The Age Pension assets test, explained without the headache

A reader question we get constantly, in one form or another: “Mum has the house plus $450,000 in super and the bank. Will she get the pension?” Short answer, probably a decent part pension. Longer answer, it depends on two tests, and understanding them before retirement, not after, is worth thousands a year.

Two tests, worse one wins

To get the Age Pension you must be 67, pass residency rules, and then Centrelink assesses you under both an assets test and an income test. Each test produces a payment amount. You receive the lower of the two. Around the typical retiree's situation, home owned, super in the few hundred thousands, little other income, the assets test usually bites first.

What counts as an asset (spoiler: nearly everything)

Almost everything except the home you live in: super and account-based pensions (once you're 67), bank accounts, shares, investment properties at market value, cars, caravans, boats, and household contents. Two details trip people up. First, contents are counted at garage-sale value, not insured value; $10,000 is a common honest figure, yet people anxiously list $80,000 because that's what their insurance policy says. Second, the family home is exempt no matter what it's worth. A $3 million house in Mosman and a $400,000 unit in Wodonga are treated identically: not counted.

The free areas and the famous taper

Below the “free area” you can hold assets with no reduction at all. Here are the current figures (free areas set 1 July 2025, cut-off points current from 20 March 2026; both are indexed again on 1 July 2026):

Above the free area, the taper rate kicks in: the pension drops by $3 a fortnight for every $1,000 of extra assets. That's $78 a year per $1,000, which means assets in the taper zone need to earn 7.8% just to replace the pension they cost you. Very few safe investments do. This is the famous “taper trap,” and it's why a retiree couple with $700,000 can end up with barely more annual income than a couple with $500,000.

Assets in the taper zone need to earn 7.8% a year just to replace the pension they cost you.

The income test and deeming

The income test runs in parallel. A single pensioner can have $218 a fortnight of assessable income, or $380 combined for a couple, before the pension reduces by 50 cents in the dollar (those free areas rise slightly on 1 July 2026). Centrelink doesn't ask what your savings actually earn; it “deems” your financial assets to earn a set rate: 1.25% on the first slice and 3.25% above that, current from 20 March 2026 and reviewed again on 20 September 2026. You can track the latest on our data page. Beyond deemed income, things like rental income and overseas pensions count too. Wages, helpfully, get special treatment: the Work Bonus lets pensioners earn $300 a fortnight from work with no impact at all.

The legal moves (and the ones that end badly)

A few well-worn, perfectly legal strategies exist. Spending on the exempt home (the new roof, the bathroom renovation) converts counted assets into uncounted ones. Gifting is allowed but capped at $10,000 a year and $30,000 over five years; give more and the excess still counts against you for five years. If one member of a couple is under pension age, money in the younger partner's accumulation super isn't counted until they hit 67, which can be worth a lot for couples with an age gap. And funeral bonds and prepaid funerals are exempt up to a limit.

What doesn't work: hiding money, “lending” it to the kids with a wink, or undervaluing the investment unit. Centrelink data-matches with the ATO and land titles offices, and the penalties make the pension look cheap.

Before you apply

Claims can be lodged 13 weeks before you turn 67, and processing takes a while, so start early. Get your asset values honest and current, check both tests rather than assuming, and run a quick estimate with our Age Pension calculator. If your situation involves trusts, a business or recent gifts, a session with a financial adviser who knows Centrelink rules usually pays for itself several times over.