Income and Assets Test Explained

Understanding the Income and Assets Test for the Australian Age Pension

For most older Australians, the Age Pension is a critical support for living costs in retirement. But to qualify, you must meet strict eligibility requirements — and a big part of that is the means test, which includes both an Income Test and an Assets Test.

This comprehensive guide explains how Centrelink calculates what you earn and what you own, what’s included and exempt, how thresholds are set, and what this means for your pension payment. Knowing how these tests work will help you plan your finances and make the most of your retirement entitlements.

What Is the Means Test?

The means test ensures that the Age Pension is paid to those who genuinely need it, based on their financial situation.

It’s made up of two parts:

• Income Test: Assesses your ongoing income from all sources.
• Assets Test: Looks at the value of what you own (your assets).

Centrelink works out your payment under both tests, then uses whichever test results in the lower pension amount.

The Income Test Explained

The Income Test includes money you receive from work, business, investments, and some pensions from overseas. To simplify things, Centrelink uses a system called deeming for financial investments — instead of assessing the actual interest you earn, they assume a set rate of return.

What Income Is Counted?

Common sources of income that count under the Income Test include:

• Salary or wages
• Business income
• Income from real estate you rent out
• Deemed income from savings, shares, managed funds, and term deposits
• Income from superannuation income streams (pensions and annuities)
• Overseas pensions
• Fringe benefits if you’re still working

What Income Is Not Counted?

Some amounts are exempt from the Income Test:

• Your principal home is not included
• One-off gifts or windfalls (but larger gifts can count under the Assets Test)
• Some compensation or insurance payments
• Certain payments to a partner who does not get a pension

Deeming Rules

Centrelink assumes your financial investments earn a certain rate of return — even if you earn less (or more) in reality. This is called deeming.

Current deeming rates (as of 2024–25) are:

Situation	Deeming Rate	Threshold
Singles	0.25% up to $60,400, 2.25% above that	$60,400
Couples	0.25% up to $100,200, 2.25% above that	$100,200

Centrelink applies these rates to the total value of your financial investments to estimate your income.

Income Test Thresholds (2024–25)

There are limits for how much you can earn before your pension payment reduces:

Situation	Fortnightly Income for Full Pension	Cut-off Point
Singles	Up to $204	$2,444.60
Couples	Up to $360	$3,737.60

Above the free area, your pension reduces by 50 cents for each $1 you exceed it (or 25 cents each for couples).

The Assets Test Explained

The Assets Test looks at the value of what you own. Your family home is exempt, but almost everything else is included.

What Assets Are Counted?

Countable assets include:

• Real estate (excluding your principal home)
• Bank accounts
• Shares and managed funds
• Superannuation (once you reach Age Pension age)
• Vehicles, boats, caravans
• Household contents
• Business assets
• Overseas assets

What Assets Are Exempt?

• Your principal home
• Some funeral bonds and prepaid funeral plans
• Special disability trusts up to a limit

Assets Test Limits (2024–25)?

To receive the full pension, your assets must be below these thresholds:

Situation	HomeOwner	Non-HomeOwner
Singles	$ 301,750	$ 543,750
Couples	$ 543,750	$ 693,500

If your assets exceed these thresholds, your pension reduces by $3 per fortnight for every $1,000 over the limit.

How the Tests Work Together

Both the Income Test and Assets Test are applied to your situation. Centrelink will pay you the lower of the two results.

This means that even if you pass the Income Test, your Assets Test might limit your pension — or vice versa. It’s important to check both when planning your finances.

Gifting Rules

You can’t simply give away assets to meet the limits. Centrelink allows limited gifting without penalty:

• Up to $10,000 per financial year
• Up to $30,000 over five financial years

Anything above this is treated as if you still own it for five years.

Special Assets: Granny Flat Rights

If you pay money for a lifetime right to live in someone else’s home (a ‘granny flat arrangement’), the money you pay may be exempt from the Assets Test — but strict rules apply. Always seek advice.

How to Report Income and Assets

When applying for the Age Pension, you must declare:

• All sources of income
• All countable assets

Once you’re on the pension, you must report any changes. This includes:

• New work or business income
• Changes to investment values
• Purchasing or selling property
• Inheritance or large gifts

Failing to report changes can lead to overpayments, debts, or fines.

Strategies to Maximise Your Pension

Here are some legal and well-proven ways to manage your income and assets:

• Use exempt assets like your home to add value (e.g. home improvements).
• Prepay funeral expenses within the allowable limits.
• Make appropriate gifts within the annual and five-year caps.
• Seek advice about structuring income streams to reduce assessable income.
• Consider special disability trusts if caring for a disabled family member.

Reviews and Updates

Your income and assets will be reviewed regularly. Centrelink may cross-check your information with other agencies like the ATO or banks. Keeping good records is essential.

Where to Get Help

Managing the means test can be complex. It’s worth getting professional guidance:

• Contact Centrelink’s Financial Information Service (FIS) — it’s free.
• Speak with a financial adviser specialising in retirement planning.
• Use the online calculators at Services Australia to estimate your payment.

Final Thoughts on the Income and Asset Test

Understanding the Income and Assets Test is key to getting the most from your Age Pension. Small changes in how you manage money and property can make a big difference.

Take the time to check what’s included, plan ahead, and get help if you need it — so you can make the most of your entitlements and retire with confidence.