Understanding the Age Pension Income Test
For many retirees in Australia, the Age Pension is a vital source of income. However, eligibility is not automatic and is determined through a 'means test,' which includes both an income test and an assets test. The maximum income for the Age Pension is not a single, fixed number but rather a cut-off point beyond which you will no longer receive any payment.
Centrelink assesses your income and your assets and then applies the test that results in the lowest pension amount. This guide focuses on the income test, breaking down the latest thresholds and how different types of income are assessed to give you a clear picture of your potential eligibility.
Income Test Thresholds from September 20, 2025
Services Australia regularly reviews and updates the income test thresholds to keep pace with the cost of living. The figures below, effective from September 20, 2025, detail the income-free areas and the ultimate cut-off points for different circumstances.
Single Person
- Income-free area: Up to $218 per fortnight. Your pension is not affected if your income is at or below this amount.
- Part pension cut-off point: $2,575.40 per fortnight. If your assessable income is above this amount, your pension will be zero.
Couple Living Together (Combined Income)
- Income-free area: Up to $380 per fortnight.
- Part pension cut-off point: $3,934.00 per fortnight.
Couple Separated by Illness (Combined Income)
- Income-free area: Up to $380 per fortnight.
- Part pension cut-off point: $5,094.80 per fortnight.
How Your Pension is Reduced
Once your income goes above the fortnightly income-free area, your pension payment will be reduced. This reduction is calculated as follows:
- For a single person: The pension is reduced by 50 cents for every dollar of income over $218 per fortnight.
- For a couple: Each member's pension is reduced by 25 cents for every dollar of combined income over $380 per fortnight.
The Work Bonus
For pensioners who continue to work, the Work Bonus provides a significant incentive. It allows you to earn a certain amount from employment without it affecting your Age Pension. Here’s how it works:
- The first $300 of employment income you earn each fortnight is not counted in the income test.
- If you earn less than $300 in a fortnight, the unused amount is added to your Work Bonus balance, up to a maximum of $11,800.
- This balance can be used to offset future employment income.
- New Age Pension recipients also receive an upfront $4,000 credit in their Work Bonus balance.
How Centrelink Assesses Income
Centrelink assesses income from all sources, not just employment. For financial assets, it uses a process called 'deeming.' This assumes your financial assets, such as savings and shares, earn a certain rate of income, regardless of the actual return. The rates, effective from September 20, 2025, are:
- Single: 0.75% on the first $64,200, and 2.75% on the balance over $64,200.
- Couple: 0.75% on the first $106,200 combined, and 2.75% on the balance over $106,200.
Other assessable income includes rental income, business income, and certain foreign pensions.
Income vs. Assets Test: Which One Applies?
Crucially, Centrelink will apply whichever means test (income or assets) results in the lowest rate of pension payment for you. It is possible to be eligible under one test but receive a reduced or zero payment due to the other. You can learn more about how the means tests interact by visiting the official Services Australia website.
Comparison of Income Test Thresholds (effective 20 September 2025)
| Situation | Income Free Area (Fortnightly) | Part Pension Cut-off Point (Fortnightly) |
|---|---|---|
| Single | Up to $218 | $2,575.40 |
| Couple (Living Together) | Up to $380 (Combined) | $3,934.00 (Combined) |
| Couple (Separated by Illness) | Up to $380 (Combined) | $5,094.80 (Combined) |
Planning for Your Retirement Income
Understanding these thresholds is key to effectively planning your retirement. Factors like continuing part-time work or managing your financial investments need careful consideration to maximize your Age Pension. For personalised advice, it is recommended to speak with a financial information services officer or a financial planner.
Conclusion
In summary, there is no single maximum income that applies across the board for the Age Pension in Australia. Instead, there are specific cut-off points determined by your living arrangements and marital status. The income test, along with the assets test, assesses your overall financial situation. With the latest figures updated as of September 20, 2025, it is important for eligible Australians to stay informed about these thresholds to plan their retirement finances accordingly.
