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Understanding the Age Pension Assets and Income Tests in Australia

Published 10/10/2024 | Last Updated 10/10/2024

Written by:
Joel Simmonds
Head of Advice  

If you’re planning for retirement or already enjoying it, the age pension can be a lifeline to help cover your living expenses. But understanding how Centrelink calculates your payments can be a bit like navigating a maze.

The two key tests that determine your eligibility — the assets test and the income test — are worth getting to know, because their outcome will determine how much pension you’re entitled to receive. So, let’s break them down in a way that makes sense!

Table of Contents

What Is the Age Pension Assets Test?

The age pension assets test is basically Centrelink’s way of checking out what you own and determining how it might impact your pension payments.

It’s not just about cash in the bank; it includes everything from investment properties to your car, shares, and even collectibles. But don’t worry—your family home isn’t included.

How the Assets Test Affects Your Pension

Here’s the deal: if you’ve got assets beyond a certain threshold, your pension payments can be reduced. The more you own (excluding your main residence), the less you might receive.

  • Thresholds and Limits: The cut-off points are different depending on whether you’re single or part of a couple, and whether you own your home. Staying under these limits can mean a full pension, while going over means a reduced payment.
  • Every Dollar Counts: For every $1,000 that you go over the threshold, your pension drops by $3 every fortnight.

Quick Look at the Current Assets Test Limits

As of 2024, the assets test limits vary depending on your living situation and whether you are single or part of a couple. Here’s a summary:

  • Single Homeowners: Asset limit up to $280,000 for the full pension.
  • Single Non-Homeowners: Asset limit up to $504,500 for the full pension.
  • Couple Homeowners: Combined asset limit up to $419,000.
  • Couple Non-Homeowners: Combined asset limit up to $643,500.

For a part pension, the asset limits are a bit higher:

  • Single Homeowners: Up to $634,750.
  • Single Non-Homeowners: Up to $859,250.
  • Couple Homeowners: Up to $954,000 combined.
  • Couple Non-Homeowners: Up to $1,178,500 combined.

If your assets are above these limits, you’ll see a reduction in your pension payments. Keep an eye on those numbers to avoid surprises!

Full Pension Asset Limits

  • Single Homeowners: Asset limit up to $301,750 for the full pension, with payments reducing if assets exceed this amount.
  • Single Non-Homeowners: Asset limit up to $543,750 for the full pension.
  • Couple Homeowners: Combined asset limit up to $451,500.
  • Couple Non-Homeowners: Combined asset limit up to $693,500.

The value of your assets is assessed to determine how much pension you can receive.

If your assets exceed these limits for the part pension, you may no longer be eligible for age pension payments. 

How the Age Pension Income Test Works

Now, let’s chat about the income test. This test looks at any money you’ve got coming in regularly — think earnings, investment returns, or even rental income. Centrelink uses this to decide how much pension you’re eligible for.

How the Age Pension Income Test Works

Centrelink adds up your regular income and if you earn above a certain amount, your pension payment gets trimmed.

  • Free Pass: The first $204 per fortnight for singles and $360 for couples is income Centrelink ignores—this is known as the “income free area.”
  • Beyond the Free Pass: After this, your pension drops by 50 cents for every dollar you earn over the limit if you’re single, and 25 cents for each dollar for couples.

Income Test Thresholds for 2024

Here’s a quick summary of where the cut-offs stand:

  • Single Pensioners: Full pension if your income is below $204 per fortnight; part pension if income is below $2,332.80 per fortnight.
  • Couples (Combined): Full pension if income is below $360 per fortnight; part pension if income is below $3,570.40 per fortnight.

Exceed these limits, and your pension gets adjusted. So, managing your income is just as crucial as managing your assets.

How the Income and Assets Test Work Together

Centrelink looks at both the income and assets test and uses whichever results in a lower pension payment. It’s their way of balancing things out, but it means you’ll need to keep both tests in mind when managing your finances.

Tips for Getting the Most from Your Pension

  • Think About Asset Reduction: Things like gifting within Centrelink’s allowed limits or pre-paying your funeral expenses could help you stay below the asset threshold.
  • Consider Income Strategies: Products like annuities might help you balance your income levels and avoid hitting that income limit.

Important Things to Know About the Age Pension

Life happens, and big events can throw a wrench into your pension plans. Here’s a look at how certain scenarios might affect your payments and what you can do about it.

