Age Pension Means Testing: How Your Assets and Income Affect Your Entitlement
The Age Pension isn't all or nothing. Centrelink uses two tests—assets and income—to work out how much you'll get. Understanding both is crucial for retirement planning.
The Two-Test System
Centrelink applies two means tests to work out your Age Pension rate:
- Assets test — Based on what you own
- Income test — Based on what you earn (including deemed income from financial assets)
Whichever test produces the lower pension is the one you get. Both tests run simultaneously—there's no choosing between them.
The Pension Rates (2024)
Single: $1,116.30 per fortnight (max rate)
Couple combined: $1,682.80 per fortnight (max rate)
Rates include Pension Supplement and Energy Supplement.
The Assets Test
The assets test looks at what you own, excluding your family home. If you own your home, you get higher asset thresholds.
Full Pension Asset Limits (2024)
| Status | Homeowner | Non-homeowner |
|---|---|---|
| Single | $301,750 | $543,750 |
| Couple combined | $451,500 | $693,500 |
Part Pension Cut-off (Assets)
| Status | Homeowner | Non-homeowner |
|---|---|---|
| Single | $674,000 | $916,000 |
| Couple combined | $1,012,500 | $1,254,500 |
For every $1,000 in assets above the full pension limit, your pension reduces by $3 per fortnight (or $1.50 each for couples).
What counts as assets: Super (once you're Age Pension age), bank accounts, shares, investment properties, cars, boats, caravan—basically anything of value except your home and certain exempt assets like funeral bonds up to $15,000.
The Income Test
The income test looks at your assessable income, including:
- Employment income
- Rental income
- Business income
- Deemed income from financial assets (super, bank accounts, shares)
Income Test Free Areas (2024)
Single: $204 per fortnight
Couple combined: $360 per fortnight
Income above these amounts reduces your pension by 50 cents in the dollar (single) or 25 cents in the dollar each (couple).
Deeming: The Hidden Test
Centrelink doesn't care what your investments actually earn. They use deeming rates to assume a return based on how much you have in financial assets:
| Asset Level | Deeming Rate |
|---|---|
| First $60,400 (single) / $100,200 (couple) | 0.25% |
| Above this amount | 2.25% |
Example: A single person with $300,000 in super and bank accounts would have deemed income of:
- $60,400 × 0.25% = $151
- $239,600 × 2.25% = $5,391
- Total deemed income: $5,542 per year
That's about $213 per fortnight—just above the income test free area, so it would slightly reduce their pension.
Why Super Drawdown Strategy Matters
Here's where it gets strategic. Your super counts as an asset from Age Pension age (67). But how you draw it down affects both tests:
- Spend more super early? Lower assets = higher pension later, but your super runs out faster
- Keep super invested? Higher assets = lower pension now, but more money overall if you live long
- Convert super to non-assessable assets? Possible strategies exist (funeral bonds, home renovations) but come with trade-offs
The sweet spot: For many people, the optimal strategy involves drawing down super to the full pension asset threshold by their mid-80s. But this depends heavily on health, lifestyle, and how long you expect to live.
Gifting Rules: The 5-Year Trap
Thinking of giving money to the kids to reduce your assets? Centrelink looks back 5 years. You can gift up to:
- $10,000 in any single financial year
- $30,000 over any 5-year rolling period
Amounts above this are still counted as assets for 5 years—even after you've given them away.
How Talk Through Wealth Helps
Navigating means testing requires modelling your whole financial picture over time:
- Project your Age Pension entitlement year by year
- Compare different super drawdown strategies
- See how asset restructuring affects your pension
- Model the income and assets tests together
- Plan for both tests to optimise total retirement income
Model Your Age Pension Entitlement
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