Age Pension Income Test

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The income test is one half of the means test for the Age Pension. Applicants must pass both parts of the means test, i.e. both the income and the assets test. If either one of these aspects – income or assets – results in a lower Age Pension entitlement, then that is the test which will determine how much you will be paid.

Centrelink considers your income to come in from a few different sources, including the following:

Actual income

  • Wages or salary earnings
  • Rental income
  • Sole trader or partnership income
  • Dividends or distributions from private trusts or private companies
  • Overseas earnings (this includes non-Australian pensions)

Deemed income*

  • *Financial investments (including shares, term deposits, managed funds)
  • *Income on super fund balances
  • *Income stream earnings (often from account-based pensions)

Income is ‘deemed’ by applying the current Centrelink deeming rates. These rates are 0.25% on financial assets up to $62,600 (for singles), $103,800 (for couples) and 2.25% for financial assets above these amounts.

You may actually earn more or less than this deemed amount. At the moment this calculation is advantageous for retirees as they are likely to be earning much more than 2.25% – perhaps 5% or higher on fixed term bank deposits and higher again on super fund returns. But that is of no concern to Centrelink, it will assess you on the official deemed rates which are set by the relevant government minister and in place until 30 June 2025.

How much income can you earn?

Knowing how Centrelink calculates the Age Pension will help you to understand the questions they ask and why they need the information. Centrelink determines your Age Pension entitlement by assessing your income and your assets independently, which is referred to as the Means Tests. The Means Tests are there to ensure the Age Pension is targeted to those who need it most. Currently around 7 in every 10 people over the age of 65 receive some level of age pension.

Under the income test, how much income can I earn before I start to lose my pension entitlement?

You are entitled to a full pension when your income is equal to or less than*
Single
$212 per fortnight$5,512 per year
Couple
$372 per fortnight$9,672 per year

*Your pension amount starts reducing by $0.50 for every $1 your income exceeds above and does not include the work bonus

You are not entitled to a pension when your income as assessed by Centrelink exceeds
Single
$2,500 per fortnight$65,020 per year
Couple
$3,822 per fortnight$99,382 per year

Centrelink assesses the income you generate anywhere in the world from:

  • Employment, including part time, casual or seasonal work
  • Rental property income
  • Business incomes or profits
  • Pensions or social security style benefits from other authorities

However, Centrelink does NOT assess the income you actually receive on your financial assets (e.g. bank accounts, shares, bonds, loans, superannuation, etc). To make the assessment process simpler Centrelink ‘deems’ (calculates) the income they include in the Income Test from your financial assets. The current deeming rates are 0.25% on your financial assets up to $62,600 (Singles) or $103,800 (Couples) and 2.25% on your financial assets over these thresholds.

Deeming ExampleSingle
Bank account:$5,000.00
Term deposit:$30,000.00
Shares:$50,000.00
Superannuation:$100,000.00
Total Financial Assets$185,000.00
0.25% on first $62,600$151.00
2.25% on excess over $62,600$2803.50
Deemed Income$2,954.50

IMPORTANT NOTE: The deeming rates are reviewed annually in July

Deeming ExampleCouple
Bank account:$5,000.00
Term deposit:$30,000.00
Shares:$50,000.00
Superannuation:$100,000.00
Total Financial Assets$185,000.00
0.25% on first $103,800$250.50
2.25% on excess over $103,800$1908.00
Deemed Income$2,158.50

IMPORTANT NOTE: The deeming rates are reviewed annually in July

Your free Age Pension eligibility test

Our team can guide you through your retirement journey step-by-step.  Start by filling in your free eligibility test to determine if you are eligible for the Age Pension or Commonwealth Seniors Health Card.

Additional Information about the Income Test

Steven Sadler recently answered your most common questions about the Income Test. If you still have more questions, gain a deeper understanding by reading our Income Test explained article.

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