Work Bonus balances for couples. The intention of the Work Bonus is to provide an incentive to age pensioners who can and want to continue to work. The Work Bonus recognises that continuing employment for older Australians provides financial and non-financial benefits for individuals and brings substantial benefit to the broader community. For these reasons, the Work Bonus applies to the individual work income of each pensioner. The suggestion that any unused Work Bonus balance be shared within a couple would be inconsistent with the policy intent of the initiative.
Comment: Fluff response – A member of a couple who works has their Pension decreased by 25% (after the $300 fortnightly threshold) their partner also has their Pension decreased by 25%, this inflates the ‘Earners’ Taxable Income by the amount deducted from their partners Pension.
What is the Policy intent?
I appreciate you bringing this matter to my attention.
Your ely
Amanda Rishworth MP
Increase the Work Bonus providing Aged Pensioners incentive to re-enter the workforce and ease the current skills shortage at no cost to Government, without disadvantaging those unable to work.
Comment
They actually believe enough incentive already exists.
No reference to Workplace Skills Shortage
No reference to saving Government Money
Why:
The current Work Bonus system discourages Pensioners to return to the workforce.
A Pensioner earnings gained from work over $150 p/week is reduced by 50%, this has not changed since July 2019.
Comment: The Government believes this is enough incentive to return to work without indexation.
Reduce a black cash economy.
Comment: No reference to the Black Cash Economy
Australian average wage 2009/10 to 2024 88% increase
Pension Sept 2009 to March 2024 66% increase
Work Bonus Sept 2009 to March 2024 20% increase
Comment: Response “The current settings under the Work Bonus already provide a substantial incentive for pensioners over pension age to undertake paid employment. The incentives have also increased with the recent changes the Government has implemented, as outlined above.” (The $2,000 one off benefit)
Comment: The $4,000 Work Bonus Cap increase had an actual one off value of $2,000, not enough to entice Aged Pensioners to change their lifestyle.
Comment: 92,265 Pensioners reported earnings as of March 2025. This number would increase to 113,888 if pre-covid levels were restored.
Increasing the threshold from $300 to $500 p/fortnight and restoring participation to pre-covid levels could realise a saving to Government of $200 Million. An average income of $30,720 would potentially realise an initial cost of approx $24.8M, with an $213M gain from Taxation and an additional $45.5M from extra GST, a net total of $233.88M benifit to the Nation.
Comment: No mention of the reduction in Working Pensioners or the potential to increase Govt revenue.
AIM:
To immediately change the Work Bonus system providing Aged Pensioners incentive to re-enter the workforce and ease the current skills shortage at no cost to Government without disadvantaging those unable to work.
Comment Government NOT INTERESTED
Action Required:
- Increase Work Bonus Threshold from $300 per fortnight to $500 per fortnight.
- Index Work Bonus Threshold in line with Aged Pension review every March and September.
- Consider combining Couples Work Bonus balance
DSS Benefit and Payment Recipient Demographics – quarterly data https://data.gov.au/data/dataset/dss-payment-demographic-data
June 2019 4.29% of Aged Pensioners reported Earnings
March 2025 3.48% of Aged Pensioners reported Earnings
March 2025 Total number of Aged Pensioners 2,654,725
Restoring June 2019 participation rate would see 113,888 reporting Earnings
Aged Pensioners reporting Earnings as at March 2025 was 92,265
Restoring 2019 participation rates would see an additional 21,623 Working Pensioners contributing to the economy by way of Pension Deduction and Taxation.
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