Taper rate explained

But how will this work for you?

As you no doubt know the income and asset limits for full and part-Age Pensions were increased on 1 July this year. This is good news for many Australians who may have almost qualified for the Age Pension. It also means a slight increase in payments. This is because a ‘taper rate’ is applied to both income and assets over the threshold for a full Age Pension while still below the cut-off points. This makes it timely to step through an explanation of how taper rates work, so that you can ensure you are receiving your maximum possible income.

What are taper rates?

Around 2.6 million Australians are currently receiving either a full or a part-Age Pension. 

Regardless of which pension you receive, your eligibility is based upon a means test. This means test is two-part, requiring that both your assets and your income are below a certain amount. You cannot comply with just one half of the test and whichever test has a less favourable result is the test by which your payments are defined.

How does the income test taper rate work?

There is an income test free area which means that those with assessable income less than (or equal to) this amount will be eligible for a full Age Pension based on the income test (they could be affected by the assets test though). A work bonus credit will also be applied to any employment income, which allows you to earn more income before reducing your pension payments.

There is also a cut-off amount (the upper income threshold), so if your income is above this amount you are automatically ineligible for the Age Pension

If, however, your income falls between the income test free area (the lower income threshold) and the cut-off amount, you will have the taper rate applied.  

What are the new 1 July limits?

Single person

Income per fortnightAmount by which your pension will reduce Annual income
Up to $212 (free area)$0$5512
Over $21250 cents for each dollar over $212


Combined income per fortnightAmount the couple’s pension will reduce byAnnual income
Up to $372 (free area)$0$9672
Over $37250 cents for each dollar over $372 (each)

What are the new 1 July cut off points?

Your situationFortnightly income cut off pointAnnual
A couple living together$3,737.60 combined$97,177.60

Your cut off point may be higher if you receive Commonwealth Rent Assistance or a Work Bonus credit, but lower if you are not currently living in Australia.

How the taper rate on (income) reduces payments

Jeff and Julie are in their seventies. They no longer work but do still each receive income from overseas pensions.

Their combined assets are under the threshold as home-owners ($470,000), so their Age Pension entitlement will be assessed based upon their income. 

The maximum they can earn as a couple each year before their pension is reduced is $9,672 but their combined pensions pay an amount that converts to AUD $50,000.

This means that a taper rate of 50c per $1 will be applied to the $40,328 in excess of the threshold, thus halving Jeff and Julie’s pension to $20,764 per annum (or $775.53 per fortnight). 

How does the Assets test taper rate work?

As with the income test, there is an assets test free area which applies a limit to assessable assets in order to access a full Age Pension.

There is also an assets test cut-off value above which no pension will be permitted. In between the maximum amount before ineligibility and the asset test free area, the assets test taper rate is applied. This taper rate is a reduction in payments by $3 per fortnight for every $1000 of assets above the maximum pension amount, i.e. the assets test free area. 

What are the 1 July asset limits for a full Age Pension?

Your situationHomeownerNon-homeowner
A couple, combined$470,000$722,000

If you’re a member of a couple, the limit is for both your and your partner’s assets combined, not each of you.

What are the 1 July limits for a part-Age Pension?

Your situationHomeownerNon-homeowner
A couple, combined$1,031,000$1,283,000

(Those who received Commonwealth Rent Assistance will have a higher cut off point.)

How the taper rate (on assets) reduces Alfred’s payments

Alfred is a 69-year-old single homeowner.

He earns no wages or salary, and his income which is deemed on assets of $331,250 is well below the income threshold.

So his Age Pension entitlement will be assessed on the basis of his assets.

The full Age Pension assets threshold is now $314,000 for single homeowners.

Because Alfred is $17,250 over the threshold, a taper rate of $3 per fortnight, per $1000 in excess of the threshold, means that his pension will be reduced by $3 x 17.25, or $51.75 per fortnight ($1,345.50 per annum).

What happens if you are just over income and assets test free areas?

The taper rate can be easier to understand if you have a situation like Alfred or Julie and Jeff. But how does it work if you are in the area between maximum Age Pension allowance and cut off points for both your income and assets? Here’s how it works for Alice who is a single homeowner hoping to receive an Age Pension.

She is earning $25,512 in work income ($20,000 over the limit of $5,512). She has $364,000 in super assets (which is $50,000 more that the limit of $314,000). According to Guru Steven Sadler, the Head of Retirement Essentials Customer Services Team, Alice would be assessed under the income assessment and would be eligible for $19,455 per annum (which is $9,568 less than a full single Age Pension). An asset test assessment would lead to an entitlement of $25,123 per annum. But as previously mentioned, Centrelink will provide the income associated with the lower of the two tests.

Staying up to date

The team at Retirement Essentials prides itself on keeping all our calculators and support information up to date. This link takes you to a page which reflects the current income and assets thresholds as well as other helpful information.

You can also, at any time and without obligation, use the free Age Pension Eligibility Calculator. It automatically applies all income and asset limits as well as the Work Bonus credit, based upon your own personal circumstances. This means that you can quickly and easily check your Age Pension status.

Finding it hard to keep up with all these changes? You are not alone. For this reason Retirement Essentials offers two very relevant consultations:

An Age Pension consultation to help you with your Age Pension application 


Maximising your Entitlements which is designed to help you explore ways you might be able to maximise your Centrelink entitlements).

Last week we heard from a member who bemoaned the difficulty of ‘not knowing’ what he didn’t know. Do you, too, feel that the rules for the Age Pension entitlement are really hard to keep up with? If so, in what way might we help?