Australia pension rules face pressure to ease work income limits

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Australia pension work income limits

Highlights

Current income test reduces age pension payments for recipients who earn over $526 a fortnight (singles) or $996 (couples), with a $300 work bonus exemption.
About 15% of Australians over 67 now work, up from 11% in 2021, amid rising financial pressure and insufficient retirement savings, according to COTA.
Australian Chamber of Commerce and Industry proposes doubling the work bonus to $600 a fortnight to increase workforce participation and address labour shortages.

Work bonus debate gains momentum

As reported by ABC News, some age pension recipients say the current income test penalises them for remaining in paid work even when they cannot afford to retire fully.

South-east Queensland pensioner Peter Gibney, 71, says he and his wife both receive part age pensions, but lose more of those payments as they increase their work hours. He says the couple, who do not have large superannuation balances and still have a mortgage, need the added income for financial security while also valuing the purpose and community connection that work provides.

A spokesperson for the Department of Social Services says a single pensioner with no other income can earn up to $526 a fortnight before the pension starts to fall. Under the work bonus, the first $300 of employment income each fortnight is excluded from the income test, while a couple with no other income can earn a combined $996 a fortnight if both qualify.

The department says age pensioners who work keep more of their pension than they did four years ago, and adds that the government remains committed to reviewing social services payment rates in each budget. Gibney argues the pension should be tied more simply to age, describing it as a return for decades of tax contributions.

Ageing workforce adds economic pressure

Council on the Ageing Australia chief executive Patricia Sparrow is calling for the system to be simplified as the share of older Australians staying in work rises. COTA's latest State of the Older Nation report says about 15 per cent of Australians over 67 continue to work, up from 11 per cent in 2021, while almost a quarter say they are open to returning to work in some capacity.

Sparrow says the trend is likely to strengthen as more people retire with mortgages or without a partner, and she urges the government to examine barriers across the system that prevent older people from supporting themselves and contributing to the community. She also identifies age discrimination as a major obstacle to fair workforce participation.

Industry groups are also pushing for change, arguing that older workers could help ease labour shortages and lift productivity. Australian Chamber of Commerce and Industry chief executive Andrew McKellar says the system should be made more flexible and backs doubling the work bonus to $600 a fortnight, adding that even part-time work could help sectors that continue to struggle to find staff.

New Zealand offers one overseas comparison, with its NZ Super pension paid at a universal rate. For pensioners such as Gibney, however, the case for reform also extends beyond economics, with continued work seen as supporting mental health, independence and social ties.

In our earlier article on early-career job-hopping, we examined research showing that switching jobs is a major driver of wage growth and helps workers find better long-term employment matches. The analysis highlighted a gap between cultural skepticism about frequent job changes and evidence that labor mobility can improve both pay progression and eventual career stability.

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