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Work Bonus

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Last amended: 27 June 20111

Intention of Work Bonus

The Work Bonus was introduced on 20 September 2009 and replaces the former Pension Bonus Scheme, as a scheme to encourage and reward older Australians who remain in the paid workforce past their normal retirement age. In addition to an age requirement, it is necessary that the income be received by the person in an employee capacity, rather than as business earnings or from self-employment.

Income test concession applies to employment income

    

VEA ?

Section 46AA VEA – Income concession

Section 5Q(1) VEA – General definitions

VEA ? (go back)

Where a person who receives service pension or income support supplement has reached qualifying age and they receive employment income arising from remunerative work undertaken as an employee in an employer/employee relationship, an income test concession (known as Work Bonus) applies.

Under this income test concession, the first $250 of the person's fortnightly employment income is excluded from the income test.  The income concession amount is not subject to indexation. Where the fortnightly employment income is less than $250 per fortnight, an eligible person will accrue the unused portion of the $250 per fortnight income concession to a work bonus bank to offset their employment income in the future.

Note:  From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.  .

Effect on transitional cases

To receive the benefit of the Work Bonus a person's income support pension must be assessed under the Rate Calculator using the 50c income test taper rate,  i.e. they must not be in a transitional assessment continuing to be calculated under pre September 2009 Secure and Sustainable Pension Reform rules, with the 40c income test taper rate.  While transitional assessments do not attract the work bonus discount, a pension rate calculation under the post September 2009 rules including the work bonus is carried out for comparison purposes, to work out when the pension rate payable is higher under the post September 2009 rules.  A work bonus bank will be maintained for transitional pensioners for the purpose of the comparative calculation.

Income of couples

Where a working pensioner is a member of a couple, the reduction in his/her income under the income test concession is calculated before combining and then halving the couple's joint income.

Meaning of “employment income”

    

VEA ?

Section 46AB VEA – Meaning of employment income

VEA ? (go back)

Employment income is income earned, received or derived from remunerative work as an employee, in an employer/employee relationship.  Income from self-employment as a Sole Trader business, or other forms of business income, are not included.

Employment income in the form of salary, wages, commissions and employment-related fringe benefits satisfies the test of employment income.

In considering whether a person is receiving employment income or business income (as a self-employed Sole Trader or from a Partnership, Private Company or Trust), the same factors should be considered as in assessing whether the income should be treated as business income for the income test generally:

  • persons receiving employment income would normally receive PAYG pay slips and Payment Summaries from their employer,
  • employment income is recorded as a gross amount on a person's individual income tax return as “Salary or wages” or “Allowances, earnings, tips, etc”,
  • business income of a self-employed Sole Trader is recorded in the Supplementary section of the individual's income tax return, allowing for deduction of expenses, and a net figure is transferred into the Income section of the tax return, and
  • business income of a Partnership, Private Company or Trust is recorded in a separate business income tax return with net income distributions transferred into the individual's income tax return.

Income generated by a person's business is only employment income if it is paid by the business to the individual in the form of a wage or salary.  To satisfy this requirement it must be shown as an expense (Salary or Wages, Directors' Fees) on the Business Profit and Loss statement and as “Salary or wages” or “Allowances, earnings, tips, etc.” on the individual's income tax return.

Director's fees are generally excluded

When assessing remuneration described as director's fees, it is necessary that the person receives the payment in the form of salary, wages or commission, in their capacity as an employee of the company, for the Work Bonus to apply.

Director's fees are therefore generally excluded from the meaning of employment income where the person is attributed with control over the company or entity making the payments. In these cases the person's ownership or control means that they are undertaking the role of employer, and the necessary conditions for the Work Bonus, that the person is performing remunerative work undertaken in an employer/employee relationship, is unlikely to exist. In this situation the business owner is permitted to reduce their assessable income by certain business losses and outgoings which are not available to employees.

Allowed director's fees

Where the entity's financial statements show that the remuneration received by a person with control over the company or entity is described as salary, wages, commission or employment-related fringe benefits, these payments can be regarded as not being director's fees and can be assessed as employment income.

Where a person works for a company or other entity in which they exercise no control, or has no association (e.g. no family connection) with those controlling the entity, remuneration designated as director's fees may be regarded as employment income where the delegate is otherwise satisfied that the person is genuinely undertaking work in an employer/employee relationship.

Royalty payments

Royalty payments are not employment income[glossary:.:] While remunerative work is being, (or has been), undertaken, the requirement for the person to be in an employer/employee relationship is not met.

Amounts not part of employment income

    

VEA ?

