Upcoming changes for pension and income support recipients
As a part of the government’s strategy to get more people back into work to solve skills shortages being experienced by many industries, a permanent enhancement to the pensioner work bonus has been announced, along with a doubling of the employment income nil rate period to reduce barriers for income support recipients to take up work. Under the age pension income tests, a single individual can earn up to $204 per fortnight and a couple up to $360 per fortnight before the amount of pension starts to reduce at a rate of 50 cents for every dollar over the respective thresholds. The work bonus for pensioners reduces the amount of eligible income that is included in the income test, meaning that pensioners can earn more before their pensions are reduced. It accrues at a rate of $300 per fortnight up to the maximum limit. The maximum work bonus balance limit is $11,800 from the period 1 December 2022 to 31 December 2023. During this period, pensioners are also eligible for a one-off increase of $4,000 to their work bonus balance. The maximum work bonus balance limit was temporarily increased from the previous limit of $7,800 as a result of the Jobs and Skills Summit and was set to expire 1 January 2024 without the introduction of legislation to extend it.
Example Grace is on the age pension and is on a short-term contract working in a part-time capacity. She earns $450 per fortnight and has accrued a $6,000 work bonus balance. Each fortnight, Services Australia will reduce the amount of Grace’s income first by $300, which is how much is accrued each fortnight. It will then reduce the remaining $150 by the work bonus balance that she has. This means that until Grace’s work bonus balance reaches zero, her pension will not be affected by her working this short-term contract.
To enable to continuation of the measure, the government has announced that, pending the passage of legislation, all new pension entrants over the Age Pension age and eligible Veterans will have a starting work bonus income bank balance of $4,000. In addition, existing and new eligible recipients will retain the current elevated maximum work bonus limit of $11,800, all set to commence from 1 January 2024. To compliment the work bonus measure, the government has also announced the doubling of the employment income nil rate period to 12 fortnights and expand access to those who enter full time employment from 1 July 2024, pending passage of legislation.
Currently, if an income support recipient earns employment income over a certain amount, the income support payment is reduced to nil, and after 6 fortnights, the support payment is cancelled if the employment income is still too high. This has led many to lose access to concession cards, child-care subsidies and other supplementary payments as well as having to reapply and wait for income support again if the employment opportunity falls through.
The government sees this as a disincentive to take-up work, particularly short-term, casual or gig economy work. This may mean that job seekers could miss out on opportunities and valuable skills which could be transferred later to a more permanent job. According to the government the cost of making the work bonus permanent is set to cost $42.4m through to 2026-27, and benefit around 195,000 individuals. The cost of doubling the employment income nil rate is projected to cost $42.8m through to 2026-27.
Both of these measures were announced as a part of the release of the Employment White Paper commissioned by the government.