Participating in the pension bonus scheme

Last updated: 
20 January 2020

This page provides information about the pension bonus scheme (the scheme). This information includes requirements of the scheme and changes that can affect your bonus.

Important Note

From 1 July 2014, the pension bonus scheme was closed to new registrations. Current members can remain in the scheme while they continue to meet the work requirements to accrue a pension bonus if they wish.

If you are currently registered in the pension bonus scheme, you may wish to consider whether you will be better off claiming the pension and any bonus you are entitled to. You may also then benefit from the work bonus arrangements. The work bonus is a concession on the income test treatment of employment income for pensioners over qualifying age. This may influence your choices about work and retirement. For more information on this change to the pension income test, refer to Work Bonus.

We encourage you to obtain independent financial advice before claiming pension to find out how these changes may affect your finances and your retirement and work plans.

Age limits

Before the pension bonus scheme was closed to new registrations, Veterans with qualifying service and war widows/widowers could register when they reached qualifying age, which is 60. People eligible for partner service pension could register when they reached pension age, which is 65.

For a veteran deferring an age service pension, or a war widow(er) deferring income support supplement, the upper age limit for accruing a bonus is 70. For a person deferring partner service pension, the upper age limit is 75.

Only the periods accrued before reaching age 70/75 will be used in calculating your bonus. To be eligible to receive a pension bonus you have to have been working and to have delayed claiming the pension for at least one year before reaching the upper age limit.

You can still defer pension, continue to work after age 70/75 and remain eligible to claim bonus after you stop work, provided you continue to meet the work test for each subsequent year. You may wish to do this if your partner is also deferring pension and relies on you to pass the work test for their bonus.

What is accruing and non-accruing membership?

Once you have registered with the scheme you will generally be an accruing member:

  • as long as you meet the work test; and
  • until you reach the upper age limit.

Only accruing membership can be counted towards your bonus.

However, your membership may be classed as non-accruing if you:

  • give away money or other assets in excess of the allowable limits (for more information refer to ‘Giving away your income and assets’ below); or
  • start receiving a Carer Payment from Centrelink; or
  • fail to meet the work test in specified circumstances such as:
    • leave periods for up to 26 weeks
    • participation in Community Development Employment Projects
    • imprisonment
    • you are not working and your working partner is not yet a member of the scheme.

During a period of non-accruing membership you are still considered a member of the scheme, but you cannot accrue bonus. You may start to accrue bonus again after the non-accruing period has finished.

What is the work test?

To meet the requirements of the work test you must:

  • have worked for a minimum of a year after reaching the pension/qualifying age; and
  • have worked a minimum of 960 hours for each year you have deferred claiming the pension; and
  • have worked at least 640 of these hours in Australia.

You need to work 960 hours during each 12 month period (bonus period) following your registration. This is an average of 20 hours per week, allowing for four weeks annual leave.

Provided you still work 960 hours during the 12 months, if you take more than four weeks leave, this will not affect the accrual for the bonus. You will still be regarded as an ‘accruing member’ and remain qualified during this time.

In the final bonus period, if you work less than 12 months, whether you met the work test will be determined on a pro rata basis for the part-year bonus period.

What if my partner is working?

If you have a partner, only one person needs to pass the work test, provided that person has registered as a member of the scheme. If you are relying on your partner’s work to meet the work test, both of you need to be members of the scheme. However, if you both work, one member of the couple must work sufficient hours to meet the work test alone. You cannot combine your hours to meet the work test. For example, if you work 12 hours each week and your partner works 10 hours each week, you cannot add the hours together to claim 1144 hours of work in a 12 month period.

What work do I have to do?

Any work you do must be paid work, e.g. for wages, fees or salary. Gardening or housework for your own home, or managing your own investment portfolio or family trust, does not count as work for the purpose of the bonus. Voluntary work for a charitable, welfare or community organisation does not count for the purposes of the work test for the scheme.

There is special consideration if you cannot meet the work test as a result of a major disaster, such as a cyclone.

What if I take leave from work?

