Does an inheritance affect your Age Pension?

Receiving an inheritance is one of the most common reasons an Age Pension rate changes, and one of the most misunderstood. The short answer is that an inheritance is not treated as income, but once it is in your hands it becomes part of your assets and is deemed to earn income. Whether that reduces your pension depends on how much you already have.

A lump sum is not income

A one-off inheritance, whether cash, shares or property, is not counted as income in the fortnight you receive it. There is no immediate loss of pension simply because money has arrived.

But it becomes an asset straight away

From the day you receive it, an inheritance is counted under the assets test. Cash and shares are financial assets, so they are also deemed to earn income under the income test. If your assets were already near the free area, an inheritance can move you from a full pension to a part pension, or from a part pension to none. If your assets were well below the free area, a modest inheritance may not change your rate at all.

For a single homeowner the assets free area from 1 July 2026 is $333,000, with the pension cutting out at $733,500. Above the free area the pension reduces by $3 a fortnight for every $1,000 of extra assets. An inheritance of $100,000 to someone already above the free area therefore reduces the pension by $300 a fortnight.

What if the inheritance is a house?

If you inherit a property and live in it as your principal home, it is exempt from the assets test like any other home. If you keep it as a second property, its market value (less any mortgage) counts as an asset and any rent counts as income. If you sell it, the proceeds become financial assets and are deemed.

You must tell Services Australia

You are required to notify Services Australia of an inheritance within 14 days of receiving it. Assessable assets are reviewed regularly in any case, and undisclosed amounts can lead to a debt being raised later.

Giving it away: the gifting rules

Giving an inheritance to your children does not remove it from the assessment. Under the gifting rules you can give away up to $10,000 in a financial year, and no more than $30,000 over any five-year period, without effect. Amounts above those limits are treated as a deprived asset: they continue to be counted as your asset, and deemed, for five years from the date of the gift.

Estimate the effect before it arrives

If you know an inheritance is coming, run your figures through the simple estimator with and without the extra amount. The charts show exactly where you sit against the free area and the cut-off, so there are no surprises.