Age Pension Eligibility and Current Rates
The Age Pension is administered by Services Australia and provides a safety net income for eligible retirees. The key eligibility criteria and current payment rates as at March 2025:
- Age: 67 for all Australians born after 1 January 1957; earlier transitional ages apply to those born before this date
- Residency: Must be an Australian resident and have lived in Australia for at least 10 years in total, with at least 5 of those years as a continuous period
- Assets test and income test: Must satisfy both - Services Australia pays the lower rate from each test
- Full Age Pension - single: $1,149.60 per fortnight ($29,890 per year) as at March 2025; includes Pension Supplement $81.60/fn and Energy Supplement $14.10/fn
- Full Age Pension - couple (combined): $1,732.20 per fortnight ($45,037/year); includes Pension Supplement and Energy Supplement
- Pension indexation: Adjusted twice yearly (March and September) based on the higher of CPI, Male Total Average Weekly Earnings (MTAWE) benchmark, or the Pensioner and Beneficiary Living Cost Index (PBLCI)
- Commonwealth Seniors Health Card (CSHC): If you're above the Age Pension assets/income threshold, you may still qualify for the CSHC - provides concessional PBS medications ($7.70 vs $31.60) and bulk billing priority; income test based on $95,400 singles/$152,640 couples (from November 2022)
The Assets Test: What Counts and What Doesn't
The assets test determines whether you receive the full pension, a part pension, or nothing. Understanding which assets are assessed (and which aren't) is critical:
- Full pension threshold (homeowner) - single: $301,750; couple combined $451,500 - assets below these receive the full pension
- Part pension cut-off (homeowner) - single: $674,000; couple combined $1,012,500 - assets above these receive nothing
- Non-homeowner thresholds: Add $232,500 to all homeowner thresholds - a single non-homeowner gets full pension up to $534,250
- Taper rate: For every $1,000 of assets above the full pension threshold, the pension reduces by $3 per fortnight (i.e., $78/year reduction per $1,000 of excess assets)
- What IS assessed: Account-based pensions (super drawdown accounts), financial investments, term deposits, managed funds, shares, investment property (market value), caravan/motorhome, boat, cars (over $10,000), business assets
- What is NOT assessed: The principal family home (no value limit); funeral bonds up to $15,500 per person; pre-paid funerals; special disability trusts
- Super before pension age: If you're receiving a Centrelink payment before age 67, super accumulation balances of the person under pension age are NOT counted in the assets test - this creates a planning window to hold assets in super below pension age
- Account-based pension balance: Once you convert to a retirement account-based pension, the balance IS assessed - but at the full account balance, not the underlying assets
The Income Test and Deeming Rates
The income test applies regardless of your actual investment income - the ATO 'deems' financial assets to earn a set rate of return, whether they actually do or not:
- Full pension income free area - single: $204 per fortnight; couple combined $360 per fortnight - income below these amounts doesn't reduce the pension
- Taper rate: For every $1 of income above the free area, the pension reduces by 50 cents (i.e., $1 income → 50c less pension)
- Income test cut-off - single: Approximately $2,397/fn (at which point the full pension is reduced to zero)
- What is counted as income: Deemed income from financial assets, employment income (less Work Bonus), rental income, foreign income, certain trust distributions, salary packaging fringe benefits
- Deeming rates (from July 2024): For singles - first $62,600 of financial assets deemed at 0.25%; above $62,600 at 2.25%; for couples - first $103,800 deemed at 0.25%; above $103,800 at 2.25%
- Deeming example: A single retiree with $400,000 in an account-based pension is deemed to earn: $62,600 × 0.25% + $337,400 × 2.25% = $156.50 + $7,591.50 = $7,748/year = $298/fn; this exceeds the $204/fn free area and reduces the pension by ($298-$204)/2 × 2 = $47/fn
- Deeming applies regardless of actual return: If your financial assets earn 5% but the deeming rate is 2.25%, you're assessed on the deemed amount only - which is a significant advantage in a higher-return environment
- Bank accounts are also deemed: Cash in bank accounts (savings, term deposits) is counted as a financial asset and subjected to deeming - there's no benefit from holding cash vs invested assets for income test purposes
Work Bonus: Earning Without Losing the Pension
