How the Age Pension income and assets tests work

The Age Pension isn’t an all-or-nothing payment. Services Australia pays a maximum rate to someone with little income and few assets, and reduces it as either grows. Two separate tests run, and the one that gives the lower pension applies. This year’s rates and thresholds are together in our guide to the Age Pension income and assets test thresholds.

Who can claim

Age Pension age is 67. There is also a residence requirement, and both tests apply from that date. A plan can show the pension starting at that age and changing as other income, such as super withdrawals, rises or falls.

The income test

The income test counts earnings from work, rent, and the income from investments. Below the income free area the full rate is paid; above it, the pension reduces by a set amount for each dollar of income. Two features matter for planning:

• The Work Bonus excludes part of employment income from the test, so some work doesn’t reduce the pension.
• Financial investments are assessed by deeming, not by what they actually earn.

Deeming

Deeming assumes financial assets, such as bank accounts, shares, managed funds and account-based pensions, earn a set rate, whatever they really return. There are two rates: a lower one on the first slice and a higher one above it, and the Government sets them. A portfolio that earns more than the deemed rate is assessed on less than it earns, and one that earns less is assessed on more. The 2026–27 rates and thresholds, with an example, are in deeming rates for the Age Pension.

The assets test

The assets test adds up what you own: financial assets, investment property, vehicles, and contents. It does not count the family home. A threshold applies, and it is higher for homeowners than non-homeowners, and for couples than singles. Above it, the pension reduces for each $1,000 of assets. Because the home is exempt, the same money counts differently when it is in the home than when it is in savings.

Couples

Couples are assessed together. Income and assets are combined and split between them, whichever partner holds them, so owning an asset in one name rather than the other mostly doesn’t change the result. Super is the exception: super still in accumulation isn’t counted until its owner reaches Age Pension age, so a younger partner’s super is left out of both tests until then.

Which test applies

In any year, one of the two is the “binding” test. Which one it is can change from year to year as balances draw down, income changes and deeming rates move, and the pension a household receives changes with it.

In a projection

Because the pension depends on balances that change each year, it can’t be worked out once. My Runway applies both tests each year from Age Pension age, with deeming, the Work Bonus and couples assessed together, and shows which test is setting the rate. Rates and thresholds are indexed, so we use the figures in force and then grow them for later years. Treat the result as an estimate and confirm with Services Australia.