In short

Working in retirement is often more affordable than expected. The Work Bonus excludes the first $300 per fortnight of employment income from the Age Pension income test, with unused amounts banking up to $11,800. Combined with the tax-free threshold and SAPTO, many retirees earning modest consulting or part-time income pay little or no tax and lose little or no pension.

For many Australian retirees, the assumption that retirement means no paid work at all is increasingly inconsistent with how they actually spend their time. Consulting in a former professional field, taking on board roles, teaching or mentoring part-time, or simply continuing some part-time employment — paid work in retirement, often on flexible and self-directed terms, has become a meaningful and common part of the retirement experience. For those on the Age Pension, the Work Bonus provision makes modest work income substantially less costly in pension terms than most people assume. For all working retirees, the tax position, super contribution opportunities, and Centrelink reporting obligations are worth understanding before the income starts.

The Work Bonus: how it protects Age Pension entitlement

The Work Bonus (Social Security Act 1991 s.1073AA) is one of the more generous and underappreciated provisions in the Age Pension system. For Age Pension recipients who have employment income, the first $300 per fortnight is excluded from the income test — it simply does not count. A pensioner earning $300 per fortnight from casual work has zero assessable employment income for the purpose of the income test. Any unused Work Bonus accumulates in an "employment income concession bank" to a maximum of $11,800 (permanently from 1 January 2024). A pensioner who has not worked for a year and then takes on a consulting contract can draw on their accumulated bank to shelter a substantial lump payment or elevated income period from the income test.

In practice, a couple both receiving the Age Pension can each use the Work Bonus — $600 combined per fortnight, or $15,600 per year, of employment income excluded from the income test between them. For the typical consulting or part-time retirement work arrangement, this means modest work income can be earned with no impact on pension entitlement whatsoever.

Tax: the position is often better than expected

For retirees with modest work income, the overall tax position is often surprisingly manageable. The standard tax-free threshold of $18,200 (FY2025-26, ITAA 1936 s.159N) applies to all Australian residents. On top of this, eligible seniors can access the Seniors and Pensioners Tax Offset (SAPTO), which effectively pushes the income tax-free threshold to $35,813 for a single retiree or $31,888 for each member of a couple (FY2025-26, confirmed from FirstTech Personal Deductible Contributions 2025-26). This means a single retiree earning $30,000 in consulting income pays zero income tax on the work income alone, before any further offsets.

Critically, pension-phase super income does not compete with work income for this tax-free space. Pension payments from an account-based pension are tax-free and do not appear in assessable income for any purpose — so a retiree drawing $40,000 from super and earning $25,000 from consulting is, from a tax perspective, a person with $25,000 in assessable income, well within the SAPTO threshold for a single person.

Self-employed retirees are subject to quarterly PAYG instalments on their business income and may need to register for GST if annual turnover exceeds $75,000. For most consulting arrangements with modest turnover, sole trader structure is straightforward: the income is assessed, the deductions (home office, professional subscriptions, transport, professional development) are claimed, and the net is taxed at standard marginal rates with the applicable offsets.

Super contributions: continued accumulation while working

For retirees who are still working, super contributions can continue. Employer SG contributions continue for employees under 75 (subject to the minimum contribution threshold). Personal concessional contributions — salary sacrifice or personal deductible — are available for those meeting the work test or its exceptions. For working retirees with a total super balance below $500,000 at the prior 30 June, the carry-forward concessional contribution provision allows unused portions of the annual concessional cap (currently $32,500 for FY2026-27, up from $30,000 in FY2025-26) from the previous five financial years to be contributed in a single higher-income year.

For low-income working retirees with income below $49,293 per year, the government co-contribution is available: a $1,000 personal non-concessional contribution attracts a $500 government co-contribution (FY2026-27), the most accessible and guaranteed return in the super system. This phases to zero at $64,293 (both thresholds effective 1 July 2026, confirmed from the ATO's key superannuation rates and thresholds).

