When Melbourne retiree Margaret Cole took on a few casual shifts at her local community garden café, her first thought wasn’t excitement about the extra cash — it was anxiety about her Age Pension. Like many older Australians, she’d heard stories of pensioners accidentally reducing their payments by earning even a modest amount of extra income. She almost turned the work down entirely.
Then a friend mentioned the Work Bonus.
“I had no idea this even existed,” Margaret said. “Once I understood it properly, I stopped worrying and just enjoyed the work.”
In 2026, Australia’s Work Bonus rule continues to offer a practical and often underutilised financial advantage for eligible Age Pension recipients. Under this rule, the first $300 per fortnight of employment income is not counted in the pension income test — meaning pensioners can earn that amount every two weeks from work without it affecting their pension payments at all.
For hundreds of thousands of older Australians who want to stay active, supplement their income, or simply stay connected to the workforce, this rule is one of the most useful tools available — and one of the least understood.
What Is the Work Bonus and Why Does It Exist?
The Work Bonus is a specific feature built into Australia’s Age Pension income test. Its purpose is straightforward: to remove the financial penalty that would otherwise discourage pensioners from taking on part-time or casual employment.
Without the Work Bonus, every dollar earned from employment would be assessed under the standard income test, potentially reducing pension payments dollar for dollar beyond certain thresholds. For many older Australians living on modest fixed incomes, even a small reduction in their Age Pension can have a meaningful impact on their financial security and quality of life. The fear of triggering such a reduction has historically been enough to stop many pensioners from considering any kind of paid work at all.
The Work Bonus was introduced to address exactly that problem. By shielding the first $300 per fortnight of employment income from the income test, the government created breathing room for pensioners to work without immediately losing part of their entitlement. It also serves a broader economic purpose: encouraging skilled, experienced older Australians to remain in the workforce at a time when industries from healthcare to retail are facing serious labour shortages.
As Australia’s population ages and the workforce evolves, mature-age workers are becoming increasingly valued by employers who recognise the reliability, institutional knowledge, and work ethic that experienced older staff bring. The Work Bonus supports and rewards that contribution.
How the Work Bonus Actually Works in 2026
The mechanics of the Work Bonus are simpler than many pensioners expect. Each fortnight, the first $300 of any employment income you receive is automatically excluded from the Age Pension income test. This means if you earn $300 or less from employment in a given fortnight, none of that income will count against your pension — your payment remains exactly as it would be without the work income.
If you earn less than $300 in a particular fortnight, the unused portion doesn’t disappear. Instead, it accumulates in what’s known as your Work Bonus income bank. This bank builds up over time and can be drawn on in fortnights when your employment income exceeds $300. So if you earn $500 in one fortnight but have accumulated credits in your income bank, those credits can offset the excess amount, protecting your pension from reduction.
This income bank feature is particularly valuable for pensioners who do casual or seasonal work — where earnings can vary significantly from week to week or month to month. Rather than being penalised for a bumper fortnight, they can draw on the credits they’ve built up during quieter periods to smooth things out.
There is a maximum cap on how much can accumulate in the Work Bonus income bank, so it doesn’t grow indefinitely. But for most part-time or casual pensioner workers, the bank provides a meaningful cushion that makes flexible work far more financially predictable.
Work Bonus — Key Facts at a Glance
| Feature | Detail |
|---|---|
| Income excluded per fortnight | First $300 of employment income |
| Applies to | Employment income (wages, casual, part-time, active self-employment) |
| Does NOT apply to | Rental income, dividends, super withdrawals, passive business income |
| Income bank | Unused amounts accumulate and carry forward |
| Affects assets test? | No — assets test is separate and unchanged |
| Reporting required? | Yes — all earnings must be reported to Services Australia |
| Couples eligible? | Yes — each partner has their own individual Work Bonus entitlement |
What Counts as Employment Income Under the Work Bonus?
This is where many pensioners get confused, and it’s an important distinction to understand clearly. The Work Bonus only applies to employment income — money earned by actively working for someone else or actively running your own business.
It covers wages and salary from part-time or full-time employment, casual work, and contract work where you are performing services. If you are self-employed and actively working in your business — not just passively receiving profits — that income can also qualify under the Work Bonus provisions.
What it does not cover is equally important. Rental income from an investment property, dividends from shares, interest from savings accounts, superannuation withdrawals, or income from a business you own but do not actively work in — none of these qualify for the Work Bonus exemption. They are assessed normally under the income test.
This distinction matters because some pensioners assume that any income they receive is covered by the $300 exemption. It isn’t. Only money earned through active work qualifies, and mixing up these categories can lead to unexpected pension reductions or compliance issues with Services Australia.
Real Australians Using the Work Bonus
Brisbane grandmother Linda Harris works two shifts a week at a local pharmacy. She earns around $240 per fortnight — comfortably within the $300 exemption — and her Age Pension is entirely unaffected. For Linda, the income helps cover small luxuries like birthday gifts for her grandchildren, without the stress of managing a complex financial balancing act.
