Working on the Age Pension: how the Work Bonus lets you earn without losing your pension

Plenty of people reach Age Pension age and keep working — a few shifts a week, some seasonal work, the occasional consulting job. A common worry is that every dollar earned will simply be clawed back off the pension. The Work Bonus exists to stop that happening. It is not an extra payment and you don't apply for it: Services Australia adds $300 of credit to your Work Bonus balance every fortnight, and applies that credit to your eligible work income before the income test is run (Services Australia, https://www.servicesaustralia.gov.au/how-work-bonus-works). It doesn't make your earnings tax-free, and it only reduces what counts for the pension income test. Credit you don't use isn't lost either: it builds up in the balance, to a maximum of $11,800, as a buffer for later fortnights when your earnings are higher. The concession covers employment and self-employment that involves real work, but not passive income like investments or super pensions. This article covers who qualifies, how the balance works, what counts, and how the Work Bonus sits inside the income test after the 20 September 2026 changes.

What is the Work Bonus itself?

The Work Bonus reduces the amount of your eligible work income that is calculated in the income test. You can get it if you are of Age Pension age — currently 67 for everyone born on or after 1 January 1957 (DSS Social Security Guide 3.4.1.10, https://guides.dss.gov.au/social-security-guide/3/4/1/10) — and you receive the Age Pension, Carer Payment or Disability Support Pension (Services Australia, https://www.servicesaustralia.gov.au/who-can-get-work-bonus). If you get Carer Payment or Disability Support Pension you still need to meet the normal work rules for those payments. Pensioners on the transitional rate of pension are not eligible for the Work Bonus (see our article on why your Age Pension changed for the transitional rate).

There is no limit on the hours you can work; the bonus operates on income, not hours. In a fortnight where your eligible work income is $300 or less, Services Australia reduces it to zero for the income test and adds whatever is left of the $300 to your balance (Services Australia, https://www.servicesaustralia.gov.au/how-work-bonus-works).

Why does the balance matter more than most people realise?

The Work Bonus balance is the part most people miss. Every fortnight, $300 is added to your balance up to a maximum of $11,800 — whether or not you work at all (Services Australia, https://www.servicesaustralia.gov.au/work-bonus-balance). When you earn more than $300 in a fortnight, the $300 Work Bonus amount is applied first, and then any balance is used to reduce the remainder, potentially to zero. Services Australia's own example: Doug has $400 of eligible income. The $300 Work Bonus amount takes it down to $100; if his balance is more than $100 it is used to reduce his assessable work income to zero, and if he has no balance the remaining $100 goes into the income test. Another example: Nala earns $200 a fortnight on a short contract, so $200 of the Work Bonus is applied and her balance increases by $100 (Services Australia, https://www.servicesaustralia.gov.au/work-bonus-balance-examples-if-you-work).

The starting balance depends on when you claimed. For claims submitted after 1 July 2024, you start with a balance of $4,000 the first time you claim an eligible payment. If you are re-claiming, any balance you already had carries over, and a balance under $4,000 may be topped up to $4,000 if it hasn't been topped up in the last two years. If you lodged a claim between 1 December 2022 and 30 June 2024, you received a one-off $4,000 boost if you hadn't had one before, with the total capped at $11,800 (Services Australia, https://www.servicesaustralia.gov.au/work-bonus-balance). You can see your balance in your Centrelink online account through myGov, under Payments and claims, then My payments.

What income does the Work Bonus apply to?

Services Australia applies the Work Bonus to employment and self-employment income, whether earned inside or outside Australia (Services Australia, https://www.servicesaustralia.gov.au/types-income-we-apply-work-bonus-to). It covers:

• wages, salary and other employment income, including paid leave while you are still employed;
• director's fees; and
• self-employment that involves active participation — work that takes personal effort, such as bookkeeping, lawn mowing or plumbing.

It does not apply to leave paid after your employment has ended, self-employment income that doesn't involve active participation, investment income, or superannuation. Active participation doesn't include managing an investment portfolio or rental properties owned by you, a family trust or a family company. For sole traders, partnerships, private companies and private trusts, Services Australia uses your level of active participation to decide whether the Work Bonus can be used.

So the real distinction is between income from your own work and passive income — not employee versus contractor. A consultant who invoices through their own ABN and does the work personally is in the same position as an employee.

How does it work for couples?

Each eligible partner has their own $300 credit and their own balance. You can't use your Work Bonus for your partner's wages or their self-employment income from active participation (Services Australia, https://www.servicesaustralia.gov.au/work-bonus-and-your-partners-income). However, applying your Work Bonus to your own earnings lowers the couple's combined income, so your partner benefits from the reduced combined income in the test. A couple where both partners work and both are eligible can therefore shelter up to $600 a fortnight combined, each assessed on their own earnings.

Why doesn't salary sacrifice help?

