Age Pension Income Test — How It Works and Income Limits (2026)

The Age Pension income test determines how much pension you receive based on your fortnightly income. If your income exceeds a certain threshold, your pension reduces. If it exceeds the cut-off, your pension stops entirely.

How the Income Test Works

Your Age Pension reduces by $0.50 for every dollar of income above the income free area. This is called the “taper rate”.

$$\text{Pension reduction} = (\text{Fortnightly income} - \text{Income free area}) \times 0.50$$

Example: A single pensioner has fortnightly income of $300. The income free area is approximately $204.

$$\text{Reduction} = ($300 - $204) \times 0.50 = $48 \text{ per fortnight}$$

So instead of the maximum pension (~$1,144), they receive approximately $1,096 per fortnight.

Income Free Areas (FY2025–26)

Below these amounts, you receive the full Age Pension rate (subject to the assets test).

Income Cut-Off Thresholds (FY2025–26)

Above the cut-off, no pension is payable under the income test.

What Counts as Income

Services Australia counts the following as income for the Age Pension income test:

• Employment income (wages, salaries, self-employment)
• Business income
• Income from rental properties (gross rent minus allowable expenses)
• Deemed income from financial assets (see below)
• Overseas pensions and government payments
• Boarder and lodger income
• Most other regular income

Not counted as income:

• The value of your primary home
• Income from exempt assets (e.g., certain funeral bonds)
• Some one-off capital gains

Deeming: How Financial Assets Are Assessed

Rather than asking what your investments actually earn, Centrelink applies deeming rates — notional rates of return applied to the total value of your financial assets.

Deeming rates (FY2025–26):

Financial assets subject to deeming include:

• Bank accounts, term deposits
• Shares, managed funds, ETFs
• Superannuation in pension/drawdown phase (for people of Age Pension age)
• Bonds and debentures
• Cash

Not subject to deeming:

• Your primary home
• Investment properties (these are assessed under a different income method — rental income minus expenses)
• Superannuation in accumulation phase (assessed separately under assets test)

The Work Bonus

If you are still working after reaching Age Pension age, the Work Bonus allows you to earn employment income without it fully counting towards the income test.

• The Work Bonus is $300 per fortnight (FY2025–26)
• You can accumulate unused Work Bonus amounts in a “bank” — up to $11,800 maximum
• The banked amount can offset employment income in future fortnights where you earn more

Example: A pensioner earns $600 in employment income one fortnight. The Work Bonus of $300 reduces the assessed income to $300, which is then compared to the income free area of ~$204. Only $96 is above the free area.

This is designed to encourage pensioners to remain in the workforce if they choose to.

How Employment Income Is Assessed (90-Day Averaging)

Employment income for wage and salary earners is assessed based on a 90-day average of actual earnings, rather than the exact amount received in a given fortnight. This smooths out irregular pay (e.g., overtime, casual work) and prevents large one-off amounts from causing a sudden pension reduction.

Interaction With the Assets Test

You are assessed under both the income test and the assets test. Services Australia pays you the lower amount that results from each test.

If the income test gives you a higher pension than the assets test, the assets test result applies — and vice versa.

See the Age Pension assets test guide.

FAQ

Does superannuation income count toward the income test? Superannuation in pension phase (drawdown) — the underlying account balance — is subject to deeming, and the deemed income counts in the income test. Superannuation in accumulation phase is counted under the assets test but not directly in the income test.

Does my partner’s income affect my pension? For couples, Centrelink uses your combined income and divides by two to determine each person’s pension. Both members of a couple are assessed on the combined income.

What if my income varies significantly from fortnight to fortnight? Employment income is averaged over 90 days. Other irregular income may be assessed when received. Contact Services Australia to discuss your situation.

See also: Age Pension Guide | Age Pension Assets Test | Age Pension Rates

For advice tailored to your retirement situation, speak with a licensed financial adviser via MoneySmart.