Melbourne retiree George Webb takes on occasional seasonal work at a warehouse. His fortnightly earnings vary considerably depending on the season, sometimes falling well below $300 and other times exceeding it. By building up his Work Bonus income bank during quieter fortnights, George can absorb the higher-earning periods without seeing his pension reduced. “It evens itself out,” he says. “That’s the part most people don’t realise.”
These stories reflect a broader trend. Participation rates among Australians aged 65–74 in the paid workforce have grown significantly over the past decade. Flexible work arrangements, employer attitudes toward older staff, and rules like the Work Bonus have all contributed to making part-time retirement — rather than full and abrupt retirement — the new norm for many Australians.
The Income Test: What Happens When You Earn More Than $300?
If your employment income in a fortnight exceeds $300 and you have no income bank balance to offset the difference, the excess amount is then assessed under the normal Age Pension income test rules. This doesn’t mean your pension drops to zero — it means the excess is counted as assessable income and your pension reduces gradually according to the standard taper rate.
It’s also worth noting that the income test and the assets test are entirely separate calculations. The Work Bonus has no effect on the assets test whatsoever. If your total assets — including savings, property (other than your home), vehicles, and other holdings — exceed the allowable threshold, that remains a separate consideration from your employment income.
Pensioners with higher levels of savings or investment assets may find their pension reduced or cancelled through the assets test regardless of how little employment income they earn. Understanding both tests, and how they interact, is essential for accurate financial planning in retirement.
Expert View: Why the Work Bonus Matters Beyond the Dollar Amount
Retirement income specialist Dr. Sarah Bennett has worked with older Australians navigating the pension system for over a decade. She points out that the Work Bonus does something beyond the purely financial — it removes a psychological barrier that has long stopped capable, willing retirees from re-entering the workforce even in a small way.
“The fear of losing pension payments dollar for dollar is deeply embedded in how many older Australians think about work,” Dr. Bennett explains. “Even when it’s not accurate, that fear is real and it changes behaviour. The Work Bonus softens the impact and makes the decision to work feel less risky.”
She also highlights the non-financial benefits — mental stimulation, social connection, a sense of purpose and structure — that come with remaining part of the working world, even on a part-time basis. “For many of my clients, the money is almost secondary,” she says. “They want to feel useful and engaged. The Work Bonus just removes the financial obstacle to doing that.”
Practical Steps for Pensioners Considering Work in 2026
If you’re an Age Pension recipient thinking about taking on some part-time or casual work, here’s what you should keep in mind before your first shift.
First, confirm that the type of income you’ll be earning actually qualifies under the Work Bonus — wages and active employment income do, passive income does not. Second, make sure you understand your obligation to report earnings to Services Australia. Reporting is mandatory and must be done accurately and on time, regardless of how small your earnings are.
Third, log into your myGov account and check your Work Bonus income bank balance. Understanding how much you’ve already accumulated can help you plan around higher-earning fortnights and avoid any surprises. Finally, if you’re unsure about any aspect of how the Work Bonus interacts with your specific pension situation, call Services Australia directly or speak with a financial adviser who specialises in retirement income. Getting the right advice upfront is far easier than correcting an overpayment later.
Frequently Asked Questions
Can I really earn $300 a fortnight without losing any pension?
Yes. The first $300 of employment income each fortnight is excluded from the income test under the Work Bonus.
What if I only earn $150 one fortnight — does the other $150 disappear?
No. Unused amounts accumulate in your Work Bonus income bank and carry forward to future fortnights.
Does the Work Bonus apply automatically?
Yes, as long as you receive the Age Pension and are reporting employment income, the Work Bonus is applied automatically.
Does it apply to my superannuation or rental income?
No. The Work Bonus only applies to employment income. Super withdrawals, rental income, and investment returns are assessed under standard income test rules.
Can couples both benefit from the Work Bonus?
Yes. Each partner in a couple has their own individual Work Bonus entitlement and income bank.
What if I work full-time?
You can work full-time, but higher earnings beyond the $300 threshold and any banked balance will be assessed under the income test and may reduce or cancel your pension payments.
Where can I check my income bank balance?
Log in to your myGov account and navigate to your Centrelink details, or call Services Australia directly.
A Smarter Way to Retire
For Margaret Cole, the Work Bonus changed not just her finances but her mindset about retirement. “I used to think retirement meant stopping completely,” she said. “Now I work a few shifts a month, I earn a bit of extra money, and my pension is untouched. It feels like the best of both worlds.”
In 2026, that kind of flexible, financially secure semi-retirement is exactly what the Work Bonus is designed to support. For eligible Age Pension recipients who are physically and mentally capable of working, even occasionally, the $300 fortnightly exemption represents a genuine opportunity — not just to earn extra income, but to stay active, engaged, and connected to the world beyond retirement.
Understanding the rule is the first step. Using it well could make a meaningful difference to your quality of life.
The Work Bonus won’t make you rich — but it might make retirement a little richer.