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- How does the Age Pension income test work?
- Age Pension income limits (July 2021)
- Work bonus
- What is included in the Age Pension income test?
- What is not included in the Age Pension income test?
- What if your income changes?
- Means test treatment of lifetime annuities
- Defined benefit super pensions
- How the income and assets tests work together
- Does a mortgage reduce deemed income?
A common question for those nearing, or in, retirement is ‘How much can a pensioner earn before it affects the pension?’. The answer is that it depends on how much income you earn and the total value of your assets, excluding the family home.
This article details the rules of the Age Pension income test, which is one half of the means test used by Centrelink to determine how much Age Pension you could be eligible for.
You must also pass the Age Pension assets test, have reached your eligibility age and satisfy Australian residency rules.
Statistics indicate that the Age Pension income test is passed by fewer Australians than the asset test. According to the Centre of Excellence in Population Ageing Research (CEPAR), approximately two-thirds of Australians receiving part pensions have too much income to be eligible for the full pension. The other one-third of part-pensioners have too much assessable wealth (assets).
How does the Age Pension income test work?
Centrelink assesses your gross income (that is, your before-tax income) from all sources to determine your eligibility for the Age Pension. These sources include income from overseas, not just Australia. If you have a partner, their income will also be included in your income test assessment.
The current income limits are itemised in the tables below.
Age Pension income limits (July 2021)
To be eligible for a full Age Pension your income must be below the following thresholds.
Income limits for a full Age Pension
| Situation | Current fortnightly limit | Current annual limit* | Previous fortnightly limit | Previous annual limit* | Fortnightly increase | Annual increase* |
|---|---|---|---|---|---|---|
| Single | $180 | $4,680 | $178 | $4,628 | $2 | $52 |
| Couple (combined) | $320 | $8,320 | $316 | $8,216 | $4 | $104 |
| Couple (illness-separated, combined) | $320 | $8,320 | $316 | $8,216 | $4 | $104 |
- Current limits apply 1 July 2021 to 30 June 2022
- Previous limits apply 1 July 2020 to 30 June 2021
Source: Department of Human Services.
Annual amounts are approximate.
If your income is above the thresholds in the above table, you may still be eligible for a part Age Pension. The table below shows the maximum income you can earn to still be eligible to receive any part pension payment.
The amount of Age Pension you are eligible for reduces by 50 cents for each dollar earned until it cuts off completely when your income exceeds the figures below.
Income limits for a part Age Pension (Residents)
| Situation | Current fortnightly limit | Current annual limit* | Previous fortnightly limit | Previous annual limit* | Fortnightly increase | Annual increase* |
|---|---|---|---|---|---|---|
| Single | $2,115.00 | $54,990 | $2,085.40 | $54,220 | $29.60 | $770 |
| Couple (combined) | $3,237.20 | $84,167 | $3,192.40 | $83,002 | $44.80 | $1,165 |
| Couple (illness-separated, combined) | $4,190.00 | $108,940 | $4,130.80 | $107,401 | $59.20 | $1,539 |
- Current limits apply 20 September 2021 to 19 March 2022
- Previous limits apply 1 July 2021 to 19 September 2021
Source: Services Australia
*Annual amounts are approximate.
To illustrate how the Age Pension rate decreases based on the value of assets, below are some examples of the current Age Pension payments that Australians should be eligible for at a range of different asset levels, provided they also meet the other eligibility requirements (age, passing the income test and Australian residency).
Click each example name to view.
