Written

For

The

Australian

-

When

working

longer

makes

little

sense

Here's a paradox that should make policymakers squirm: for some Australians in their late 60s, working an extra year can leave them financially worse off. Not because of tax brackets or super caps, but because our age pension system quietly punishes those who choose to keep working.

Let me walk you through why.

The age pension is generous — up to $29,874 a year for singles and $45,037 for couples. But it comes with strict income and asset tests. And there's a sweet spot where retirees can draw down their own super while still collecting the full government pension, creating a combined cash flow that far outstrips what their capital alone could produce.

Now consider a 67-year-old admin assistant earning $65,000. After tax, they take home $53,437. If they stopped work tomorrow, they'd collect roughly $29,874 in age pension. The difference? Just $23,563 for a full year of showing up. Break that down across 1,800 working hours and they're effectively earning $13 an hour to keep going. Would you?

The assets test creates similar perversities. A retired couple with $500,000 in assessable assets who earn an extra $20,000 from part-time work and tuck it into super will see their pension shrink by $1,560 a year. To recover that loss, their super needs to earn 7.8 per cent — a stretch if they're in a conservative option returning under 5 per cent. The maths says: don't bother working.

This matters at a national level. The Grattan Institute has warned about our long-term structural deficit as more Australians retire. Both major parties say they want older workers to stay engaged. But the rules say otherwise.

For lower and middle-income Australians hitting 67, the current system is a disincentive dressed up as a safety net. If we're serious about keeping people in the workforce, the age pension taper rates need a serious rethink.