Nick Bruining: Here’s how seniors can earn $1000+ a week in income while keeping their Centrelink age pension

Seniors have an opportunity to earn more than $1000 a week between now and the end of the year while keeping their full age pension at the same time. It comes on the back of announced changes to Centrelink means testing, where a one-off concession introduced for 2023 has been locked-in as a permanent change from 2024. In another twist, a person who reaches age pension age could continue working and also receive a Centrelink pension. The work bonus is the amount of money an age pensioner can earn from employment each fortnight. It does not count towards the normal income-free area used to calculate entitlements under the income means test. The current work bonus rate is $300 a fortnight per individual. The normal income-free area for a single pensioner is $204 a fortnight, which includes deemed income from financial assets, foreign pensions, net rental receipts from real estate and the income from some fixed superannuation pensions. For couples, the combined income-free area is $360 a fortnight, but that could all be earned by one member of a couple. These income-free areas also include before-tax employment income, but only the amount that exceeds the work bonus. It means a single person could earn a combined $504 a fortnight. This is made up of $300 in employment earnings and $204 in other Centrelink assessable income before losing any pension. Once these thresholds are exceeded, the pension reduces at the rate of 50¢ per dollar. Many regard this reduction in the rate of pension payable as a form of tax and a disincentive for seniors to continue working. If the fortnightly work bonus is not used, it builds up until it reaches the annual maximum amount of $7800 per individual. A non-working member of a couple can’t transfer their unused work bonus to their partner. This “income bank” can be drawn down as lump sum. For example, it means a senior with $7800 accumulated in their income bank could do one month’s work and earn $7000 without losing any pension under the income test. The one-off $4000 credit to the work bonus income bank announced after the jobs and skills summit last year will become a permanent fixture. It will be credited to a pensioner’s account as soon as their pension is granted. A pensioner who has not worked at all this year could already have the full $7800 in their work bonus income bank plus the $4000 credit, giving them a total of $11,800 to play with. In theory, they could earn $1072 over the next 11 weeks until the end of the year and not lose any pension. In another change expected to apply from January 1, 2024, a person who is granted an age pension will see an immediate $4000 deposited into their income bank. This might encourage a person intending to resign from a job to retire, stay on a little longer and receive a full or part-age pension at the same time. As a rough guide, a single person generating $2850 worth of Centrelink assessable income a fortnight would still qualify for a part-age pension. For a retired couple both still working, this figure is about $4574 a fortnight. Centrelink assessable income doesn’t include withdrawals from super or payments from an account-based pension. The announced change to the work bonus system is subject to the legislation passing through both Houses of Parliament. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association