To work or not to work?

To work or not to work?

14 March 2019 - posted in Pre-Retirees and Retirees by Sam Martin


At Age Pension age - To work or not to work? This is the question.

At Age Pension age - To work or not to work? This is the question.

Case Study: Bob and Pat are both pension age, have $300,000 in an Allocated Pension which they will draw the minimum of $15,000 pa. Have $50,000 of cars and contents and no other financial assets.

Bob has three options to consider and he would like to know what his net income position would be under each option;

Option 1: Retire

Option 2: Work part time (one and a half days per week) earning $13,000pa

Option 3: Work full time, earning $43,000pa

 

Retirement

Part Time Full Time
Employment Income $0 $13,000 $43,000
Age Pension $35,916 $32,380 $17,380
Less Gross tax (inc Medicare) $0 ($2,088) ($8,350)
Rebates $0 $2,088 $1,504
Net tax $0 $0 ($6,842)
Plus non-taxable income $15,000 $15,000 $15,000
Total Net income $50,916 $58,292 $68,538

 

The results are encouraging for someone wanting to work part time as opposed to full time.

One way of looking at it is how much of his gross pay will he end up taking home after tax and taking into account Centrelink reductions?

To keep it very simple lets assume Bob earns approximately $22 p/hour gross in both part time and full time positions and ignoring all other work benefits such as super contributions, annual leave etc.

  • Part time his take home pay is $15 p/hour due to Centrelink reductions.
  • Full time his take home pay is $9 p/hour due to both Centrelink reductions and tax payable.

To help provide some incentive for working past Age Pension age there is Centrelink’s Work Bonus Scheme. This scheme provides an exemption on the first $250 per fortnight of employment income counted towards the income test.

It would be fair to say that the Government through a combination of taxation and Centrelink assessment measures provide some incentive for people of Age Pension age to remain in the workforce only in a casual or part time nature.


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