Selling Your Home and the Age Pension

Thinking about downsizing or relocating? Here’s what you need to know:

  • Sale Proceeds: When you sell your home, Centrelink counts the proceeds as assets, which might reduce your pension. But if you plan to buy a new home, those funds can be exempt for up to 12 months — giving you some breathing room.
  • What If You Have Surplus Funds? If you don’t put all the proceeds into a new home, the extra cash might affect your pension. So, plan wisely!

How Superannuation Affects Your Pension

Once you hit pension age, your super balance counts toward the age pension assets test. Plus, any income you draw from it is part of the income test.

  • Smart Super Withdrawals: Take care with how much you withdraw at a time to avoid impacting your pension payments.
  • Lump Sums vs. Regular Withdrawals: Both types of withdrawals affect your pension differently, so consider what’s right for your needs.

Can You Get a Home Loan on the Pension?

Yes, it’s possible — but it can be a bit tricky. Lenders will look at your age pension as part of your income, and they’ll want to be sure you can make the repayments.

  • Challenges with Lending: Being older or having a limited income can make banks cautious.
  • Things to Consider: Selling your home or using it as security could affect your pension, so it’s worth chatting with a financial planner first.

Downsizing Without Losing Your Pension

If you’re selling up and moving somewhere smaller, you might end up with extra funds. But those could be counted under the assets test.

  • Impact on Pension: If the surplus funds aren’t used for a new home quickly, they’ll count towards your assets.
  • Managing Your Extra Cash: You might look at investing in annuities or other exempt assets to keep your pension intact.

Calculating Your Pension: Tools and Resources

Understanding your potential pension entitlement can be made easier with online tools like the age pension assets test calculator. These calculators allow you to input your assets and provide an estimate of your pension payments.

  • Online Calculators: Centrelink’s website offers a calculator to help you assess your eligibility.
  • Consulting a Financial Advisor: A financial advisor can provide personalised guidance, ensuring you make the most of your assets while retaining eligibility for the age pension.

How Superannuation Affects the Age Pension

One common question is how superannuation is treated under the assets test. Your superannuation balance becomes assessable once you reach age pension age, meaning it can affect your pension payments.

  • Superannuation Balance: Lump sums and income streams from superannuation are included in the assets test.
  • Impact on Pension: Higher super balances can reduce your age pension, so it’s essential to plan for this transition.

Special Considerations for the Age Pension

Navigating the age pension system can be complex, especially when specific life events or circumstances come into play. Here are some situations that could impact your age pension entitlements and what you need to be aware of:

Selling Your Home While Receiving the Age Pension

Selling your home can impact your pension entitlements, as the proceeds are considered an asset under the age pension assets test. If you plan to downsize and have leftover funds from the sale, these surplus amounts might reduce your payments.

  • Exemption Period: If you intend to buy another home, the sale proceeds may be exempt from the assets test for up to 12 months, provided the funds are set aside for the new purchase. However, if the purchase takes longer than expected, Centrelink might review your situation, potentially affecting your pension.

How Superannuation Affects the Age Pension

Once you reach age pension age, your superannuation is treated as an asset. This includes both lump sums and income streams, and it can impact your age pension eligibility under the assets test.

  • Assessable Superannuation: Super balances are included in the age pension assessable assets calculation, so they may reduce your payments if you have significant funds in superannuation or other investments.

Seeking a Home Loan as an Aged Pensioner

It’s possible for aged pensioners to secure a home loan, but there are additional challenges to consider. Lenders will assess your age pension income and other financial assets to determine your ability to repay the loan.

  • Challenges with Borrowing: Banks typically look for income stability and repayment capacity, which can make securing a loan more difficult for pensioners. Centrelink age pension selling home considerations might also come into play when evaluating your borrowing capacity, so it’s crucial to seek tailored financial advice.

Downsizing or Relocating and Its Impact on Your Pension

If you decide to downsize, any leftover funds from selling your home could affect your pension entitlements. These funds are typically counted under the pension asset test unless reinvested into a new primary residence promptly.

  • Managing Surplus Funds: Surplus funds can impact your age pension payments if they exceed Centrelink’s limits. It’s important to have a strategy in place for managing these funds to ensure your pension entitlements are not negatively affected.

Need Help with Your Pension Plans?

Understanding the age pension assets test is crucial for maximising your pension entitlements.

