A question that I’m commonly asked is whether a person has to be fully retired before they can apply for the Age Pension.
The simple answer is that you don’t have to be retired to claim a pension, however the income you earn affects how much pension you get.
The Age Pension isn’t work tested. This means Services Australia doesn’t look at whether you’re actively employed or running your own business when determining if you’re eligible for Age Pension. What we do look at is your assessable income.
As well as income from work, assessable income includes income you may receive from other sources. You can earn a certain amount from all of these sources before your pension is affected. This is called the ‘income free area’, which increased to $180 a fortnight for single people, and $320 a fortnight combined for members of a couple, on 1 July.
For each dollar you earn over that amount, your pension will reduce by 50 cents. You’ll lose eligibility entirely if your income reaches $54,220 per annum for singles and $83,002 per annum for couples. These income and assets cut-off points can change during the year with CPI.
As well as the income free area, the ‘Work Bonus’ helps you keep more of your Age Pension if you’re working.
The Work Bonus allows us to disregard the first $300 a fortnight that someone on Age Pension earns from wages or self-employment before applying the income test. This means $300 of accrued Work Bonus is added to the income free area, but it only applies to income earned from active participation through work, not to other income such as rental income.
The other benefit of the Work Bonus is if you don’t earn any income from active participation in a fortnight, the $300 gets added to your Work Bonus balance until it reaches a maximum of $7,800. If you return to work, your wages are offset against your Work Bonus balance first until that’s reduced to $0. Once your balance reaches $0, the wages can reduce your pension.
So, with the combination of the income free area and the Work Bonus, a person on Age Pension can continue to earn income from wages or self-employment and still keep more of their pension payments.
That’s all for this month. See you in September.
If you have a question of a general nature for Services Australia general manager Hank Jongen, simply email email@example.com with Hank in the subject line.