The Australian Age Pension: Income and Assets Tests
To understand how much money you can have in the bank, you must first grasp how Centrelink assesses eligibility for the Age Pension. Your bank balance is not viewed in isolation. Instead, it is considered a 'financial asset' and evaluated under two separate criteria: the assets test and the income test.
Centrelink applies both tests, and whichever one results in the lower pension payment for you is the one that is applied. Your bank savings, along with any other financial investments, are assessed under both criteria.
The Assets Test Explained
This test looks at the total value of all assets you and your partner own, including financial investments, property (excluding your principal home), vehicles, and home contents. Your bank savings are a part of this total. The limits differ depending on your relationship status (single or couple) and whether you own your own home.
Once your total assets exceed the lower threshold, your pension amount will be reduced. If your assets surpass the higher cut-off point, your pension will cease entirely. These thresholds are regularly reviewed and updated by the Department of Social Services.
Assets Test Limits (Effective from 20 September 2025)
| Situation | Homeowner | Non-homeowner |
|---|---|---|
| Full Pension Asset Limit: Single | $321,500 | $579,500 |
| Full Pension Asset Limit: Couple (combined) | $481,500 | $739,500 |
| Part Pension Cut-off: Single | $714,500 | $972,500 |
| Part Pension Cut-off: Couple (combined) | $1,074,000 | $1,332,000 |
It is important to note that if you are a homeowner, the value of your primary residence is exempt from this test. This can significantly impact your total assessable assets.
The Income Test and Deeming
For the income test, Centrelink uses a set of rules called 'deeming' to calculate the income from your financial assets. Deeming assumes your financial investments earn a certain rate of income, regardless of the actual return you receive. This simplified approach is applied to bank accounts, cash, shares, and managed funds.
Deeming Rates (Effective from 20 September 2025)
- Single: Income is deemed at 0.75% on the first $64,200 of financial assets and 2.75% on any amount over $64,200.
- Couple: Income is deemed at 0.75% on the first $106,200 of combined financial assets and 2.75% on any amount over $106,200.
Your deemed income is then added to any other income sources, such as employment income, to determine your total assessable income. If this figure exceeds the income-free area, your pension is reduced. This method ensures fair treatment for pensioners, as those with similar financial assets are assessed in the same way.
What Counts as a Financial Asset?
When Centrelink performs their assessment, they look at a wide range of financial assets, not just the balance in your everyday bank account. This can include:
- Bank Accounts: Savings accounts, term deposits, and cash on hand.
- Investments: Shares, managed funds, and bonds.
- Superannuation: Once you reach the Age Pension age, your super balance becomes a financial asset for assessment purposes.
- Annuities and Income Streams: Some types of income streams are also assessed under these rules.
It's a holistic view of your financial situation, which means simply looking at your bank account balance won't give you the full picture of your pension eligibility.
Strategies for managing assets and income
Retirees can use several strategies to manage their assets and potentially maximise their pension entitlements. These are complex financial matters, and seeking professional advice is recommended.
- Gifting: You can gift up to $10,000 in a financial year, with a maximum of $30,000 over a rolling five-year period, without it affecting your assets test. Gifting above this limit may be counted as a financial asset for five years.
- Home Improvements: Investing in your family home is not considered an assessable asset. Renovating or improving your principal residence can be a way to use savings without affecting your pension.
- Investments with different assessments: Certain financial products, like pre-paid funeral bonds (up to a limit), are exempt from the assets test.
These strategies should be explored with care and an understanding of your personal financial goals. The Australian government provides resources through their Services Australia website to help you navigate these rules.
Conclusion: A holistic assessment
Ultimately, there is no single figure for how much money an old age pensioner can have in the bank in Australia without it affecting their pension. The amount is determined by a combination of factors, including your total assets, whether you own your home, your relationship status, and your overall income from various sources. The bank balance is just one piece of a much larger financial puzzle. Understanding the interaction between the assets test and the income test, including the deeming rules, is crucial for retirees managing their finances and entitlements.
