How to maximise your Age Pension

The most significant change came at the start of 2016 with the rebalancing of the assets test measures. The majority of Age Pensioners saw a significant decrease in their pension rate or a complete loss of pension entitlements.

As a result, we’re now expected to utilise more of our own savings to fund retirement as opposed to the pension providing the bulk of retirement income.

The bigger picture

For every $10,000 of assets above the allowable threshold, your pension rate reduces by $780 per year, or $390 per year each if you’re a couple. This means the lower your assessable assets, the more pension you’re going to receive.

Unless stated otherwise, the dollar figures in this article are calculated at $780 per $10,000. That is the rate for a single person, and also the combined rate for a couple, which works out at $390 each.

One important qualification applies to everything that follows. Your pension is worked out under both an assets test and an income test, and you are paid under whichever gives the lower result. Reducing your assessable assets only increases your pension if you are assessed under the assets test. If the income test is the one reducing your payment, cutting assets may make no difference at all.

Careful restructuring of your assets can provide a welcome boost to your rate of Age Pension, but it’s important to remember that $10,000 is always worth more than $780. I’ve come across many clients who are hyper focused on maximising their pension entitlements to the detriment of their overall financial position. The takeaway is – it’s important to look at the bigger picture.

Let the Age Pension do the heavy lifting

The more work your pension does, the less you’ll eat into your retirement savings. This is important because a challenging investment market and increased life expectancies have made it difficult to know whether your retirement savings are likely to last the distance.

There are many strategies you can employ to ensure you’re making the most of your Age Pension, and I’ll go through a selection of options that may assist.

If you’re receiving the maximum rate of Age Pension, then Centrelink can’t pay you more. These tips work best for those on a part pension or those who are not receiving anything at all but could restructure to become eligible.

12 tips to maximise your Age Pension

1. Correct your asset valuations

It’s important that you correct the values of your assets, such as bank accounts, investments, cars and home contents regularly. It’s a common misconception that Centrelink will update your assets for you – this is not the case. Most of your assets depreciate over time, which provides an opportunity to increase your pension.

The most common mistake I encounter is overvaluing cars and home contents. As a guide, a fair valuation of home contents is $10,000 for couples and $5,000 for singles. Centrelink requires second-hand value, not replacement or insurance value. It may be useful to imagine you have to sell all your home contents in a garage sale, and how much cash that might raise. Reducing your asset valuations by $10,000 could see a potential increase of $780 per year in pension.

2. Find more payments

Currently Centrelink has over 50 payments and supplements available. You won’t be able to claim them all, but just finding out where to start can be hard.

This is where you need to use the payment finder. The payment finder on the Centrelink website acts like a funnel – you enter your personal information and it provides a list of your potential entitlements. There are some weird and wonderful payments you’ve probably never heard of that make the list, but nothing ventured, nothing gained!

I’ve seen clients missing out on over $10,000 per year of payments because they, like most of us, are unaware of the myriad of payments available. By obtaining the Carer Allowance, Rent Assistance or Essential Medical Equipment Payment, for example, you could increase your retirement income by thousands of dollars each year.

3. Pay down debt

The benefit of paying off debt can be two-fold – you can save interest and increase your pension.

As you may be aware, Centrelink counts the value of your bank balance towards the assets test, but doesn’t reduce your assets by your debt – except for investment debt. By paying off your credit card, personal loan, home loan or any other debt, you will reduce the value of your assessable assets and boost your rate of pension. For example, paying off $50,000 of debt could increase your pension by $3,900 per year.

One asset people often overlook is cash held in a mortgage offset account. By using that cash to pay down your mortgage (the family home is not included in the assets test), you could potentially reduce your assessable assets substantially.

4. Lifetime annuities

The legislation around lifetime annuities and other lifetime income products, which are designed to pay regular retirement income for as long as you live, changed on 1 July 2019. These products now receive concessional treatment under both the assets test and the income test. Below are a couple of examples of the advantages they can offer.

• A $100,000 investment into a lifetime annuity will only count as a $60,000 asset immediately, because only 60% of the purchase price is assessable. Compared with holding the same amount in cash, that is a $40,000 reduction in assessable assets, or $3,120 per year in extra pension.
• When you turn 84 or when five years have passed after you purchased the product – whichever comes last – your annuity’s assessable value falls to just 30% of the purchase price. On a $100,000 purchase that is a further $30,000 reduction in assessable assets, worth another $2,340 per year.
• Under the income test, only 60% of the payments you receive from the product are counted as income.

5. Shift savings to a younger spouse’s super

Superannuation in the accumulation phase is ‘quarantined’ from Centrelink assessment until the member reaches Age Pension age. This creates an opportunity where one of you is Age Pension age and the other is not. Note that the exemption only applies while the money stays in accumulation. If your younger spouse starts an income stream before reaching Age Pension age, the balance becomes assessable immediately.

By using the ‘bring-forward rule’, you can contribute up to $390,000 into your spouse’s super account in a single year. To use the full amount in 2026-27, your spouse needs to be under 75 and their total super balance on 30 June 2026 must have been below $1.84 million. Between $1.84 million and $1.97 million the limit is $260,000 over two years.

Moving $390,000 out of the assessable environment and into your younger spouse’s exempt super account can increase a couple’s combined Age Pension by up to $30,420 per year. That is $15,210 each (39 x $390).