The Work Bonus allows Age Pension recipients to earn employment income without immediately reducing their pension payment - a significant incentive to stay in the workforce part-time:
- Work Bonus amount: $300 per fortnight is excluded from the income test for employment and self-employment income (not investment income)
- Accumulated Work Bonus: Unused Work Bonus amounts accumulate up to a maximum of $11,800; the accumulated amount is drawn down first before the income test applies
- New pensioner starting balance: As of 1 December 2022, new Age Pension recipients start with a $4,000 Work Bonus credit (rather than $0)
- Practical example: A pensioner who works casually earning $400/fortnight: first $300 excluded by Work Bonus, remaining $100 over the free area reduces pension by $50/fn - far less than if they earned nothing and received the full pension reduction
- No Work Bonus on investment income: Dividends, rent, interest, and drawdowns from account-based pensions are not eligible for the Work Bonus exclusion
- Self-employment included: Working in your own business as a sole trader or through a company counts for Work Bonus - but you must be able to demonstrate the income is from personal effort, not passive investment return
Gifting Rules and the 5-Year Look-Back
Many people attempt to give away assets before applying for the Age Pension to reduce their assessable assets. Services Australia has specific rules to prevent this from inflating entitlements artificially:
- Gifting allowance: $10,000 per financial year, and a maximum of $30,000 over any rolling 5-year period
- What happens if you exceed the limit: Any gift above the allowance is treated as a 'deprived asset' - Services Australia continues to count the gifted amount in your assets test for 5 years after the gift was made
- Example: You give your child $50,000 in the 2024-25 year. Allowable: $10,000. Excess: $40,000. Services Australia assesses you as holding that $40,000 for the next 5 years, even though you no longer have it - AND deems income on it
- Estate planning interaction: Legitimate estate planning (setting up a special disability trust, contributing to children's super) may be treated as gifting if done within 5 years of Age Pension age - timing matters
- Not just cash: Selling a property below market value, forgiving a loan to a family member, paying ongoing expenses for children - all can be treated as gifts if they reduce your assets below what you'd otherwise have
- Pre-pension window: Strategies that restructure assets many years before reaching pension age (e.g., paying down the mortgage - the home is exempt; renovating the principal residence - improves an exempt asset) are generally viewed more favourably than last-minute transfers
- Funeral bonds: Up to $15,500 per person in a funeral bond or pre-paid funeral is exempt from both the assets test and income test - a legitimate way to set aside money outside the test
Account-Based Pension Drawdowns and Pension Strategy
How you draw down your super in retirement directly affects your Age Pension entitlement. Smart sequencing can significantly increase total retirement income:
- Minimum drawdown rates: Compulsory minimums based on age (4% under 65, 5% at 65-74, 6% at 75-79 etc.) - drawing the minimum keeps your account-based pension balance (and deemed income) as high as possible
- Drawing more to spend from exempt assets first: If you have both financial assets (assessed) and a home (exempt), drawing down financial assets faster reduces your assessable assets - potentially unlocking higher Age Pension payments as assets fall below thresholds
- Voluntary contributions before pension age: If you or your spouse is below Age Pension age, contributing to their super can shift assets out of the assets test (super of a person below pension age is not assessed)
- Spouse under pension age strategy: If one spouse is 67 (pension age) and the other is 63 (below pension age), keeping assets in the younger spouse's super reduces the couple's assessable assets - maximising Age Pension for the older spouse while assets compound in a low-tax environment
- Transition timing: Converting a super accumulation account to a retirement account-based pension brings the balance into the assets test - consider timing this conversion carefully if you're near an assets test threshold
- Downsizer contribution: Selling the family home and contributing up to $300,000 per person into super ($600,000 per couple) at age 55+ looks appealing but increases assessable assets if you're near the pension threshold - the new home (if you buy one) is again exempt, but a period of renting means increased assessed assets
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