Income Test for the Age Pension

17 May 2024

Generating income during your retirement might help you lead a better life in retirement. But it’s important to consider how it will affect your eligibility for the Age Pension, as well as the amount of pension you may receive. The government performs what’s called an ‘income test’ to assess whether you can receive a full or part pension during retirement. Understanding what to expect from this test can help you plan for your retirement with more confidence.

Measuring income may not be as simple as looking at a monthly pay slip. Your income may come from a variety of sources, such as investments and interest on savings. The government will look at all of these as part of the income test.

 

Understanding the Government Age Pension income test

Once you’ve reached Age Pension age, you may apply to Centrelink to see if you’re eligible. This regular payment can help people meet their basic needs during retirement. It’s sometimes referred to as a ‘safety net’. 

Apart from your age, your eligibility also depends on your residency status, as well as: 

  • how much income you get (the income test) and
  • how much your assets are worth (the assets test).

The income and assets tests also help determine how much Age Pension you may be paid. The test that results in the lower pension rate is the one that’s applied to your situation. 

The income test

In performing the income test, the government looks at your total income across all sources. If you have a partner, their income will be assessed jointly with yours. Income sources may include:  

  • Employment – wages, or money received from a business you own
  • Financial assets – super, and income from sources such as savings accounts, managed investments and shares
  • Other – income earned from overseas, director’s fees, Paid Parental Leave payments, and certain scholarship amounts. 

If you earn employment income, you’ll need to report your gross (before-tax) income to the government as part of the income test. If you own a business or rental property you may need to provide a profit and loss statement and an income tax return.

 

How income affects your Age Pension payments

To receive the maximum Age Pension payment, your fortnightly income needs to be below $204 if you’re single. Your combined income must be under $360 a fortnight if you’re in a couple who live together, or apart due to ill health1.  

For every dollar you earn over this limit, your fortnightly pension will be reduced by 50c for a single person or couple. 

If your income goes over the cut-off point, you won’t be eligible to receive any payment that fortnight. 

Age Pension cut-off points
IF YOU’RE: YOUR FORTNIGHTLY
INCOME CUT OFF POINT IS:
Single $2,436.60
A couple, living together $3,725.60 (combined) 
A couple, living apart due to ill health $4,825.20 (combined) 
20 March 2024. For the most up to date income test limits, please visit the Services Australia website.

It is worth noting that your Age Pension cut-off point may be higher if you get the Work Bonus. You can find out more about that below. All payments may be lower if you don’t live in Australia. 

READ MORE: AM I ELIGIBLE FOR THE GOVERNMENT AGE PENSION?

 

Exempt income

Income sources that are exempt from the income test include: 

  • rent assistance
  • child support
  • emergency relief payments
  • regular payments from a close relative. 

For more details on each of these, as well as a complete list of assets exempt and considered under the test, visit the Services Australia website.

 

How the government assesses income from financial assets

The government assesses the income from your financial assets, by applying a process called ‘deeming’. It assumes that you receive a set income from these assets or investments. The deeming rate can vary depending on whether you’re single or in a couple.

Learn more about deeming on the Services Australia website.  

 

Employment and the Age Pension - The Work Bonus

If you’d like to keep working after retirement age, there’s a government incentive to encourage you to do so. 

Under the Work Bonus, you can earn up to $300 of employment income a fortnight – or $7,800 a year – without it affecting your Age Pension. This is regardless of whether it’s regular, casual or short-term work. It is also on top of the money you can earn each fortnight under the standard rules of the income test. Any unused amounts of your Work Bonus can be built up to a maximum of $7,800.

The maximum Work Bonus balance will remain at $11,800 from 1 January 2024. It includes  $4,000 credit you may get to your Work Bonus balance when you claim if you’re eligible and haven’t already received one. 

For more details on the Work Bonus, visit the Services Australia website.

 

Super, account based pensions and the Government Age Pension

You may be able to top up any Age Pension payments you’re entitled to by withdrawing lump payments from your super account.

Alternatively, you may wish to set up an account based pension to help turn those super savings into a regular income stream. AustralianSuper’s account based pension is known as Choice Income.

One possible advantage of opening an account based pension (compared to withdrawing all your super) is that your money stays invested in your super. This could make a big difference to your life in retirement, especially when you consider the potential benefits of compounding returns

 

Income and assets tests applied to super and account based pensions

This table shows how the income and assets test is applied to your super, as well as your account based pension, if you have one.


SUPER ACCOUNT BASED PENSION2
BALANCE

Below Age Pension age: Not subject to income or assets tested.

Age Pension age and over: Subject to income and assets tests using deeming

Subject to income and assets tests, using deeming
LUMP SUM WITHDRAWALS Not subject to income test (although subject to condition of release). May be subject to asset test, depending on how the lump sum is used

Not subject to income test. 

May be subject to assets test, depending how the lump sum is used

INCOME PAYMENTS NA Balance subject to income test, using deeming 

The Government Age Pension is complex and subject to individual’s circumstances. Other types of income streams may have different income and asset assessment rules, such as those pre 1/1/2015, annuities, and defined benefit pensions.

FIND OUT MORE: SUPER AND THE AGE PENSION

 

Help for planning your retirement 

If you’re planning for retirement, or have retired, you may feel that managing your financial entitlements can be complex. AustralianSuper offers access to different advice options depending on your needs. Connect with one of our team members who can put you in touch with an accredited financial adviser3

 

FIND AN ADVISER


References:
1. Figures correct as of 20 March 2024 servicesaustralia.gov.au
2. Includes transition to retirement income
3. Personal financial product advice is provided under the Australian Financial Services Licence held by a third party and not by AustralianSuper Pty Ltd. Fees may apply


The government may change eligibility criteria and pension payment amounts. For the latest information on the Government Age Pension please see servicesaustralia.gov.au

This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/pds or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD.

AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

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