Age Pension Basics: Rates, Eligibility and Thresholds
The Age Pension is Australia's primary retirement income support payment, administered by Services Australia (Centrelink). Understanding the current rates, eligibility age, and test thresholds is the starting point for any maximisation strategy.
- Eligibility age: 67 for both men and women (as at 2025, for anyone born after 31 December 1956). Australian resident for at least 10 years (with some exceptions for refugees and certain visa holders).
- Current rates (April 2025): Full pension: approximately $1,144.40/fortnight (single), $862.60/fortnight each ($1,725.20 combined) for couples. Indexed to higher of CPI or Male Total Average Weekly Earnings (MTAWE) in March and September each year. Pension Supplement and Energy Supplement are included in these amounts.
- Two tests - the lower result applies: Your Age Pension entitlement is determined by both the assets test AND the income test. The lower payment from the two tests is what you receive. A person might pass the assets test comfortably but be cut off or reduced by the income test - or vice versa. Both must be assessed.
- Full pension asset test thresholds (2024-25): Homeowner single: $314,000. Homeowner couple: $470,000. Non-homeowner single: $566,000. Non-homeowner couple: $722,000. Above these thresholds the pension reduces by $3 per fortnight for every $1,000 of assets over the threshold. Full pension cuts out at approximately $697,000 (homeowner single) and $1,047,500 (homeowner couple).
- Income test: The pension reduces by 50 cents for every dollar of income above the free area. Free area 2024-25: $212/fortnight (single), $372/fortnight (couple combined). Work Bonus of $300/fortnight ($7,800/year, accruing to a maximum of $11,800) allows pensioners to earn employment income above the free area without reducing their pension.
Exempt Assets: What Centrelink Does Not Count
Certain assets are exempt from the assets test entirely or receive concessional treatment. Structuring assets to maximise the proportion in exempt categories is one of the most effective legal strategies to increase Age Pension entitlement.
- The principal residence - fully exempt: The home you live in is fully exempt from the assets test regardless of its value. A retiree with a $3M home and $400,000 in financial assets may receive a full pension. This creates the wellknown incentive to 'upgrade' the family home before retirement - but this strategy must be weighed against liquidity, downsizer contribution opportunities, and practical lifestyle considerations.
- Funeral bonds and prepaid funeral expenses: Up to $15,000 in funeral bonds (per person) is exempt from the assets test. A couple can each hold $15,000 in funeral bonds - exempting $30,000 combined.
- Superannuation before pension age: Super held by a person below Age Pension age is exempt from the assets test (it counts for the partner's assets test if the partner is already pension age). This creates an incentive for couples where one partner is below Age Pension age to keep assets in that partner's super.
- Lifetime annuities - partial exemption: From 1 July 2019, lifetime annuities receive concessional assets test treatment - 60% of the purchase price is assessable for the first 5 years of the product's life, then 30% thereafter. This can significantly reduce assessable assets compared to holding the same amount in an account-based pension. Income from the annuity is assessed under the income test.
- Car and personal possessions: One motor vehicle is assessed at market value minus the trade-in value difference (effectively the market value, but some discretion applies). Personal possessions (furniture, jewellery, collectibles) are assessed at their net market value - Centrelink typically uses a standard estimate unless items are of significant known value.
- Accommodation bonds for aged care: Refundable Accommodation Deposits (RADs) paid to aged care facilities are exempt from the assets test while the person is in aged care (they are assessed differently for means-tested care fees). This changes the asset composition significantly for retirees entering residential aged care.
Deeming, Income Test and the Account-Based Pension
The income test treats financial assets as if they are earning a deemed rate of return - regardless of what they actually earn. Understanding deeming and its interaction with account-based pensions is essential for income test management.
- Deeming rates (2024-25): Lower rate: 0.25% on the first $62,600 (single) or $103,800 (couple combined). Upper rate: 2.25% on financial assets above those thresholds. These rates are set by the Minister for Social Services and have been held artificially low since 2020 despite the rise in deposit rates - a significant concession to pensioners with financial assets.
- What is deemed: All financial investments - bank accounts, term deposits, shares, ETFs, managed funds, account-based pensions (for those who turned 65 after 1 January 2015). The actual return on these assets is irrelevant for the income test - the deemed return is applied.
- Account-based pensions and deeming: Account-based pensions (super income streams commenced on or after 1 January 2015, or by those who turned 65 after that date) are subject to deeming under the income test. The full account balance is included in the financial assets pool for deeming. Minimum pension withdrawals are not separately assessed - the deemed income is what counts.
- Grandfathered account-based pensions: Account-based pensions commenced before 1 January 2015 (and continuously maintained by the same person) are assessed under the 'deductible amount' method rather than deeming - typically more favourable. This grandfathering is lost if the pension is commuted and recommenced, rolled over to a new fund, or the pensioner's Centrelink entitlement lapses. Never commute a grandfathered pension without understanding this consequence.
- Strategies to reduce deemed income: (a) Spend down financial assets on exempt items (home improvements, prepaid funeral, car) - reduces the deemed pool. (b) Increase the home value through renovations (home is exempt). (c) Gift within allowable limits (see gifting rules below). (d) Consider a lifetime annuity - partially exempt under both assets and income tests.
Gifting Rules, Downsizer Contributions and Other Strategies
Centrelink has strict rules around gifting assets to reduce the assessable pool - exceeding the allowable amounts results in the gifted amount being counted for 5 years regardless. Understanding what is and is not permitted protects against costly mistakes.
- Gifting allowance: You can gift up to $10,000 per financial year and up to $30,000 in total over any rolling 5-year period without the excess being included in the assets test. Any amount gifted above these limits (excess gifts) is included in the assets test as a 'deprived asset' for 5 years from the date of the gift - regardless of whether the money is spent by the recipient.
- Gifting strategies within limits: Gifting $10,000/year consistently to children or grandchildren is within the allowable limit. Paying for grandchildren's school fees or medical costs (as gifts, not in exchange for anything) is permissible within the annual limit. Gifting must be genuine - not part of a scheme to reduce assessable assets while retaining effective control.
- Downsizer super contributions: Australians aged 55+ who sell their principal residence (held for 10+ years) can contribute up to $300,000 each ($600,000 per couple) into superannuation as a downsizer contribution - regardless of the NCC cap, work test, or total super balance. These contributions count toward the assets test (super is assessable for Age Pension age individuals) but the family home is replaced by super, which the income test deems at only 0.25–2.25%.
- Timing retirement: The Age Pension income test uses the current fortnight's income (or an annual estimate for self-employed). If you have a high-income year (business sale, large investment distribution), this affects your pension for that assessment period. Smoothing income over the year (via account-based pension drawdown timing, or avoiding large distributions in a single quarter) can improve the average recurring income position.
- Means-tested care fees for aged care: If entering residential aged care, the Aged Care Means Assessment uses a different framework from the Age Pension assets test - though there is significant overlap. The family home may be partially included in the means-tested care fee assessment (exempt for 2 years if a partner remains in the home). Aged care financial planning is a specialist area - get advice before making any moves that affect both Age Pension entitlement and means-tested care fees simultaneously.
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