The Age Pension is means-tested using two separate tests: the assets test and the income test. Centrelink applies whichever produces the lower pension entitlement. For most retirees with investment portfolios and/or super, the assets test is the binding constraint.
Understanding how it works — and what can be done to improve your position — is one of the most practical things you can do in the years approaching retirement.
The 2025–26 thresholds
As of the March 2025 indexation, the thresholds are:
Singles:
- Full pension: assets below $295,500 (homeowner) / $504,500 (non-homeowner)
- Part pension: assets below $695,500 (homeowner) / $947,500 (non-homeowner)
Couples (combined):
- Full pension: assets below $443,500 (homeowner) / $652,500 (non-homeowner)
- Part pension: assets below $1,045,500 (homeowner) / $1,297,500 (non-homeowner)
For every $1,000 of assets above the full pension threshold, the pension reduces by $3 per fortnight ($78 per year).
What counts as an asset?
The assets test casts a wide net. Assessable assets include:
- Financial investments: bank accounts, shares, managed funds, term deposits
- Superannuation (from Age Pension age onwards)
- Investment property (at market value)
- Business assets
- Motor vehicles, caravans, boats above nominal value
- Household contents and personal effects (a standard value is applied)
- Gifts made in excess of the gifting rules (see below)
Your principal home is exempt. This is the single most significant exemption in the assets test, and it creates an important asymmetry: a retiree with $1.5 million in their family home and $200,000 in super is likely eligible for a full pension, while a retiree who has sold their home and holds $1.7 million in investments likely isn’t.
What doesn’t count?
Key exemptions include:
- Principal home — no matter the value
- Funeral bonds up to the Centrelink-approved amount (currently around $14,000 per person)
- Accommodation bonds and RADs paid to aged care providers (once paid, these are exempt)
- Some exempt assets under specific rules (certain farm assets, disability equipment)
The gifting rules
If you give away assets to reduce your assessable assets and improve your pension entitlement, Centrelink has gifting rules that limit this. You can give away up to $10,000 per year (and $30,000 over five years) without assessment. Amounts above this are treated as a deprived asset and assessed for five years — they don’t disappear from the assets test the moment you give them away.
Income test interaction
The income test uses deeming, which means Centrelink assumes your financial investments earn a standard rate of return, regardless of what they actually earn. Current deeming rates are 0.25% on the first $56,400 (singles) and 2.25% on amounts above that. Your actual income from those assets is irrelevant — the deemed amount is what’s counted.
Strategies to consider
Spending on the home. Money spent on renovating or improving your principal home reduces your assessable assets and is not added back. This is legitimate provided the renovation is genuine.
Prepaying funeral expenses. Purchasing a pre-paid funeral or contributing to a funeral bond reduces assessable assets within the allowed limits.
Superannuation for younger spouses. If your spouse is below Age Pension age, their super is not counted in the assets test. Structuring contributions to a younger spouse’s super can legitimately reduce assessable assets.
Retirement income streams. Some annuities are assessed more favourably than account-based pensions. Depending on your balance, converting a portion of your super to an annuity may improve your pension entitlement.
The assets test interacts with the income test, your super balance, your housing situation and your gifting history. The optimal strategy is rarely obvious without modelling. Book a conversation with an AGS adviser to understand your specific entitlement and what can be done to improve it.