Age Pension Assets Test and Income Test Explained (2025-26)

For everyday Australians, planning for retirement is one of the most important financial milestones of a lifetime. The Australian Government Age Pension, administered by Services Australia (Centrelink), acts as a crucial safety net for hundreds of thousands of retirees. But securing your entitlements requires navigating a rigorous means-testing process built around two separate tests: the Assets Test and the Income Test.

Because thresholds are regularly indexed (on 20 March, 1 July, and 20 September each year), staying current with 2025-26 figures is vital to ensure you receive every dollar you're entitled to.

1. Who is Eligible for the Age Pension?

To qualify in 2025-26 you must:

• Be aged 67 or older
• Be an Australian resident for at least 10 years (with at least one continuous period of 5 years)
• Pass the Assets and Income means tests

Certain exemptions apply for refugees and people covered under Australia's international social security agreements.

2. The Assets Test (2025-26 Thresholds)

The Assets Test measures the net market value of what you own. For every $1,000 of assessable assets above the full pension threshold, your fortnightly pension reduces by $3.00.

What's Included in the Assets Test

• Superannuation (once you reach Age Pension age of 67)
• Shares, managed funds, term deposits, and cash
• Investment properties and holiday homes
• Business assets, vehicles, caravans, and boats
• Gifts exceeding $10,000/year or $30,000 over a rolling 5-year period (counted as your assets for 5 years from the date of the gift)

What's Excluded from the Assets Test

• Your principal home (up to 2 hectares on the same title) - 100% exempt
• A younger spouse's super in accumulation phase (if they're under Age Pension age)
• Prepaid funeral bonds (up to government limits)

Full Pension Asset Limits (Asset-Free Areas)

Part Pension Upper Cut-off Limits

Assets above the upper cut-off limit reduce your pension to $0.

3. The Income Test (2025-26 Thresholds)

The Income Test measures your fortnightly income from all sources. Once income exceeds the free area, your pension reduces by 50 cents per dollar (singles) or 25 cents per dollar each (couples).

4. How Deeming Works (With Examples)

For financial assets, Centrelink doesn't look at your actual returns. Instead it applies deeming rates - assumed rates of return that apply to your financial assets regardless of what they actually earn.

Current 2025-26 deeming rates:

• 1.25% on the first $66,800 (single) or $110,600 combined (couple)
• 3.25% on any amount above the threshold

5. Which Test Applies to You?

Centrelink calculates your pension under both tests separately, then applies whichever gives the lower result. Understanding which test limits you tells you where to focus your planning:

• Asset-tested: Focus on legitimately reducing assessable assets (home improvements, gifting within limits, etc.)
• Income-tested: Focus on managing financial asset levels and deemed income

6. The Work Bonus

Pensioners who continue working can earn up to $300 per fortnight from active employment without it affecting their pension. Unused amounts accumulate in a Work Bonus bank (capped at $11,800) and offset future employment income - ideal for casual or seasonal work.

Work Bonus Accumulation Example

If you earn nothing from employment for 6 months, your Work Bonus bank accumulates to $300 × 26 fortnights = $7,800. Then if you take a casual job paying $500/fortnight, only $0 is assessed for the first 15 fortnights (because $500 is within your accumulated $7,800 bank). After that, only $200/fortnight is assessed ($500 minus the $300 fortnightly exemption).

7. Gifting Rules and How They Affect Your Pension

Giving away assets to reduce your assessable assets below the thresholds is a common strategy, but Centrelink has strict gifting rules that limit how much you can give away without penalty.

The gifting limits for 2025-26 are:

• $10,000 per financial year — the maximum you can gift without it counting as a deprived asset
• $30,000 over a rolling 5-year period — the total maximum over any 5 financial years

Any amount gifted above these limits is counted as your asset (and subject to deeming) for 5 years from the date of the gift. After 5 years, the gifted amount is no longer counted.

Gifting can still be worthwhile — especially if you expect to be asset-tested and the gifted amount will push you below the cut-off threshold after 5 years. But the 5-year waiting period means it's a long-term strategy, not a quick fix.

8. Common Mistakes That Reduce Your Pension

• Not updating Centrelink when your circumstances change. If your assets or income change (e.g., you sell shares, receive an inheritance, or start working), you must tell Centrelink within 14 days. Failing to do so can result in an overpayment that you'll have to repay, plus potential penalties.
• Forgetting to report deceased estate income. If you're a beneficiary of a deceased estate, income from the estate may count towards your income test. Many pensioners don't realise this until Centrelink's data-matching catches it.
• Not understanding the principal home exemption boundary. Your principal home and up to 2 hectares on the same title are exempt. If your property is larger than 2 hectares, the excess land IS assessable. This catches many rural pensioners by surprise.
• Overlooking the Work Bonus. If you're working part-time and not claiming the Work Bonus, you may be receiving less pension than you're entitled to. The Work Bonus is not automatic — you need to tell Centrelink you're working.
• Withdrawing super to reduce assets. Withdrawing a lump sum from super and gifting it doesn't reduce your assessable assets — the gift is subject to the gifting rules, and the withdrawn amount may still be assessed as a deprived asset for 5 years.

9. Age Pension Payment Rates (2025-26)

The maximum Age Pension rates as of 20 March 2025 (indexed again on 20 September 2025) are:

Rates are indexed twice a year (March and September) in line with the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI), whichever is higher. Supplements (Pharmaceutical Allowance, Energy Supplement) are included in the figures above.

10. How to Apply via myGov

Apply at myGov under Centrelink - Payments and Claims - Make a Claim - Age Pension. Start up to 13 weeks before your 67th birthday. You'll need: Tax File Numbers for you and your partner, bank account details, super statements, property valuations, and proof of identity and residency.

11. Tips to Legitimately Maximise Your Entitlements

• Pay down your mortgage or renovate your home - your principal residence is 100% exempt; cash in the bank is not
• Shift assets to a younger spouse's super - accumulation-phase super for under-67s is fully exempt from both tests
• Gift within the limits - up to $10,000/year or $30,000 over 5 years; any excess is still assessed for 5 years
• Explore lifetime income streams - some products receive highly favourable assets test treatment
• Consider prepaid funeral bonds - exempt up to government thresholds
• Apply early - claim up to 13 weeks before turning 67 to avoid missing payments