What is the Age Pension income test?

The Age Pension forms an important part of many Aussies’ retirement income. However, there are caps on how much money you can earn before your pension payment will be reduced. In some cases, you may not be eligible to receive the pension at all.

The Age Pension is currently available to eligible Australians aged 66 and over, but this is increasing to 67 by mid-2023. To work out your eligibility for the Age Pension, as well as the amount you will receive, the government looks at your income and assets.

What is the income test?

The income test looks at how much money you get from employment, investments and other income sources. The test assesses both your and your partner’s income, if you have one. The outcome can determine whether or not you can receive the full or partial Age Pension.

There is also a separate assets test that looks at the value of what you own, such as your savings, investments and investment properties.

If your income or assets are above certain amounts, your pension payment will be reduced, or you may not be eligible to receive a pension at all.

How much money can I earn and still get the Age Pension?

A single person can earn up to $178 per fortnight and still be eligible to receive the full single pension of $952.70 per fortnight (including all supplements), at the time of writing, according to Services Australia, the government agency that administers the Age Pension. If a single person’s income goes over $178 per fortnight, the pension payment will reduce by 50 cents for each additional dollar. If a single person’s income reaches $2,083.40 a fortnight, they will not be eligible for the Age Pension.

A couple can currently earn up to $316 combined a fortnight and still be eligible to get the full couple pension of $1,436.20 per fortnight (including all supplements). If the couples’ income goes over $316 per fortnight, the pension payment will reduce by 50 cents for each additional dollar. If the couples’ combined income reaches $3,188.40 a fortnight, they will not be eligible for the Age Pension.

Different rules and rates may apply depending on your circumstances. For example, for couples who are living apart due to ill health or for transitional rate pensioners. Your cut off point will also be higher if you receive income from work and get the Work Bonus. We’ll explain this more below.

What does the income test consider?

Most types of income are counted in the income test, Services Australia says. It will look at your gross income, which is what you earn before tax or any other deductions. It includes income you earn from work such as:

• wages
• bonuses
• penalty rates and overtime
• commissions
• fringe benefits
• amounts you salary sacrifice.

It can also include income such as:

• real estate income, such as from a rental property
• deemed income from financial investments
• deemed income from money in your super fund/s if you have reached Age Pension age (currently 66, but increasing to 67 by mid-2023)
• income from a sole trader or partnership business
• income from a farm
• distributions or dividends from a private trust or private company
• reportable superannuation contributions
• some lump sums
• some types of income specific to Indigenous Australians
• paid parental leave payments.

What are deeming rules?

The government uses ‘deeming’ rules to work out how much income you receive from financial investments and your superannuation. Under these rules, the government assumes your financial assets earn a certain rate of income, rather than looking at what the assets have actually earned.

Deeming rates are set by the government. For singles, the government currently assumes that the first $53,000 of your financial assets earns 0.25% and anything above this earns 2.25%. For couples where at least one person gets a pension, the first $88,000 of your combined financial assets is assumed to earn 0.25% and anything over this is assumed to earn 2.25%.

Can I work and still get the Age Pension?

You may be able to work and still receive the Age Pension. The government’s Work Bonus increases the amount of income you can earn before your pension will be reduced.

Under the Work Bonus, the first $300 of fortnightly income from work is not assessed and is not counted towards the income test. This means that a single person can earn up to $478 a fortnight from work and still receive the full single pension payment.

For couples, the government says the Work Bonus applies on an individual basis and cannot be shared. However, the Work Bonus will affect your combined income. This means your partner may still benefit, Services Australia says.

All pensioners who are over Age Pension age are eligible for the Work Bonus if they have income from work. You can find out more information about the Age Pension and eligibility requirements on the Services Australia website.

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