The Age Pension income test
The Age Pension is an income support payment to help eligible older Australians afford their basic living expenses in retirement.
To qualify, you need to be of pension age (currently 66 years and 6 months), satisfy Australian residence rules and meet the income and assets tests.
The below is a brief overview of what the Age Pension income test is, what’s included and limits. See our article on the Age Pension assets test for more on assets. The rules can be complex, and we encourage you to seek personal advice from either a qualified financial adviser or Centrelink.
What is the income test for the Age Pension?
Your income is one factor that determines whether you’re eligible for an Age Pension, and how much you may receive.
Income above a certain threshold may mean you’re either not eligible for a pension or you’re only eligible for a part pension.
What counts as income?
When you claim the Age Pension, you’ll be asked if you receive any of the following types of income related to employment or self-employment:
- wages, penalty rates and overtime
- fringe benefits
- amounts you salary sacrifice.
Additionally, you’re asked if you receive any of the following income types:
- real estate income (this may be from a rental property you own, or if you rent out space in your home to a lodger)
- deemed income from financial investments. (It may not be the actual income)
- deemed income from money in your super fund if you’ve reached Age Pension age
- reportable super contributions
- income from a farm
- income from a sole trader or partnership business
- private trust or private company dividends or distributions
- certain lump sums (see the Lump Sums page on Services Australia for more detail)
- certain types of income specific to Indigenous Australians, such as Native Title claim payments, consultancy fees, royalties and more.
Is income from overseas counted?
Yes. Any income from overseas is included, and exchange rates are applied to calculate the value of that income.
What income is exempt?
Centrelink lists the following examples of income that is not included in the income test:
- rent assistance from government
- most Centrelink payments - these may still count in the Family Tax Benefit income test
- compensation for loss or damage to things you own
- child support - this may still affect your Family Tax Benefit Part A
- any free board and lodging you get
- regular payments from a close relative
- emergency relief or similar assistance
- payments as a victim of National Socialist persecution
- First Home Saver Account withdrawals or interest
- repayment for expenses
- some allowances if you spend the whole amount on what it’s meant for, for example, work travel
- payments through a National Disability Insurance Scheme package
- some lump sums
- equity or merit based scholarships below $8,355 per year.
How your income may reduce your Age Pension
If you receive the Age Pension, but aren’t working, income above $180 per fortnight will reduce your pension by 50 cents for every dollar above $180 (or $320 for couples living together, or apart due to ill health). For transitional rate pensioners, it is 40 cents for every dollar above $180.
This changes if you’re at the eligible Age Pension age and still working as you’ll receive the Work Bonus. With the Work Bonus you can earn up to $300 per fortnight through eligible work, without your pension being reduced.
Age Pension income cut off points
If your income exceeds a certain threshold, your Age Pension cuts off.
Fortnightly income cut-off points are:
- Singles: $2,115.00
- Couples (living together): $3,237.20 combined
For Transitional rate* pensioners, fortnightly income cut-off points are:
- Singles: $2,198.25
- Couples (living together): $3,576.00 combined
*Transitional rates apply to those who commenced receiving part pensions on 19 September 2009 or prior.
The government usually updates the income limit every March and September. This figure is accurate as at 20 September 2021.
It’s your responsibility to accurately report income when you apply for an Age Pension.
If you receive the pension and your income changes, you must also report changes via the myGov website. This includes reporting any gifts you receive, and updating details of savings, shares, managed investments, income streams, real estate and other assets.
If you own a business or rental property, you’ll need to provide an income tax return and/or profit and loss statement.
Planning for your retirement
It’s a good idea to plan early when it comes to retirement. If you’re thinking about income streams in retirement, consider visiting our Retirement Planning page. We have useful tools available to help, including:
- A pension income calculator, that may help you figure out what your pension income could be in retirement