While this is a popular strategy, you should weigh up the benefits against what is being given up. For example, by putting $390,000 into a pension account and withdrawing the minimum 5% per year, you would receive tax-free income of $19,500. Depending on the age of your younger spouse, any money you contribute to their super may not be accessible for years.

6. Gifting

Centrelink allows you to gift up to $10,000 per financial year and a maximum of $30,000 over a five-year rolling period. Your generosity may provide a potential extra $780 per year in Age Pension. If you gift $10,000 per year over three separate financial years, you could see an increase of up to $2,340 per year in Age Pension.

An important thing to consider with gifting is timing. Centrelink assesses gifts for five years from the date they are made. A gift made more than five years before you reach Age Pension age will not be assessed when you claim.

Gifts above the $10,000 and $30,000 limits are still treated as deprived assets during those five years, and are deemed to earn income. For someone not yet receiving a pension, that has no practical effect once the five years have passed.

For example, a single person who gifts $300,000 more than five years before reaching Age Pension age could see a pension increase of up to $23,400 per year (30 x $780), assuming their assets would otherwise have reduced their pension by at least that much. For a couple the same gift produces up to $23,400 combined, or $11,700 each.

7. Structure your investment loans correctly

Your principal home is exempt from Centrelink assessment, so any loans secured against it can’t be utilised to reduce your assessable assets.

By comparison, any loans secured against your investment assets (loans used for the purpose of investing) can reduce the assessable asset value of the investment.

For example:

• A $500,000 investment property minus a $200,000 loan secured against your principal residence equals a $500,000 assessable asset.
• A $500,000 investment property minus a $200,000 loan secured against the investment property equals a $300,000 assessable asset.

By structuring your loans to your advantage, your Age Pension could increase by $15,600 each year in this scenario (20 x $780).

8. Pre-pay your funeral or purchase a funeral bond

Prepaying your final expenses can be a way to reduce your assessable assets and increase your Age Pension. There is no limit to the amount you can pay for a prepaid funeral or burial plot.

The allowable limit for funeral bonds is $16,250 from 1 July 2026 (reviewed on 1 July each year). Investing this amount could increase pension entitlements by up to approximately $1,268 per year.

Two points to watch. You can hold up to two eligible bonds, but if their combined value exceeds the allowable limit the full amount becomes assessable, not just the amount above the limit. And if you have already prepaid a funeral for the same person, funeral bonds are not exempt.

9. Special Disability Trusts

Special Disability Trusts provide for the care and accommodation needs of a family member with a severe disability.

Benefits include:

• Eligible immediate family members can contribute a combined total of up to $500,000 into the trust without this being counted towards Centrelink’s gifting rules. Conditions apply, including that contributors are of Age Pension age or qualifying age for their payment.
• Better still, the assets held within the trust are exempt for the principal beneficiary (up to $862,750 from 1 July 2026, reviewed annually on 1 July), meaning that it will not affect their rate of Disability Support Pension.
• By contributing $500,000 to a Special Disability Trust, a couple could go from no pension entitlement to the full rate of pension, which is $47,070 per year combined. Singles could also increase their payment to the maximum, which is $31,223 per year.

10. Lump sum payment of expenses in advance

Spending money on things like holidays, home improvements, rent or other lump sum costs is a way to reduce your bank account and increase your pension. Centrelink allows you to prepay lump sum costs up to one year in advance. Prepaying a $10,000 holiday one year in advance has the potential to increase your pension by $780 for the year.

11. Work to top up your pension

Changes to the work bonus incentive in recent years have made it possible for Age Pensioners to earn more income from employment before their pension reduces.

An eligible pensioner can earn $300 per fortnight of employment or business income and this will not count towards the income test.

The good news is that if you do not use the $300 per fortnight available, then it banks into your ‘work bonus balance’. This is great for those with lumpy incomes, for example, exam supervisors, Santa at Christmas and electoral officers.

Even better news is that, as of December 2023, all Age Pension recipients were granted a one-off $4,000 boost to their work bonus balance, meaning it takes even longer for employment income to affect their rate of pension.

By using your full $300 per fortnight of work bonus ($7,800 per year) plus the $4,000 starting credit, you could earn $11,800 in your first year without affecting your rate of Age Pension. The $4,000 is a one-off credit, so in later years the shielded amount is $7,800 per year unless you have banked unused work bonus. Each member of a couple has their own work bonus, so for a couple that is $23,600 in the first year and $15,600 per year after that.

12. Granny flat or life interest arrangements

A granny flat or life interest arrangement is the agreement to accommodate someone for the remainder of their life in return for a lump sum payment, asset or transfer of real estate.

The amount that’s paid towards the life interest arrangement may be exempt in full (depending on a reasonableness test calculation), meaning you could reduce your assessable assets significantly by purchasing your accommodation for the remainder of your life.

This is a popular strategy for pensioners who would like to downsize and live close to their adult children to ensure that their future care needs are covered.

The reasonableness test multiplies the combined annual partnered pension rate ($47,070 from 20 September 2026) by a conversion factor based on your age next birthday. For a 69-year-old the factor is 17.36, so up to $817,142 could be contributed towards a life interest and be exempt from Centrelink assessment. This could mean the difference between getting no pension and a full Age Pension.

Finally: Seek professional advice

This isn’t an exhaustive list of all options available to increase your Age Pension entitlements. Everyone’s financial situation is different and it’s vitally important to seek personal financial advice to achieve your own goals and objectives.