Social security amendments will benefit SMSF members
Amendments to the social security work bonus could be beneficial for SMSF members in the pension phase, says a senior technical manager.
Kim Guest, senior technical manager for Colonial First State, said in the latest FirstTech podcast the amendment concerns a temporary increase to the work bonus which was due to expire on 31 December 2023.
“The government temporarily increased the work bonus by $4000 for everybody who was a pensioner from the beginning of December 2022 to 31 December 2023,” she said.
“Pensioners could also add additional credits up to $11,800 in their income bank.”
The government has now introduced draft legislation to make the increase to the work bonus permanent.
“If the legislation gets through, from 1 January 2024, all pensioners over pension age, and eligible veterans will be able to maintain or accumulate a balance up to $11,800 in their income bank for the work bonus,” Ms Guest said.
“It was originally going to revert back to $7800. It also means new pensioners who are granted age pension on or after 1 January 2024 will get a $4000 starting balance when they first start off on the pension.”
She explained that the decision to increase the work bonus came from an employment white paper released in September that focused on ways to get more people into employment.
“We still have a skills shortage in Australia and there are a lot of areas that are crying out for workers and one of the ways the government is trying to address that is to get older people back into the workforce,” she said.
“And though the work bonus is really aimed at people being able to earn income from employment or self-employment for gainful work, this legislation change is about reducing the impact of that income on their age pension under the income test.”
Ms Guest said the measure will be beneficial not just for those who have already retired but also for people planning to retire.
“Under this measure, when they first go on to the age pension, they're going to have $4000 in their work bonus income bank which means that any employment income that they earn, the first $4000 of that will be offset by the work bonus and won't reduce their age pension under the income test,” she said.
“It means people could apply for the age pension while they're working. And if they're planning on retiring and they're over age pension age, they could actually apply for the age pension a few weeks or months before they plan to cease work.”
