Working part-time once you reach Age Pension age can offer many benefits. However, any part-time earnings may also reduce the amount of Age Pension you receive.
Reasons to continue with part-time work
Once you've reached Age Pension age, working can be a great way to maintain your social connections. And you’ll be keeping yourself active while you make the transition to retirement.
You might also discover some financial advantages – such as reducing the amount you need to draw from your super fund or account-based pension.
The other good news is that the Government provides a 'work bonus', which reduces the amount of employment income that affects the Age Pension.
In addition, working may enable you to make additional super contributions, helping boost your income in retirement.
How does part-time work affect the Age Pension?
Any earnings from part-time employment may affect Age Pension entitlements you’re eligible to receive.
The amount of Age Pension you receive is determined by Centrelink applying an income and assets test. If you receive earnings from part-time employment, these are generally included under the Centrelink income test.
However, to encourage people to work beyond Age Pension age, the Government’s 'work bonus' reduces the amount of income from employment (or self-employment) which is included under the income test.
What is the work bonus?
If you've reached Age Pension age, the work bonus automatically reduces the amount of employment income assessed under the income test by up to $300 per fortnight, before tax.
In addition, if you earn less than $300 per fortnight before tax, any unused amounts are added to your work bonus balance and can be used to reduce future employment income.
Your work bonus balance can accumulate up to $7,800.
Example – receiving maximum Age Pension
Peter receives the Age Pension and earns part-time employment income of $300 per fortnight, before tax.
Thanks to the work bonus, his employment income which counts under the Centrelink income test is nil.
Peter’s other income and assets are below allowable thresholds, so he receives the maximum Age Pension.
Where can I find out more?
A great place to start is the Services Australia website. It’s also a good idea to consult a financial adviser about your retirement options.
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Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.
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