Nick Bruining: How to pick up extra work at Christmas without it affecting your Centrelink age pension

It’s time to dry-clean the Santa outfit, stack on a few kilos and refresh your knowledge of reindeer names. For many, box No.2 can already be ticked. Some seniors will have an opportunity to earn nearly $2000 a week in the lead-up to Christmas Day and not lose a cent of age pension along the way. At the heart of the strategy lies the working credit bonus system, which is designed to keep Santa, Mrs Clause look-alikes — and any other senior who wants to work — in the system. While there’s a scaled-back version available for other Centrelink income support recipients like the disability support pension and JobSeeker, the age pension variety is the rolled-gold version. A working bonus credit is a $300-a-fortnight amount that you can earn without it counting towards the income-free area used for the income means test. It can be from self-employment or from an employer, and the figure used is the pre-tax amount. When the credit is unused, it builds up in a “working credit bonus bank” to a maximum amount of $11,800 which, if unused, continues to roll over on a fortnightly basis. For someone recently retired, there’s an instant $4000 credit applied to the bonus bank, which is then topped up at the $300-a-fortnight rate until it hits the maximum amount of $11,800. Assuming no dip-ins, that would take exactly 12 months to achieve. It particularly suits those who might be considering seasonal or one-off work. Fruit picking, extra Christmas staff in the retail and hospitality sector or even those working on polling booths during elections can all make use of the scheme. The $300 is in addition to the normal income-free area of $218 a fortnight for singles, and a combined $380 a fortnight for couples. Unlike all other tests where Centrelink treat couples as a single entity, unused working bonus credits cannot be transferred to your partner. In the unlikely event that your only Centrelink-accessible income was derived from employment, a single could earn up to $74,760.40 a year before losing the pension under the income test. A couple, on the other hand, can earn a combined $117,884, assuming that each person has $7800 a year from employment income. The credit only applies to that part of your income derived from employment and can’t be used to minimise the effects from other income like rental income or the deemed income from financial assets. There’s no concessions on the tax front, other than those tied to the senior and pensioners tax offset. In essence, a single pensioner can earn $35,813 before they’re required to pay tax or Medicare levy. For a couple it’s $31,888 each, or a combined $63,776. Beyond those levels, normal income tax rates apply — a source of heavy criticism from many of those impacted. In effect, some seniors are copping a 50 per cent penalty tax for remaining in the workforce. For example, a senior with taxable income of $70,000 a year is above the thresholds where any tax offsets or credits apply. They’ll be paying at least 30 per cent tax plus 2 per cent Medicare levy — or 32 per cent in total. If the senior is a part pensioner who’s receiving a reduced pension because of the income means test, each $1 over the thresholds reduces the pension by 50¢. In a nutshell, that’s equivalent to an 82.5 per cent tax on employment income. Hardly an incentive for seniors to remain in the workforce and pass on their valuable skills. Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association