Structuring self-employment work income

For retirees generating income through consulting or other self-employment, the business structure affects both tax and personal liability. Sole trader structure is the simplest: all income flows directly to the retiree, taxed at their marginal rates (which, given SAPTO and the tax-free threshold, are zero for the first $35,813 for single retirees). A family trust structure can allow income to be distributed to family members with lower tax rates, though the compliance requirements and establishment costs make this most relevant at higher income levels. Company structure (base rate 25% for entities with aggregated turnover under $50M) can deter extraction of retained profits until later, which may or may not suit the retiree's objectives.

For most retirees consulting at modest levels, sole trader structure is simple, adequate, and requires no establishment cost beyond an ABN application (free from the ATO).

The Centrelink reporting obligation

Age Pension recipients who work must report employment income to Centrelink. The reporting period is typically fortnight by fortnight, either online through myGov, via phone, or through the Express Plus Centrelink app. Failure to report employment income that exceeds the Work Bonus amount can result in overpayments that become debts of the pensioner — the 14-day reporting obligation applies to changes in employment income as much as to changes in assets. Establishing a consistent reporting habit at the start of any work arrangement is substantially easier than managing accumulated unreported income after the fact.

Integration with the broader retirement plan

Working in retirement has financial implications beyond the immediate income: it can delay super drawdowns (extending portfolio longevity), provide personal deductible super contributions that reduce tax on work income while building the super balance, and improve the Age Pension means test position over time if the extra income reduces the need to draw on financial assets. For retirees who are genuinely engaged by the work and comfortable with the hours, the encore career can meaningfully improve both financial and lifestyle outcomes simultaneously — which is a reasonably rare planning outcome.

Sources

Key takeaways

  • The Work Bonus excludes the first $300 per fortnight of employment income from the Age Pension income test, with unused amounts banking up to $11,800 for later use.
  • A couple who both receive the Age Pension and both work can each use their own Work Bonus — up to $600 combined per fortnight, or $15,600 a year, excluded from the income test.
  • The standard tax-free threshold ($18,200) plus SAPTO push the effective tax-free threshold to $35,813 for a single retiree or $31,888 per member of a couple — pension-phase super income doesn't compete for this space, since it's tax-free and not assessable.
  • Working retirees can keep contributing to super, including via carry-forward concessional contributions (currently $32,500 for FY2026-27) if their total super balance was under $500,000 at the prior 30 June.
  • Low-income working retirees earning under $49,293 a year can get the full $500 government co-contribution on a $1,000 personal contribution, tapering to zero at $64,293 (FY2026-27).

Frequently asked questions

Will working part-time in retirement cost me my Age Pension?

Not necessarily. The Work Bonus excludes the first $300 per fortnight of employment income from the income test entirely, and unused Work Bonus banks up to $11,800 for later use — so modest, irregular consulting or part-time work often has no impact on your pension at all.

Do I pay income tax on consulting income in retirement?

Often very little. The standard $18,200 tax-free threshold combined with the Seniors and Pensioners Tax Offset (SAPTO) effectively pushes the tax-free threshold to $35,813 for a single retiree, so modest work income can be earned tax-free, before even accounting for deductible business expenses.

Can I still put money into super while working in retirement?

Yes. Employer super contributions continue for employees under 75, and you can make personal concessional or non-concessional contributions if you meet the relevant conditions. If your total super balance was under $500,000 at the prior 30 June, you can also use carry-forward concessional contributions to use up unused cap from the past five years.

Do I need to tell Centrelink about my work income?

Yes, every reporting period, typically fortnightly via myGov, phone, or the Express Plus Centrelink app. The 14-day notification obligation applies to employment income the same way it applies to asset changes, and unreported income above the Work Bonus amount can create an overpayment debt.

A note on advice. This article is general information only and doesn't account for your personal circumstances. Everyone's situation is different — before acting, it's worth talking it through with a licensed adviser who knows your full picture.