Age Pension - Asset & Income Tests

Age Pension Assets and Income Tests

The Age Pension in Australia is means-tested, meaning your income and assets will determine how much (if any) pension you receive. This ensures the system is fair and sustainable.

There are two key tests you’ll need to pass: the income test and the assets test. Centrelink uses whichever test gives the lower payment.

How the Income Test Works

The income test assesses the money you earn from various sources. This includes income from work, investments, superannuation, and some foreign pensions.

Under the income test, you can earn up to a certain amount before your pension is reduced. For singles, the threshold is $204 per fortnight; for couples, it’s $360 combined (as at 1 July 2023).

Deeming and Investment Income

For simplicity, the government uses a system called ‘deeming’ to estimate your earnings from financial assets. Rather than tracking every dollar of interest, it assumes your investments earn a set percentage.

This applies to bank accounts, shares, managed funds, and some superannuation. It’s designed to make assessing your pension quicker and easier—though it doesn’t always reflect actual returns.

How the Assets Test Works

The assets test considers what you own. This includes property (excluding your primary home), vehicles, personal belongings, and financial assets.

Centrelink sets limits on how much you can own before your pension is reduced. These limits vary depending on whether you’re single or part of a couple, and whether you own your home.

Current Asset Thresholds

• Single Homeowners: Up to $301,750 in assets.
• Single Non-homeowners: Up to $543,750 in assets.
• Couple Homeowners: Up to $451,500 in combined assets.
• Couple Non-homeowners: Up to $693,500 in combined assets.

Above these levels, your pension payment reduces by $3.00 per fortnight for every $1,000 over the limit.

How the Tests Interact

Centrelink applies both tests but uses the one that results in the lower payment. So, if your income test shows you should get $600 per fortnight, but your assets test results in $500, you’ll receive the lower amount.

What’s Exempt?

Some assets and income are exempt from assessment, such as:

• Your principal home (regardless of value)
• Prepaid funeral plans
• Certain compensation payments
• Gifts within allowable limits

Common Traps and Tips

Here are a few helpful things to keep in mind:

• Gifting Limits: You can gift up to $10,000 per financial year (or $30,000 over five years) without affecting your pension.
• Superannuation: Once you reach Age Pension age, your super is assessed as an asset and any income it generates is counted.
• Reverse Mortgages: Taking out a reverse mortgage can affect your assets test and reduce your pension.

How to Stay Informed

Because thresholds and deeming rates can change regularly, it’s worth checking the Services Australia website or speaking with a financial adviser. They can help you navigate the rules and maximise your entitlements.

Help is Available

There’s no need to navigate the Age Pension tests alone. You can reach out to:

• Services Australia: For current thresholds and calculators.
• Financial Information Service (FIS): A free government service offering information about pensions and planning.
• Retirement advisers: Professionals who can help you structure your finances to suit your needs and entitlements.

Final Thoughts

Understanding the income and assets tests is key to getting the most out of your Age Pension. Even small tweaks like rearranging investments, updating records, or checking exemptions can make a big difference.

At Silver Lifestyle, we’re here to keep you informed, confident, and empowered to make the most of your retirement years. Bookmark this page, check back regularly, and don’t hesitate to ask questions. The more you know, the better you’ll retire!