Age Pension Income Test Explained

The income test determines how much Age Pension you receive based on your regular income. Every dollar you earn above the income-free area reduces your pension — but it doesn't stop immediately. This guide explains what counts as income, how the reduction works, and how to apply it to your situation.

The Income-Free Area

Centrelink allows you to receive a certain amount of income each fortnight before your pension starts to reduce. This is the income-free area:

What IS Counted as Income?

• Employment and self-employment income (subject to the Work Bonus — see below)
• Superannuation pension payments — if you are receiving regular drawdowns from a super pension
• Deemed income from financial assets (bank accounts, term deposits, shares, managed funds, account-based pensions, super if you've reached Age Pension age) — Centrelink doesn't track your actual investment returns. Instead it applies a deeming rate to your asset balances. See our Deeming Rules guide or work out your figure with the Deeming Calculator.
• Rental income from investment properties (net of allowable expenses)
• Overseas income and pensions — including foreign government pensions
• Business income — profit from any business activity
• Trust and company distributions

What Is NOT Counted as Income?

• Centrelink payments — all Centrelink payments are excluded from the income test, for both you and your partner. This includes Age Pension, Disability Support Pension, Carer Payment, Carer Allowance, JobSeeker, Family Tax Benefit, Pension Supplement, Energy Supplement, Pharmaceutical Allowance, and Commonwealth Rent Assistance.
• Capital gains — the gain itself when you sell an asset is not separately counted as income. The treatment of the proceeds depends on what you do with them: cash sitting in your bank is deemed at the standard rates; reinvested in shares or managed funds is also deemed; used to buy another property is assessed under the assets test as property; spent on lifestyle or non-assessable items, no further treatment.
• Lump-sum inheritances — the inheritance itself is not income, but the assets you receive (cash, shares, property) will count from the day you receive them: financial assets become deemed income; property becomes assessable under the assets test. You must report the change to Centrelink within 14 days of receipt.
• One-off irregular windfalls (assessed case-by-case)

The Work Bonus

The Work Bonus is a special concession that allows Age Pension recipients to earn money from employment or self-employment without it counting toward the income test — up to a generous limit.

Unused Work Bonus accumulates in a "bank" up to the maximum annual amount. This means if you don't work for several months and then take on a short contract, you may have a large credit built up that protects a significant period of employment income. See the Work Bonus Explained guide for full details.

Income Test Cut-off Points

Once your assessable income reaches the cut-off point, your Age Pension payment under the income test reduces to zero. The cut-off is calculated from the maximum pension rate divided by the taper rate (50 cents per $1):

These figures show the income test cut-off only. The assets test runs in parallel and has its own cut-offs (see the Assets Test guide). Your actual pension is whichever test gives the lower result — the How Much Age Pension Calculator runs both tests for you.

If you have an accrued Work Bonus bank balance, your effective cut-off can be temporarily higher because the bank shelters employment income from the income test until depleted.

Worked Examples

How to Report Your Income

If you receive Age Pension, you must report your income to Centrelink. Depending on your circumstances:

• Employment income — reported every fortnight (online via myGov, via the Express Plus app, or by phone)
• Financial asset balances — you do not report your actual investment income or returns to Centrelink. Centrelink applies deeming to your asset balances directly. Most banks and super funds report balance changes to Centrelink automatically; you don't need to track returns yourself. You do need to report material changes to your asset balances (e.g. you withdraw a large sum, sell an investment, or receive an inheritance) within 14 days of the change.
• Rental income changes — report within 14 days of the change (deeming doesn't apply to rental property; the actual net rental figure is used)
• Lump sum payments (such as a superannuation withdrawal or inheritance) must be reported within 14 days of receipt of funds. The lump sum itself isn't income, but the resulting change in your asset balance affects deeming and the assets test.

Last reviewed: 10 September 2026 · All rates shown above are current. For previous indexation periods or other Centrelink rates, see the Centrelink Rates & Thresholds reference page.