With workers hard to find and pensioners looking to earn more, the Albanese government last week announced a concession that addresses both issues.
The question is: How long will it last?
When new legislation is passed, probably by December, pensioners will be able to earn an extra $4000 per year without affecting their pension entitlements.
But there’s a catch. The benefit will only last until the end of the current financial year.
Currently pensioners who receive a full pension can earn an extra $180 per fortnight ($320 for couples) without having their pension entitlements reduced.
An extra benefit for pensioners is the Work Bonus, which allows an extra $300 per fortnight to be earned in wages without reducing pension payments.
Remember that this bonus is only available for income earned through some kind of work.
It can’t be applied to investment income or any other cash that doesn’t involve effort on your part.
If either of these two limits is breached then the income from the age pension is reduced at a rate of 50c in the dollar.
Given the work bonus arrangements can be spread over the financial year, people who start working extra hours now will not be penalised at year’s end.
The expanded pension bonus scheme means that the amount pensioners can earn from work has increased from $7800 to $11,800, a significant advance.
The questions pensioners face are: Why has the government restricted it to this financial year, and is it likely to be extended?
Just testing
‘‘The government’s putting its toe in the water,’’ COTA (Council on the Ageing) CEO Ian Yates said.
‘‘They’re not sure what difference it will make so they are going to look closely and see what sort of take up the expanded scheme attracts.’’
The extent to which the expanded work bonus will bring pensioners back into the workforce is the question the government will want answered.
‘‘It’s a good step forward, but they’ve got to follow through with other things if you are saying to pensioners, ‘Your country needs you to step up to the plate’,’’ National Seniors chief advocate Ian Henschke said.
Mr Yates said: ‘‘What this will probably do is encourage people who are already working to work a bit longer.
‘‘I’ve met employers who say, ‘I’ve got pensioners working for me but will only work one day a week as they don’t want to lose 50 cents in the dollar’ [if income limits are breached]. They say they would work more hours if they could – and I have more work to offer them,’’ he said.
Getting people who have retired to go back into the workforce is another thing altogether, Mr Yates said.
‘‘Most active people I know tell me they don’t want to keep working because there are all these other things they want to do in their lives,’’ he said.
Those people might be engaging in recreational activities after a lifetime of work.
They could also be helping care for grandchildren or partners, so bringing them back into the workforce would only create demand for other workers to take up their current voluntary roles.
So, rather than just run an experiment by boosting the work bonus for a period of time, the government ‘‘needs to do some really good qualitative research’’, Mr Yates said.
That research should explore what financial and non-financial factors would influence a person about to leave the workforce to stay on, he said.
Wholesale change
Mr Henschke is calling for a dramatic change to the retirement system.
‘‘If you want to help older people reduce the 500,000 job vacancies, then you need to get Centrelink off their backs,’’ he said.
National Seniors supports the idea of allowing age pensioners to work with their income taxed as normal wages.
That would mean pensioners would pay tax once the tax-free threshold had been breached.
‘‘It would all get reconciled at the end of the year with your tax return,” Mr Henschke said.
‘‘If we get the response that pensioners are telling us we would – in other words, if 20 per cent of those aged between 66.5 and 75 wanting to work – that would be 200,000 people. The result would be a net benefit to the budget,’’ Mr Henschke said.
The government did not respond to questions about whether it planned to extend the work bonus beyond June.
