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.

7. 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.

8. 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