You are here

Work Bonus Bank

Document

Last amended: 14 June 2011

Work Bonus Bank

    

Where a work bonus eligible person has nil or less than $250 employment income per fortnight, they will accrue the unused amount of the work bonus income concession in a work bonus bank. The difference between $250 and the gross employment income each fortnight is credited to their work bonus bank to a maximum balance of $6,500.  The balance in a person's work bonus bank will then reduce their employment income that would otherwise be assessable in the future.

Work bonus bank accrual examples
  1. If a person has fortnightly employment income of $200, their employment income is discounted by the $250 income concession amount and there is no assessable employment income.  The person will also accrue $50 credit per fortnight in their work bonus bank (up to a maximum of $6,500), being the unused amount of the income concession.
  2. If a person has fortnightly employment income of $600, the $250 income concession applies and $350 per fortnight employment income will be assessed.  As the full income concession amount has been used, there is no work bonus bank accrual.
Work Bonus Bank depletion

When a person's work bonus bank credit is applied to reduce their assessable employment income, their work bonus bank balance will deplete. This depletion will occur when a person has employment income greater than the $250 per fortnight income concession amount and they have a work bonus bank credit balance.

Depletion from the work bonus bank will continue to offset employment income over the $250 per fortnight income concession discount until the work bonus bank balance is depleted to nil.

In most cases the daily rate of depletion from the work bonus bank will not divide evenly into the work bonus bank balance. This means that on the final day of depletion a balance smaller than the daily rate of depletion will remain in the work bonus bank and will only partially offset employment income over $250 per fortnight. This will often result in pensioners receiving two pension reductions on consecutive days when depletion from the work bonus bank ends. The first reduction will occur when the work bonus bank balance has reduced to less than the daily rate of depletion and only part of employment income over $250 per fortnight is offset. The second reduction will occur on the following day when the work bonus is reduced to nil and all employment income over $250 per fortnight is assessed under the income test.

Work bonus bank depletion example - simple fortnightly

John has accrued $1,500 in his work bonus bank.  He starts part-time work earning employment income of $400 per fortnight.  In working out John's pension, his fortnightly assessable employment income is first discounted by the $250 work bonus income concession amount.  The remaining $150 per fortnight employment income is offset by his work bonus bank credit.  His work bonus bank credit is reduced at a rate of $150 per fortnight, being the amount used to offset his employment income. This means John has no assessable employment income at this point.

As John continues with this employment and his income remains at the level of $400 per fortnight, his work bonus bank credit will continue to reduce. Once his work bonus bank credit runs out after 10 fortnights ($1,500 depleting at $150 per fortnight), John will still have access to the $250 work bonus income concession amount, but employment income above $250  per fortnight will no longer be disregarded. His assessable employment income will then be $150 per fortnight ($400 less $250 income concession amount).

Work bonus bank depletion example - complex daily

Ian is eligible for the work bonus and has employment income of $95 per fortnight from 28 June 2011 when the work bonus bank comes into effect.  He therefore accrues a work bonus bank credit at a rate of $155 per fortnight ($250 - $95).  By 22 August 2011 he has accrued a balance of $620.  His fortnightly employment income increases on 23 August 2011 to $330 per fortnight and his work bonus bank credit is applied to discount his employment income over $250 per fortnight.

After the $250 per fortnight work bonus income concession, Ian's work bonus bank credit is applied to fully offset the remaining $80 per fortnight of employment income ($330 - $250) and Ian has nil assessable employment income. There is sufficient work bonus bank credit to discount the employment income to nil for 108 days at a depletion rate of $5.71 per day ($80 / 14) to 8 December 2011.

As at 9 December 2011 Ian's work bonus bank balance will have depleted to $2.86.  On this day part of Ian's employment income over $250 per fortnight will be assessed as there is insufficient balance in work bonus bank to offset all employment income over $250 per fortnight.  Ian's income support pension may reduce.

On 10 December 2011 the work bonus bank balance will be fully depleted and all employment income over $250 per fortnight will be assessed.  Ian's income support pension may reduce again under the income test.

Period

Employment income less income concession per fortnight

Work bonus bank accrual per fortnight

Work bonus bank depletion per fortnight

Assessable earnings per fortnight

Work bonus bank balance

28 June 2011 – 22 Aug 2011

$95 - $95 = $0

$250 - $95 = $155

N/A

Nil

$620

23 Aug 2011 – 8 Dec 2011

$330 - $250 = $80

N/A

$80

Nil

$2.86

9 Dec 2011

$330 - $250 = $80

N/A

$40.04

(Residual balance of $2.86 x 14)

$80 - $40.04 = $39.96

$0

10 Dec 2011 and ongoing

$330 - $250 = $80

N/A

N/A

$80

$0

Transitional assessments

A person is not entitled to the work bonus discounts if their pension rate is calculated under the transitional rules. However, a work bonus bank is maintained for all transitional pensioners who are eligible for the work bonus to allow comparative calculations under the post September 2009 rules to be carried out.

Veterans Vocational Rehabilitation Scheme (VVRS)

VVRS participants who are also eligible for the work bonus are entitled to the more beneficial of the work bonus income concession or the VVRS excluded income amount.  Where the VVRS excluded income amount is applied, the VVRS participant may still accrue a balance to their work bonus bank if their employment income is under $250 per fortnight. (In practice a VVRS participant with employment income under $250 per fortnight will always be advantaged by the work bonus which will disregard all of the employment income.)


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.