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Maximising Your Age Pension: The Work Bonus Most Retirees Don't Know About

Merit Financial Services · February 2026 · 6 min read

The Age Pension is Australia's retirement safety net, providing a fortnightly payment to eligible Australians over Age Pension age. Yet many retirees leave money on the table simply because they don't understand how the income and assets tests interact — or how the Work Bonus can shelter employment income from the income test. Here's what you need to know.

What Is the Work Bonus?

The Work Bonus is a Centrelink concession that allows Age Pension recipients (and certain other income support recipients over Age Pension age) to earn up to $300 per fortnight from employment or self-employment without it being counted under the income test. That's $7,800 per year per person — or $15,600 for a couple — of effectively invisible income.

Crucially, the Work Bonus applies to earned income only — wages, salary, self-employment income, and income from a partnership in which the person is actively involved. It does not apply to investment income, superannuation income streams, or rental income.

How the Work Bonus Bank Works

If you don't use your full $300 fortnightly Work Bonus, the unused portion accumulates in a Work Bonus bank, up to a maximum of $11,800. This banked amount can offset larger amounts of employment income in future fortnights.

For example, if you haven't worked for several months and your Work Bonus bank has accumulated to $11,800, you could then earn a lump sum of up to $11,800 + $300 = $12,100 in a single fortnight without any impact on your pension payment.

New pension recipients start with an opening balance of $4,000 in their Work Bonus bank, giving an immediate buffer.

Partnership Structures for Income Splitting

For couples where one partner is under Age Pension age, structuring a small business as a partnership can be advantageous. If the pension-age partner is genuinely involved in the business, their share of partnership income may qualify for the Work Bonus. This requires genuine participation — Centrelink will assess whether the involvement is real and not merely a paper arrangement.

Combined with the couple's income-free area, this can allow significant business income to flow through without reducing the pension.

Deeming Rates and How They Affect Your Pension

Centrelink doesn't assess the actual income your financial investments earn. Instead, it applies deeming rates — assumed rates of return — to your total financial assets. As of early 2026, the rates are:

• 0.25% on the first $60,400 (single) or $100,200 (couple combined)
• 2.25% on amounts above these thresholds

This means a couple with $500,000 in financial assets would be deemed to earn approximately $9,271 per year, regardless of whether their actual return is higher or lower. Deeming applies to bank accounts, shares, managed funds, super account-based pensions, and most other financial investments.

Assets Test vs Income Test: Which One Bites?

Centrelink calculates your pension entitlement under both the income test and the assets test, then pays you the lower of the two amounts. Understanding which test is reducing your pension is critical to effective planning.

For homeowners (couple), the key thresholds in 2025–26 are approximately:

• Assets test: Full pension up to ~$419,000 in assessable assets; pension cuts out at ~$954,000
• Income test: Full pension up to ~$336 per fortnight combined income; pension cuts out at higher income levels

Many retirees are caught by the assets test, particularly if they have significant superannuation balances in account-based pensions. Others, particularly those with part-time employment income, may be caught by the income test — which is where the Work Bonus becomes valuable.

Strategies to Maximise Your Pension

• Understand which test bites: If the assets test is limiting your pension, Work Bonus strategies won't help — you need to focus on asset restructuring instead.
• Use the Work Bonus fully: If you're doing any paid work, ensure Centrelink has correctly classified your income as employment income eligible for the Work Bonus.
• Maintain your Work Bonus bank: If work is seasonal or sporadic, let the bank build up so it can absorb larger payments when they come.
• Consider gifting rules: You can gift up to $10,000 per financial year (and $30,000 over a rolling 5-year period) without it being counted as an asset. Beyond these limits, the gifted amount is still assessed for 5 years.
• Prepay expenses: Funeral bonds (up to the Centrelink-exempt amount), home improvements, and other exempt expenditures can reduce assessable assets.
• Review super structure: Depending on your age and circumstances, the interaction between super and Centrelink can be complex. Seek advice.