A Low Yield Assessed at Full Value Is an Expensive Asset
An investment property held into retirement is assessed at market value less secured debt under the Age Pension assets test, and its net rent is assessed as actual income. Where the net yield is below the effective 7.8% the assets taper charges, a part-pensioner is losing more pension than the property produces — which is the arithmetic that drives most sale decisions at this point.
- The answer: Compare the net rent against the Age Pension lost on the property's assessed value at the taper rate. Below the taper, holding costs money.
- The trap: Selling realises the gain in one income year, which for a long-held property can be substantial even after the discount.
- The recommendation: If selling, time the contract into the lowest-income year available and use the concessional cap to absorb part of the gain.
Where the AI summary above gets this wrong
"Property is a good retirement asset because it produces reliable rental income."
That's surface-true. Here's what it misses:
- The Age Pension charges more than most yields produce — The assets taper is $78 a year per $1,000 assessed, which is an effective 7.8%. A property yielding 3.5% net is costing a part-pensioner the difference.
- It is illiquid at the point you most need liquidity — Aged care deposits, health costs and a market you cannot sell into all arrive at once, and a property cannot be part-sold.
01 The arithmetic against the taper
The assets test reduces the Age Pension by $3 a fortnight per $1,000 of assessable assets, which is $78 a year — an effective 7.8% charge on the assessed value, as set out in the assets taper reference.
A property assessed at $600,000 therefore costs $46,800 a year of pension for a household in the taper range. Against a net rent of perhaps $22,000, that is a substantial annual loss before any view about capital growth.
The comparison is only relevant for a household actually in the taper range. Above the cut-off there is no pension to lose and the property is assessed on its own merits.
02 What selling costs
The gain is realised in the year of the contract and taxed at your marginal rate after the discount. For a property held for decades that is a large one-off amount, and the timing decision is in the sale timing post.
Selling costs — agent commission, marketing, legal — are a further few per cent, and they are added to the cost base rather than deducted from income.
The proceeds are then assessable and deemed, so the assets test position is broadly unchanged unless the money is spent on an exempt asset or used to reduce debt.
Shows: the net rent from an investment property against the Age Pension lost on its assessed value, for a household in the taper range. Ignores: capital growth, the income test on the rent, capital gains tax on a sale, and what the proceeds would earn instead.
Source: ATO — Capital gains tax
03 What the proceeds could do instead
Contributing to super is limited by the caps and by your total super balance, and after 67 by the work test for a deductible contribution. For someone over 75 the door is largely closed.
Spending on the principal home removes the money from the assets test permanently, which is the only route that changes the means test rather than just relocating the asset — the mechanics are in the home exemption reference.
A lifetime income stream receives concessional means-test treatment, which is a genuine alternative for part of the proceeds and is covered in the annuity post.
Source: Services Australia — Asset types
Work out the break-even yield: the pension lost divided by the assessed value. For a part-pensioner it comes out near 7.8%, and almost no residential property in Australia yields that net. That single number settles more of these decisions than any view about the property market.
FAQ
Should I keep my investment property or sell it to fund my account-based pension?
Compare the net rent against the Age Pension lost on the property's assessed value at $78 a year per $1,000. Where the net yield is below that, a part-pensioner is losing more than the property produces.
How does property affect my retirement sustainability?
It is assessed at full market value under the assets test while producing a yield that is usually well below the taper rate, and it cannot be part-sold when liquidity is needed.
What should I do with the proceeds if I sell?
Contributing to super is limited by the caps and the work test after 67. Spending on the principal home is the only route that removes the money from the assets test, and a lifetime income stream receives concessional treatment.
Sources
Regulator references
- Services Australia — Assets test for Age Pension · Services Australia · 2026The assets test: which assets count, the thresholds, and the taper that reduces the payment.Last verified: 2026-09-07
- ATO — Capital gains tax · Australian Taxation Office · 2026Capital gains tax: the events that trigger it and how the gain is worked out.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.