Pension changes to encourage workforce participation

As a result of the government’s recent Jobs Summit and responding to pressure from employer and agricultural lobby groups, proposed changes have been introduced into Parliament that will enable pensioners to work longer and earn more money without losing their pension and other social security benefits. It is hoped this measure will go some way to alleviating the current skills and labour shortages, particularly in the agricultural sector.

Currently, those eligible for the age pension will have their pension cut off if their total ordinary income exceeds a certain limit. For single pensioners, the income cut off point is $2,243 per fortnight, and for couple pensioners, it is $3,431.20 per fortnight. The cut off points for couples living apart due to illness, and transitional rate pensioners are slightly higher.

Where a pensioner exceeds the relevant income limit, they will be subject to a 12-week employment nil rate period during which the individual is still considered to be receiving the age pension, allowing them to access other payments supplements and concessions. However, after the 12-week period, if the income of the pensioner exceeds the relevant income limit, the age pension will cease.

This was originally conceived to provide incentives for pensioners to take up work, particularly substantial part-time or irregular casual work. The Bill introduced in Parliament seeks to provide further flexibility for aged pensioners by allowing recipients to have their pension suspended for up to 2 years instead of cancelled. These new suspension provisions will operate separately to the existing 12-week employment nil rate period provisions. It is hoped the proposal will encourage those on the pension to re-enter the workforce or increase their work hours and resume the pension more easily if it becomes payable again within 2 years.

The process to resume the pension will only require an update of details, including income and assets information, instead of the lodgement of a new claim. In addition, while currently age pensioners will have their pensioner concession cards cancelled 12 weeks after their pension ceases to be payable due to their level of income, these amendments seek to ensure that recipients can remain qualified for the concession card for up to 2 years.

Finally, the Bill as introduced will temporarily increase the pensioner work bonus. The work bonus, as it currently stands, allows eligible pensioners to disregard the first $300 of work income per fortnight from the pension income test. Any unused amounts of the $300 per fortnight accumulate in an unused concession balance or income bank to a maximum of $7,800. While the amendments will not affect the existing application of the $300 per fortnight income concession, it will provide an additional $4,000 to the unused concession balance of all eligible pensioners and increase the maximum available unused concession balance from $7,800 to $11,800 until 30 June 2023.

Speak to one of our accountants today if you have any questions or need assistance with any pension changes.