Example 1: Single
| Income | Age Pension | Combined | |||
|---|---|---|---|---|---|
| per fortnight | per year | per fortnight | per year | per fortnight | per year |
| $180 | $4,680 | $967.50 | $25,155 | $1,147.50 | $29,835 |
| $250 | $6,500 | $932.50 | $24,245 | $1,182.50 | $30,745 |
| $500 | $13,000 | $807.50 | $20,995 | $1,307.50 | $33,995 |
| $750 | $19,500 | $682.50 | $17,745 | $1,432.50 | $37,245 |
| $1,000 | $26,000 | $557.50 | $14,495 | $1,557.50 | $40,495 |
| $1,250 | $32,500 | $432.50 | $11,245 | $1,682.50 | $43,745 |
| $1,500 | $39,000 | $307.50 | $7,995 | $1,807.50 | $46,995 |
| $1,750 | $45,500 | $182.50 | $4,745 | $1,932.50 | $50,245 |
| $2,000 | $52,000 | $57.50 | $1,495 | $2,057.50 | $53,495 |
Example 2: Couple (combined)
| Income | Age Pension | Combined | |||
|---|---|---|---|---|---|
| per fortnight | per year | per fortnight | per year | per fortnight | per year |
| $320 | $8,320 | $1,458.60 | $37,924 | $1,778.60 | $46,244 |
| $500 | $13,000 | $1,368.60 | $35,584 | $1,868.60 | $48,584 |
| $750 | $19,500 | $1,243.60 | $32,334 | $1,993.60 | $51,834 |
| $1,000 | $26,000 | $1,118.60 | $29,084 | $2,118.60 | $55,084 |
| $1,250 | $32,500 | $993.60 | $25,834 | $2,243.60 | $58,334 |
| $1,500 | $39,000 | $868.60 | $22,584 | $2,368.60 | $61,584 |
| $1,750 | $45,500 | $743.60 | $19,334 | $2,493.60 | $64,834 |
| $2,000 | $52,000 | $618.60 | $16,084 | $2,618.60 | $68,084 |
| $2,250 | $58,500 | $493.60 | $12,834 | $2,743.60 | $71,334 |
| $2,500 | $65,000 | $368.60 | $9,584 | $2,868.60 | $74,584 |
| $2,750 | $71,500 | $243.60 | $6,334 | $2,993.60 | $77,834 |
| $3,000 | $78,000 | $118.60 | $3,084 | $3,118.60 | $81,084 |
Example 3: Couple (illness-separated, combined)
| Income | Age Pension | Combined | |||
|---|---|---|---|---|---|
| per fortnight | per year | per fortnight | per year | per fortnight | per year |
| $320 | $8,320 | $1,935.00 | $50,310 | $2,255.00 | $58,630 |
| $500 | $13,000 | $1,845.00 | $47,970 | $2,345.00 | $60,970 |
| $750 | $19,500 | $1,720.00 | $44,720 | $2,470.00 | $64,220 |
| $1,000 | $26,000 | $1,595.00 | $41,470 | $2,595.00 | $67,470 |
| $1,250 | $32,500 | $1,470.00 | $38,220 | $2,720.00 | $70,720 |
| $1,500 | $39,000 | $1,345.00 | $34,970 | $2,845.00 | $73,970 |
| $1,750 | $45,500 | $1,220.00 | $31,720 | $2,970.00 | $77,220 |
| $2,000 | $52,000 | $1,095.00 | $28,470 | $3,095.00 | $80,470 |
| $2,250 | $58,500 | $970.00 | $25,220 | $3,220.00 | $83,720 |
| $2,500 | $65,000 | $845.00 | $21,970 | $3,345.00 | $86,970 |
| $2,750 | $71,500 | $720.00 | $18,720 | $3,470.00 | $90,220 |
| $3,000 | $78,000 | $595.00 | $15,470 | $3,595.00 | $93,470 |
| $3,250 | $84,500 | $470.00 | $12,220 | $3,720.00 | $96,720 |
| $3,500 | $91,000 | $345.00 | $8,970 | $3,845.00 | $99,970 |
| $3,750 | $97,500 | $220.00 | $5,720 | $3,970.00 | $103,220 |
| $4,000 | $104,000 | $95.00 | $2,470 | $4,095.00 | $106,470 |
Income limits for a part Age Pension (Non-residents)
Be aware that if you’re currently residing outside Australia but are still eligible for an Australian Age Pension, different maximum income test thresholds and payment rates apply for the part pension.
The different maximum income test thresholds are outlined in the table below.
| 1,Situation | Current fortnightly limit | Current annual limit* | Previous fortnightly limit | Previous annual limit* | Fortnightly increase | Annual increase* |
|---|---|---|---|---|---|---|
| Single | $1,993.80 | $51,839 | $1,965.40 | $51,100 | $28.40 | $738 |
| Couple (combined) | $3,061.60 | $79,602 | $3,018.40 | $78,478 | $43.20 | $1,123 |
| Couple (illness-separated, combined) | $3,947.60 | $102,638 | $3,890.80 | $101,161 | $56.80 | $1,477 |
- Current limits apply 20 September 2021 to 19 March 2022
- Previous limits apply 1 July 2021 to 19 September 2021
Source: Services Australia
*Annual amounts are approximate.
The Age Pension income limits are adjusted three times a year based on movements in the consumer price index (CPI). The thresholds for the full Age Pension change in July, while thresholds for the part Age Pension change in March and September.
You can access the latest Age Pension rates here.
Work bonus
From 1 July 2019 you can earn up to $300 a fortnight if you’re still working and you will not have this amount included in your income test for the Age Pension. This amount is known as a ‘work bonus.’ The work bonus amount can be accumulated up to an amount of $7,800. You don’t need to apply to have this done. Centrelink will apply the work bonus to your income test.
Prior to 1 July 2019 the work bonus was $250 per fortnight or up to $6,500 annually.
Income limits for a transitional part Age Pension (residents)
Some Age Pensioners in Australia are on transitional pensions. Transitional pensions rates are paid to people who would otherwise be getting a lower payment after changes to the income test were introduced in 2009.
