The Age Pension income test explained

The income test is the second of the two means tests Services Australia applies to the Age Pension. It looks at the income you and your partner receive each fortnight, from work, investments, superannuation and other sources, and reduces your pension once that income goes above a free area. The assets test runs at the same time, and whichever test gives the lower amount is the rate you are paid.

How the income test works

Every fortnight of assessable income up to the free area has no effect on your pension. Above the free area, the pension reduces by 50 cents for every extra dollar of income. For a single person the free area from 1 July 2026 is $226 a fortnight, and the pension cuts out altogether at around $2,627.80 a fortnight of assessable income. Couples have a higher combined free area and cut-off, and the reduction is applied to their combined income.

Because the taper is 50 cents in the dollar, earning more never leaves you worse off overall. Each extra dollar above the free area still puts about 50 cents in your pocket until the pension cuts out completely.

What counts as income

• Employment income, including wages, salary, bonuses and most fringe benefits
• Deemed income from financial assets such as bank accounts, shares, managed funds and superannuation (see how deeming works)
• Defined benefit pensions and most other superannuation income streams
• Rental income from investment properties, after allowable expenses
• Foreign pensions and income from overseas
• Business income and some compensation payments

Note that for financial assets the actual interest or dividends are ignored. The deemed amount is what counts, which keeps the assessment simple and predictable.

The Work Bonus

If you are still working past Age Pension age, the Work Bonus lets you keep a portion of your employment income out of the income test. The first $300 of employment income each fortnight is disregarded, and unused amounts accumulate in an income bank, currently capped at $11,800, that can offset future earnings. The estimators on this site do not model the Work Bonus, so if you have wages, your actual rate may be higher than the estimate.

Which test applies to you?

People with large superannuation balances or high savings are usually limited by the assets test, because those balances count fully as assets but only produce modest deemed income. People with a defined benefit pension, rental income or ongoing wages are more often limited by the income test. The only way to know is to run both, which is exactly what the estimators do.

Check your income test result

The simple estimator asks for your other income and financial assets, works out your deemed income and shows the income test and assets test side by side. The advanced estimator lets you enter each income type separately, including defined benefit and account-based pensions.