By knowing how your assets are assessed and what exemptions may apply, you can plan your retirement more effectively. Whether it’s managing superannuation, understanding the implications of selling your home, or seeking advice on complex situations, a well-informed approach can help you make the most of your pension benefits.

If you’re unsure about your situation or need personalised guidance, consulting with a financial advisor can provide clarity and help you optimise your assets for a more secure retirement.

Click here to learn more about our Retirement Planning Services.

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FAQs About Aged Pension Assets Test

Here’s some of the most commonly asked questions about the aged pension assets test.

If your question isn’t answered below, please feel free to get in touch. We’re always happy to help.

1. What Is the Seniors Pensioners Tax Offset?

The Seniors Pensioners Tax Offset (SAPTO) can help eligible senior Australians reduce their tax liability, potentially making them pay less tax or even none at all.

It’s especially useful for pensioners who receive the age pension, as it considers income from investments, pensions, and other sources.

This can be an important factor when calculating your overall retirement income alongside the income test.

2. How Does the Centrelink Age Pension Asset Test Work?

The Centrelink age pension asset test assesses the total value of your assets to determine your eligibility for pension payments.

If your assets exceed the asset test threshold, your pension payments may be reduced or stopped altogether.

The test is used alongside the income test to ensure that pension support is provided to those who need it most.

3. What Is the Asset Threshold for the Age Pension?

The asset threshold refers to the maximum value of assets you can have while still being eligible for a full or part pension.

This threshold varies depending on factors like whether you are a single homeowner, a non-homeowner, or part of a couple.

Centrelink regularly updates these thresholds, so it’s a good idea to check the most recent information.

4. Can an Aged Pensioner Get a Home Loan in Australia?

Yes, aged pensioners can apply for a home loan in Australia, but it may be more challenging due to age and income considerations.

Lenders will look at your age pension, any other income, and your overall ability to repay the loan.

It’s best to speak with a financial advisor who understands the specific challenges and can help you navigate this process.

5. What Are the Exempt Assets for the Age Pension?

Certain assets are exempt from the age pension asset test. For example, your primary residence (your home) is not counted as an asset. Some types of prepaid funeral plans and specific types of annuities may also be exempt.

Understanding which assets are included or excluded can help you better plan for your retirement and maximise your age pension entitlements.

6. How Much Assets Can You Have Before Losing the Pension?

If your assets exceed a certain limit, you may lose your eligibility for the age pension or see your payments reduced. This limit varies depending on whether you are single or part of a couple, and whether you own a home or not. It’s crucial to keep track of your asset value to ensure you remain eligible.

7. How Does the Income & Assets Test for the Aged Pension Work Together?

Centrelink combines the results of the income test and the asset test to determine your pension payment rate. Whichever test results in a lower pension payment is the one that will be applied.

This means it’s important to understand both how your income from investments affects your pension and how your assets are valued under the assets test.

8. What Are the Maximum Assets for Full Pension Eligibility?

To qualify for the full age pension, your assets must fall below specific thresholds, which differ for single homeowners, non-homeowners, and couples.

If your assets are above these limits, you may still receive a part pension, depending on how far above the threshold you are.

Please see the figures above for guidance. 

9. Is Superannuation Counted as an Asset for the Pension?

Yes, once you reach age pension age, superannuation is considered an assessable asset under the age pension assets test. The value of your super balance can impact your age pension payments, particularly if you have significant super savings. It’s important to factor this into your retirement planning to ensure you maximise your pension benefits.

10. How Does Selling My Home Affect My Pension?

When you sell your home, the proceeds may be counted as an asset if not reinvested into a new home within a specific timeframe. The funds from the sale are exempt for up to 12 months while you find a new residence, but any leftover funds may impact your pension entitlements under the asset test once that period is over.

11. What Is the Maximum Asset Threshold for a Full Age Pension?

The asset threshold for receiving a full pension varies based on whether you are a homeowner or non-homeowner, single or part of a couple.

For example, single homeowners typically have a lower threshold than non-homeowners due to the value of their primary residence being excluded. Exceeding the asset threshold means you may only qualify for a part pension or none at all.

12. What Should I Know About Centrelink's Income Test for the Aged Pension?

The income test looks at money you earn from sources like investments, rental properties, and part-time work. This test affects your pension payments if your income exceeds certain thresholds. For every $1 you earn over the threshold, your pension payment is reduced by a specific amount per fortnight, impacting the final payment you receive.

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