Section 46AB VEA - Meaning of employment income

VEA ? (go back)

Amounts which are excluded from the employment income concession, requiring that they be assessed in full under the income test, are:

  • superannuation payments,
  • payments of compensation or payments under an insurance scheme relating to the person's inability to earn, derive or receive employment from remunerative work
  • termination payments,
  • comparable foreign pension payments, and
  • leave payments to persons no longer involved in remunerative work.
Assessment of leave payments

Where a person has actually ceased working for an employer and has received payments in lieu of accrued leave, or has stopped work and is continuing to be paid outstanding leave entitlements leading up to the cessation date of their employment, these payments have no association with the person's engagement in remunerative employment.  These leave payments are excluded from the meaning of employment income whether the payments are made as a lump sum, a series of regular payments or otherwise.

Sick leave, annual leave, maternity leave, long service leave and other leave types from which the person returns in order to resume their remunerative employment are assessed as part of employment income.

Veterans' Vocational Rehabilitation Scheme

    

VEA ?

Section 115D VEA – Reduced daily pension amount - pensions under Parts II and IV

VEA ? (go back)

Where invalidity service pensioners are participating in the Veterans' Vocational Rehabilitation Scheme (VVRS), an income safety net applies.  This safety net allows for 50% of the pensioner's income to be disregarded during their first two years of participation in the VVRS, before reducing over the following five years at 5% every six months, until after seven years the full income amount is assessable.

As VVRS and work bonus both result in discounted employment income, the VEA allows the more beneficial pension outcome to be applied.  Where the Work Bonus income test concession applies to a pensioner and the income concession amount is equal to or greater than the VVRS excluded income amount, the VVRS excluded income amount does not apply and the pensioner is given the benefit of the Work Bonus income concession.  Where the Work Bonus income concession is less than the VVRS excluded income amount, the Work Bonus income concession does not apply and the pensioner is given the benefit of the VVRS excluded income amount.


The work bonus exempts the first $250 per fortnight of employment income for eligible people over pension age or qualifying age. From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.

 

 

Qualifying age is defined in section 5Q(1) of the VEA and is equivalent to the pension age for a veteran which is described in section 5QA VEA as:

  •       60 years for a male,
  •       for females subject to age equalisation (refer to the table in section 5QA VEA).

The work bonus exempts the first $250 per fortnight of employment income for eligible people over pension age or qualifying age. From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.

 

 

The unused portion of the fortnightly $250 per fortnight work bonus income concession can be accrued to a maximum of $6,500. Any amount of work bonus bank credit can be used to offset future assessable employment income.

The work bonus exempts the first $250 per fortnight of employment income for eligible people over pension age or qualifying age. From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.

 

 

For work bonus purposes, employment income is ordinary income that is earned, derived or received from remunerative work undertaken by a person in an employer/employee relationship. It includes salary, wages, commissions and employment related fringe benefits, but does not include business income.

The following payments are excluded from the definition of employment income:

  • superannuation payments,
  • payments of compensation or payments under an insurance scheme relating to a person's inability to earn, derive or receive employment from remunerative work,
  • termination payments,
  • comparable foreign pension payments, and
  • leave payments to persons no longer involved in remunerative work.

The work bonus exempts the first $250 per fortnight of employment income for eligible people over pension age or qualifying age. From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.

 

 

For work bonus purposes, employment income is ordinary income that is earned, derived or received from remunerative work undertaken by a person in an employer/employee relationship. It includes salary, wages, commissions and employment related fringe benefits, but does not include business income.

The following payments are excluded from the definition of employment income:

  • superannuation payments,
  • payments of compensation or payments under an insurance scheme relating to a person's inability to earn, derive or receive employment from remunerative work,
  • termination payments,
  • comparable foreign pension payments, and
  • leave payments to persons no longer involved in remunerative work.

The work bonus exempts the first $250 per fortnight of employment income for eligible people over pension age or qualifying age. From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.

 

 

For work bonus purposes, employment income is ordinary income that is earned, derived or received from remunerative work undertaken by a person in an employer/employee relationship. It includes salary, wages, commissions and employment related fringe benefits, but does not include business income.

The following payments are excluded from the definition of employment income:

  • superannuation payments,
  • payments of compensation or payments under an insurance scheme relating to a person's inability to earn, derive or receive employment from remunerative work,
  • termination payments,
  • comparable foreign pension payments, and
  • leave payments to persons no longer involved in remunerative work.

The work bonus exempts the first $250 per fortnight of employment income for eligible people over pension age or qualifying age. From 20 September 2009 to 27 June 2011, only half of the first $500 of the person's fortnightly employment income was disregarded.