Age Pension income test rules (from September 2026)

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 fortnightly work bonus mentioned earlier in this article).
• Any investment income you may have received, including any deemed income from money in super funds if you have reached Age Pension age. Rental income from property investments will be assessed at its actual rate, whereas income from other investments (such as shares, super and bank deposits) will be assessed using Centrelink’s deeming rate of return, regardless of the actual amount of income received.
• Any income from a lifetime annuity or lifetime income product, but at a discounted rate. These payments are not deemed. Only 60% of what you receive is counted (see below).
• Any voluntary super contributions that you may make (or that an employer may make on your behalf that is in excess of the 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 and redundancy payouts).

If any of the income you or your partner have 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).

How lifetime annuities and lifetime income products are assessed

Lifetime annuities and the lifetime income products are treated differently from other investments under both means tests. The rules below apply to products bought after 1 July 2019.

• Under the income test, the payments you receive are not deemed. Instead, only 60% of each payment counts as assessable income. The other 40% is ignored.
• Under the assets test, only 60% of the purchase price counts until you turn 84, or for five years after you buy the product, whichever comes later. After that, only 30% of the purchase price is assessed. The assessed value is based on what you paid, not on what the product is currently worth, so it doesn’t change with investment returns.

Because both tests assess these products at a discount, moving part of your savings into a lifetime income product can increase your Age Pension entitlement. The trade-off is that the money is generally locked away for the rest of your life.

Different rules apply to annuities bought before 1 July 2019 and to some deferred products, and the calculation can be complex, 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.

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 may 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.

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 assets test and the value of investments under the income test.