The table below shows the asset value cut-off points for receiving a transitional pension.
| Situation | Current fortnightly limit | Current annual limit* | Previous fortnightly limit | Previous annual limit* | Fortnightly increase | Annual increase* |
|---|---|---|---|---|---|---|
| Single | $2,198.25 | $57,155 | $2,170.75 | $56,440 | $27.50 | $715 |
| Single with one dependent child | $2,222.85 | $57,794 | $2,195.35 | $57,079 | $27.50 | $715 |
| Couple (combined) | $3,576.00 | $92,976 | $3,532.00 | $91,832 | $44.00 | $1,144 |
| Couple (illness-separated, combined) | $4,356.50 | $113,269 | $4,301.50 | $111,839 | $55.00 | $1,430 |
- Current limits apply 20 September 2021 to 19 March 2022
- Previous limits apply 1 July 2021 to 19 September 2021
Source: Services Australia
*Annual amounts are approximate.
Income limits for a transitional part Age Pension (non-residents)
| Situation | Current fortnightly limit | Current annual limit* | Previous fortnightly limit | Previous annual limit* | Fortnightly increase | Annual increase* |
|---|---|---|---|---|---|---|
| Single | $1,998.50 | $51,961 | $1,973.50 | $51,311 | $25.00 | $650 |
| Single with one dependent child | $2,023.10 | $52,601 | $1,998.10 | $51,951 | $25.00 | $650 |
| Couple (combined) | $3,360.00 | $87,360 | $3,318.00 | $86,268 | $42.00 | $1,092 |
| Couple (illness-separated, combined) | $3,907.00 | $101,582 | $3,907.00 | $101,582 | $50.00 | $1,300 |
- Current limits apply 20 September 2021 to 19 March 2022
- Previous limits apply 1 July 2021 to 19 September 2021
Source: Services Australia
Annual amounts are approximate.
What is included in the Age Pension income test?
You and your partner’s gross income from all sources could include any of the following.
- Any employment income you may have received (excluding the $300 fortnightly work bonus mentioned earlier in this article).
- Any investment income you may have received, including any pension income stream from your super fund, as well as rental property income and share dividends. It’s important to note that Centrelink uses a deeming rate to assess the potential return you’ll get from different types of investments you may have, regardless of whether you actually earn that rate or not.
- Any voluntary super contributions that you may make (or that an employer may make on your behalf that is in excess of the 10% superannuation guarantee). These payments are known as reportable super contributions and are treated as income for the purposes of assessing your eligibility for the Age Pension under the income test. That’s because they are taxed at the concessional super rate of 15% and you can claim them as a tax deduction.
- Any income you may have received from being a sole trader or a partner in a business.
- Certain types of lump sum payments you may have received (for example, leave payments, distributions from family trusts, royalty payments, or severance/redundancy payouts).
If any of the income you or your partner has received is from overseas sources, the amounts will be converted to an equivalent Australian dollar value using current exchange rates.
What is not included in the Age Pension income test?
Income that isn’t assessed as part of the Age Pension income test includes:
- Most government payments
- Regular payments from close relatives
- Some lump sums (such as one-off super payments, gifts, inheritances, insurance payouts, lotto prizes and gambling wins).
What if your income changes?
If you’re receiving the full or part Age Pension, you need to inform Centrelink of any changes to you or your partner’s income within 14 days. This includes both increases and decreases to your income.
Centrelink will then reassess your correct Age Pension entitlement. If you’ve been overpaid the Age Pension since your income has increased, you’ll be required to repay the excess amount. On the other hand, if you’ve been underpaid, you’ll be reimbursed.
You may also be required to confirm your earnings with Centrelink every 14 days to make sure you’re continuing to be paid the right Age Pension amount.
Means test treatment of lifetime annuities
From 1 July 2019 changes to the means testing of lifetime annuities for the purposes of determining Age Pension entitlements came into force. It’s a complex calculation so you may need independent financial advice.
Defined benefit super pensions
If you’re one of the estimated 10% of Australians receiving a defined benefit super pension, 10% of that income is excluded from the Age Pension income test.
How the income and assets tests work together
If you reach the threshold limits in both the income and assets tests, your pension will be based on the lower amount. For example, if you are eligible for $400 a fortnight according to the assets test, and $500 a fortnight under the income test, then the $400 a fortnight test will apply.
Does a mortgage reduce deemed income?
Q: I have my own home, but with a $200,000 mortgage on it. I also have $375,000 invested in shares. Does the income test assess the deemed income on $375,000 or does it reduce by the home mortgage amount and assess the deemed income on $175,000?
Jacie Taylor, an independent financial adviser from Periapt Advisory in Adelaide, answers our reader question:
The value of the financial assets for deeming purposes in the income test cannot be reduced by the mortgage on the principal place of residence. It seems like you are conflating the issues of assessable assets under the asset test and the value of investments under the income test.
Furthermore, under the assets test, just as the value of a person’s home is not counted, neither are any loans secured against the residence. This means when a person or a couple use their home as security for an investment loan, the full value of the investments are counted under the assets test and not the net value after deducting the loan balance.
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