Leave (like time off for holidays, long service leave, personal or family leave and unpaid leave) does not count as work for the purpose of the work test.

You may be treated as a non-accruing member for up to 26 weeks during a period of leave. This period will not count towards your bonus but you can remain in the scheme.

When you return to work, you can resume accruing if you meet the work test. If you do not return to work, or your leave exceeds 26 weeks, you will need to claim your bonus.

What records do I have to keep of my work?

In order to determine whether you pass the work test for each accrual period you will need to provide a record of:

  • the kind work you have been carrying out;
  • name and contact details of your employer/s;
  • the dates you worked;
  • the total number of hours worked for each 12 month period; and
  • the total number of hours worked in Australia (if any).

The record may be kept in diary format or you can use Form D0640 Pension Bonus Scheme 52 Week Work Record, which is available from DVA. You must also be able to provide the Department with your tax returns, payment summaries, payslips or any other work related document, if requested to do so.

How do I know if I am fulfilling the work test?

You have the choice of either:

  • contacting DVA for a work test assessment at the end of each year; or
  • being assessed when you are ready to claim the pension and bonus.

*Note: - If you are not sure you are meeting the requirements of the work test, you should not delay in contacting DVA for advice.

When and where do I need to lodge my claim for bonus and pension?

When the time comes to claim your bonus and pension, you need to lodge the bonus and pension claims together. If you cannot continue to meet the work test, or you decide to stop working, you have 13 weeks from that date to lodge a claim for the pension and pension bonus at the same time. The lodgement period may be extended if the delay was due to extenuating circumstances.

DVA can give you the necessary forms or you can access them on the DVA website

You need to be in Australia to claim your pension and pension bonus. If you are not in Australia when you make your claims, you will not receive a bonus.

What happens if my retirement benefits are still to be finalised?

The relationship between the pension rate and the amount of bonus means you will generally benefit by claiming your pension and bonus after employment income ceases and/or superannuation arrangements are finalised. However, to lodge your claim in time, you may need to claim pension and bonus while your finances are unresolved following retirement.

A pension bonus ’top up’ may be payable if your pension rate increases in the first 13 weeks of payment, due to a reduction in your income and/or assets. The top up is the difference between the actual bonus paid and the amount of bonus that would be payable, had the highest pension rate in the 13-week period been substituted as the annual pension rate in pension bonus formula.

There is no specific claim for a top up to the bonus. You should let us know within 14 days of changes to your income and assets. Should your notification result in an increased rate of pension, the top up will be calculated and paid automatically.

What happens to the bonus if I die before I get paid?

If a person dies before submitting a claim for pension bonus, their bereaved partner may be eligible to claim a pension bonus bereavement payment, in lieu of the bonus payable to the deceased member.

To claim the bereavement payment, the surviving partner should contact DVA to discuss their particular circumstances and request the necessary claim forms.

If you are registered separately for the scheme, you do not lose your own pension bonus entitlement if your partner dies. However, if you are not working and have been relying on your partner’s work to meet the work test, you will need to start work, or claim your bonus within 26 weeks of your partner’s death.

Giving away your income and assets

If you give away income or assets, you may not accrue a bonus for a period of five years from the date you make the gift, when you give away more than:

  • $10,000 in a financial year; or
  • $30,000 in a rolling 5-year period.

These rules also apply to gifts:

 

  • you made before registering as a member of the scheme; and
  • of smaller amounts that added up to more than either limit. The five years starts from the date the gifts went over the limit.

It is also important to note that if you decide to give away income or assets over the limits within the 5 years before you claim a pension, the rate of pension may be affected. For more information refer to Giving Away Income or Assets.

Do I need to advise changes?

As a pension bonus scheme member, you do not have to keep DVA informed of changes to your circumstances.

However, you may wish to notify DVA and discuss the impact on your pension bonus entitlement due to changes in your personal or financial circumstances, such as:

  • change of address;
  • marriage, separation, death;
  • giving away assets, or income;
  • reduction in working hours; or
  • if you and/or your partner start to receive a payment, or a pension bonus from Centrelink.

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