Nick Bruining Q+A: Centrelink’s work bonus scheme allows you to work AND keep collecting a pension

Question

Centrelink has indicated to my wife and I that we can each receive up to $11,800 from paid employment, which represents a combined total of $23,600.

As it stands, I’m likely to exceed that amount, while my wife will not receive any employment income.

If I exceed the $11,800 and as my wife does not earn any employment income, could I be paid up to $23,600 from employment without our pensions being reduced?

Answer

The work bonus scheme is a program specifically targeted at aged pensioners. Under the scheme, a person can earn $300 gross a fortnight from employment income, before the additional employment income is added to their Centrelink-assessable income.

That income is used for means-testing purposes. If the $300 work bonus is not used in any particular fortnight, it accumulates in a work bonus “bank” up to a maximum of $11,800.

People who apply and qualify for a pension receive an instant credit of $4000 to their working bonus account.

This might allow them to assist in a “handover” program with their employer at retirement.

Any employment income would be applied against the bonus bank credit before it carries over to the normal income-free area of $212 a fortnight for singles and a combined $372 a fortnight for couples.

For example, let’s say as a member of a couple you had the maximum $11,800 in your individual working bonus bank account. You had a one-off contract for a few weeks and at the end, received a payment of $12,500.

The $11,800 would be fully used up, the $372 income free amount in the fortnight the payment is received is also used, leaving you with $328 of Centrelink assessable income above the income free area.

This amount will reduce your pension by 50¢ per $1 so your combined household pension will be reduced by $164 for the next fortnight.

Centrelink will use your combined fortnightly income for the income test, no matter which member of the couple generates that income.

Significantly however, the unused work bonus credits cannot be transferred. That means your wife’s $11,800 bank credit cannot be used by you.

Question

I have a self-managed superannuation fund which was set up many years ago with myself as the director of the corporate trustee of my now pension fund.

I intend to transfer all of my SMSF into a public offer, Australian Prudential Regulation Authority-regulated fund.

Would corporate trustee arrangement prevent me from joining an APRA-regulated fund?

Answer

The simple answer is no, there are no issues in rolling over your entire account balance into an APRA-regulated fund.

All public offer superannuation schemes are APRA regulated. Your situation is common for those who have been operating an SMSF for some time.

For reasons including total operating costs, complexity and the fact we just want to simplify things as we age, many SMSF users are keen to shut down the fund as they get older.

The most effective and simple way would be to sell down the assets and convert all holdings to cash. Because the fund is in retirement phase, no tax is payable on the sale of the assets.

You then need to select the receiving fund and prepare the rollover benefit statement, or RBS, which provides the receiving fund with specific tax and date based information.

An electronic transfer of funds will need to be done by you as trustee, essentially via a superannuation clearing or messaging facility.

It’s important to leave an adequate amount of money in the SMSF to meet the wind-up expenses which should be similar to the annual expenses you are currently paying.

By making this transition now, all of the transactions should be complete by June 30, meaning that year’s accounts can incorporate the shut-down documentation and costs.

Any amount left over can simply be paid out to you as a final withdrawal from the account.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association