The Work Bonus excludes the first $300 of employment income per fortnight from the Age Pension income test. Unused amounts accumulate in a Work Bonus balance up to $11,800, which can be drawn on when you earn more. It applies to wages and self-employment income, but not to investment or rental income. New pensioners automatically start with a $4,000 balance from 1 July 2024.
A common worry for retirees considering part-time or casual work is that any income they earn will simply reduce their Age Pension dollar-for-dollar. The reality is more favourable than that — and since changes made in late 2022, more favourable still.
The mechanism is called the Work Bonus, and it is a provision within the Age Pension income test administered by Services Australia. It excludes the first $300 of eligible employment income per fortnight from the income test entirely. That means if you earn $300 a fortnight from work, none of it reduces your pension. If you earn $500 a fortnight, only $200 is assessed under the income test. The Work Bonus is applied automatically — no application or form is required, and it applies to each member of a couple separately, so a couple where both partners are working each get the fortnightly exclusion in their own right.
What most people miss is the balance. If you earn less than $300 in a fortnight — or nothing at all — the unused portion does not disappear. It accrues to your Work Bonus balance, which builds at $300 per fortnight until it reaches a maximum of $11,800 (a cap raised from $7,800 in late 2022). That balance can be used to offset employment income above the $300 fortnightly amount in future — whether that income comes gradually or in a single lump sum from a consulting project or seasonal work. Once the balance hits $11,800, it stops accruing, but it stays there until you draw on it.
To see how this works in practice: suppose one partner in a couple has not worked for the past 12 months and has accrued the full $11,800 balance. That partner then takes on a ten-week consulting contract paying $14,000 in total. The first $300 per fortnight — across five fortnights — is automatically excluded, shielding $1,500. A further $11,800 is drawn from the accumulated balance. That leaves only $700 of the $14,000 assessed under the income test. Without the Work Bonus, all $14,000 would have counted as assessed income.
The Work Bonus applies to employment income — wages or salary from working as an employee — and to self-employment income from gainful work, meaning work that involves your personal effort such as consulting, contracting, or providing services. It does not apply to investment income such as interest, dividends, or managed fund distributions; to rental income from investment property; to overseas pensions; or to returns from passive investments. A retiree who picks up occasional shifts or runs a small consulting practice benefits from the Work Bonus on that income. A retiree who lives entirely on term deposits and share dividends receives no Work Bonus benefit, though they do still receive the standard income test free area that applies to all assessed income.
The income test free area is the separate amount of income from any source that is excluded before the Age Pension begins to reduce. For singles, the free area is $218 per fortnight; for couples, it is $380 per fortnight combined. Income above those thresholds reduces the pension at 50 cents per dollar for singles, and 25 cents per dollar for each member of a couple. The Work Bonus is applied first, before the free area. This matters: eligible employment income is excluded under Work Bonus rules first, and only the remainder is then subject to the broader income test. A working pensioner gets layered protection — Work Bonus exclusion on employment income, then the free area on remaining income, and only then does the standard income test taper kick in.
A note on new pensioners: the $4,000 starting balance is now a permanent feature, not a one-off 2022 measure. Since 1 July 2024, new Age Pension claimants automatically start with a $4,000 Work Bonus balance rather than zero. Recipients returning to the pension after a break are also topped up to $4,000 if their balance has fallen below that amount and they have not received a top-up in the past two years.
If you last thought about the Work Bonus before 2023, it is worth reviewing the changes. A few questions are worth considering: Are you currently doing any paid work, even occasionally, and do you know the Work Bonus is being applied? Have you been pension-eligible but not working for some time — in which case your balance may be sitting at the maximum, ready to absorb a burst of earnings? Are you considering picking up part-time, casual, or contract work in the near future? And a note on tax: the Work Bonus affects only how Services Australia counts income for the Age Pension income test. It does not change how the ATO treats your income for income tax purposes — employment income earned from work remains assessable income for tax regardless of the Work Bonus.
Sources
- Services Australia — Work bonus
- Services Australia — How work bonus works
- Services Australia — Work bonus balance
- Services Australia — Income test for age pension
- DSS Social Security Guide
Key takeaways
- The Work Bonus excludes $300 of employment income per fortnight from the Age Pension income test — applied automatically, no form required.
- Unused Work Bonus amounts accumulate to a maximum balance of $11,800, available to offset higher employment income in future fortnights.
- Since 1 July 2024, new Age Pension claimants start with a $4,000 Work Bonus balance rather than zero.
- The Work Bonus applies to wages, salary, and self-employment income from personal effort — not to investment income, rental income, or overseas pensions.
- The Work Bonus only affects the Centrelink income test — employment income remains fully assessable for income tax regardless of the bonus.
Frequently asked questions
How does the Work Bonus affect my Age Pension if I go back to work?
The Work Bonus excludes the first $300 of employment income per fortnight from the Age Pension income test. If you earn less than $300, the unused amount builds your Work Bonus balance. If you earn more than $300, only the excess above that threshold (reduced further by any accumulated balance) is assessed. A pensioner earning $500 a fortnight from work would have only $200 assessed under the income test — a significant difference from the full $500 that would otherwise count.
What is the Work Bonus balance and how does it accumulate?
Each fortnight you earn less than $300 in employment income, the unused portion accrues to your Work Bonus balance, which builds to a maximum of $11,800. That balance can be drawn on in future fortnights to offset employment income above the standard $300 exclusion — including lump sums from consulting or seasonal work. Once the balance reaches $11,800 it stops building, but it remains available until drawn on. New pensioners from 1 July 2024 automatically start with a $4,000 balance.
Does the Work Bonus apply to self-employment income?
Yes. The Work Bonus applies to income from self-employment where the work involves personal effort — consulting, contracting, tradework, or other active services. It does not apply to passive income such as dividends, interest, managed fund distributions, rental income, or overseas pensions. A retiree running a small consulting practice or taking on occasional contracts benefits from the Work Bonus on those earnings in the same way as an employee would on wages.
Does the Work Bonus reduce how much tax I pay on employment income?
No. The Work Bonus applies only to how Services Australia counts income for the Age Pension income test. It has no effect on how the ATO treats your income for income tax purposes. Employment income earned from work is fully assessable income for tax regardless of whether it is excluded under the Work Bonus for Centrelink purposes.
Do both members of a couple each get the Work Bonus separately?
Yes. The Work Bonus applies separately to each member of a couple who is receiving the Age Pension. Each partner gets their own $300 fortnightly exclusion and their own Work Bonus balance up to $11,800. If both partners are doing paid work, each gets the full protection on their own employment income independently of the other.