A natural instinct is to salary-sacrifice some wages into super to "reduce the income Centrelink sees". It doesn't work that way for the Age Pension. FirstTech's income tests guide lists salary sacrifice super contributions among the components of ordinary income for the social security pension income test (FirstTech, Income Tests Quick Reference Guide 2025-26, citing Social Security Act 1991 s 8(1)). So sacrificing $200 of a $600 fortnightly wage doesn't drop your assessable income to $400: the full $600 is still counted. Salary sacrifice can be useful for tax reasons, but it doesn't improve your Age Pension income-test position.

Does the Work Bonus affect the assets test too?

No. The Age Pension has an income test and an assets test, and you are paid under whichever gives the lower rate. The Work Bonus only reduces your assessable work income for the income test. Your savings, super and investments are assessed under the assets test regardless of whether you work, and the Work Bonus does nothing to deemed income from financial assets, which is still counted in full.

That matters more from 20 September 2026, when deeming rates rose to 1.75% on the first $66,800 (single) or $110,600 (couple combined) of financial assets and 3.75% above that (see deeming rates and the Age Pension). The income free areas did not change on 20 September: they remain $226 a fortnight for a single person and $396 a fortnight combined for a couple, and the pension still reduces by 50 cents per dollar for a single person, or 25 cents per dollar for each partner in a couple, over those amounts. What did change are the income cut-off points, above which no pension is paid for that fortnight: $2,701.40 a fortnight for a single person and $4,128.00 combined for a couple living together (Services Australia, https://www.servicesaustralia.gov.au/income-test-for-age-pension).

The Work Bonus also doesn't apply to the Commonwealth Seniors Health Card, which uses adjusted taxable income instead.

What if my work income pushes me over the cut-off?

If your income goes over the cut-off point in a fortnight, your pension is $0 for that fortnight, and you still have to keep reporting employment income. If it stays over the cut-off for more than 12 fortnights in a row, Services Australia suspends the Age Pension automatically for up to two years, and you can keep your Pensioner Concession Card during that time. It won't suspend your pension if you don't have Australian employment income, if you have a Work Bonus balance, or if your only earnings are self-employment income that doesn't involve personal effort (Services Australia, https://www.servicesaustralia.gov.au/working-while-youre-getting-age-pension). For the wider picture see our articles on employment income and the nil rate period and on Age Pension suspension and cancellation.

What does the Work Bonus look like in practice?

These cases are illustrative only and not personal advice. They assume the income test is the test that binds, and the arithmetic is our own.

Orson, 68, single, does part-time consulting earning about $600 a fortnight and has no Work Bonus balance left. The $300 Work Bonus amount leaves $300 of assessable income. After the $226 single income free area, $74 is over the threshold, and at 50 cents in the dollar his pension reduces by about $37 a fortnight. He has heard that "going contractor" would cost him the Work Bonus, but self-employment involving active participation qualifies just as employment does, so the employee-or-contractor choice should turn on tax, expenses, super, insurance and admin. If he did have a balance of $300 or more, the remaining $300 would be offset too, and his work income would not reduce his pension at all.

Pearl, 70, works seasonally: almost nothing most of the year, then about $900 a fortnight for three fortnights at Christmas. Each quiet fortnight adds $300 to her balance. When she earns $900, the $300 Work Bonus amount leaves $600, which comes out of her balance. Three such fortnights use $1,800, roughly six fortnights' worth of credit, so if she has that much banked none of her Christmas earnings reach the income test. She can check her balance in myGov before the season starts.

Margaret, 72, is single, owns her home and has $180,000 in financial assets. Under the rates from 20 September 2026 her deemed income is $5,414 a year, about $208 a fortnight, just under the $226 free area. Then she takes on $500 a fortnight of casual work. With no balance, $300 is covered by the Work Bonus, leaving $200 of work income. Her assessable income is $200 + $208 = about $408, or about $182 over the free area, and her pension reduces by about $91 a fortnight. With a balance of $200 or more, her work income is offset to zero and her assessable income stays at the deemed $208, below the free area, so her pension is not reduced. It is the balance, not just the $300, that keeps her earnings from costing her anything.

One further illustration. With no other income and no balance, the $300 Work Bonus amount means a single pensioner's gross work income can reach roughly $3,001 a fortnight before it hits the $2,701.40 cut-off ($2,701.40 + $300). That is our arithmetic, not a Services Australia figure, and any other income (including deeming) brings the cut-off closer.

For Age Pension recipients thinking about paid work, the headline is reassuring: you generally can work and keep much of your pension, provided you report your income accurately and understand that the balance, not only the $300, does the heavy lifting. Rates and thresholds change with indexation, so confirm the current figures with Services Australia before relying on them.

Sources

• Services Australia — How a Work Bonus works
• Services Australia — Who can get the Work Bonus
• Services Australia — Work Bonus balance
• Services Australia — Types of income we apply the Work Bonus to
• Services Australia — Work Bonus and your partner's income
• Services Australia — Work Bonus balance examples if you work
• Services Australia — Working while you're getting Age Pension
• Services Australia — Income test for Age Pension
• DSS Social Security Guide 3.4.1.10 — Qualification for Age (pension age)