Pensioner Jocelyn has urged anyone on the pension to seek advice and preparation when returning to work after she was met with a large tax bill at the end of 2023.
Ms Jos, 68, has been on the age pension for three years and recently returned to the workforce, taking part in 10 to 15 hours per week as a community support worker.
She said that it is particularly important for anyone on any pension to be aware of possible taxes after returning to work, if you work more than their work credit.
“I am reasonably savvy with my tax returns, so I was pretty surprised I got sprung… I do my own tax, so it wasn’t until I logged in to finalise my tax returns for the last financial year that I saw this huge debt,” she said.
“I was on the pension for roughly a year before I decided I wanted to go back to work just to keep busy, so I thought I would ring Centrelink and find out what is about going back to work.
“I was on the phone with them for about an hour and unfortunately I wish I could make them accountable for the shortfall of information I received.”
A Centrelink contact confirmed that Ms Jos had $7,800 Work Credit, the result of not working for a year on the pension and the guaranteed 300 Word Credits received each fortnight.
“She had told me that I could earn some money before my pension is affected because it accumulates,” Ms Jos said.
“But at no stage was there any insight or handover of needing to speak to a tax agent or accountant before you get down to zero Work Credits.
“Once I got down to zero, I just had 300 Work Credits and for everything over that, I’d lose 50 cents in the dollar, on my pension.
“No one had explained to me that I had to look at the tax angle or that the pension was a taxable income.
“But you imagine if someone had spent it as a pensioner and then had a $5,300 debt… some people do work because they need the additional income and may not be prepared for the bill.”
After being made aware of the tax bill, Ms Jos received support from the Australian Taxation Office who helped her set up a payment plan.
“I had the money there and could have cleared the debt straightaway, but I thought, what if I need to jump on a plane urgently and go home to my parents in New Zealand.”
The ATO advised Ms Jos that should she earn similar in the next financial year, she should put aside the funds and commit to a private payment plan to ensure the funds were available for the debt.
“So, I set up an extra account to put aside tax,” she said.
“The tax office worked out with me that if I’m earning between $800 and $900 per fortnight, how much tax I would have to put aside.
“I think the most important thing is that this could happen to anyone around the country and that for anyone that is considering returning to work or adding onto their hours, they need to chat with a tax agent or the tax office.
“Everyone’s situation is different…”.
“The age pension is roughly $24,500 per year… even an additional couple of hours could affect what tax bracket you fall.”
