Income Sources in Retirement
Beyond super: the work income and investment income that can fund your retirement lifestyle.
When people think about retirement income, superannuation usually dominates the conversation. And yes, for most Australians, drawing from your super will be your primary income source. But it's rarely the only source.
This section explores the other side of the retirement income equation: earned income from continued work, and investment income from assets you hold outside super. Both can play important roles in your overall retirement strategy — whether by design or by necessity.
The Two Types of Non-Super Income
Think of retirement income sources in two broad categories: earned income (you trade time/skills for money) and passive income (your money works for you). Most retirees have some mix of both, especially in early retirement.
Earned Income: Working in Retirement
Retirement doesn't have to mean stopping work entirely. Many Australians continue working part-time, consulting, or running small businesses well into their 60s and 70s — sometimes for financial reasons, often for purpose, social connection, or simply because they enjoy it.
The key question isn't "should I work?" but rather "how does working affect my overall position?" The good news: the government actively encourages continued workforce participation through the Work Bonus scheme, which lets Age Pension recipients earn up to $11,800 per year from work without affecting their pension.
💰 Work Bonus
Pensioners can earn work income without losing pension payments.
- $11,800 annual Work Bonus bank
- Eligible work income excluded from income test
- Builds up automatically each fortnight
👔 Part-Time Work
Options for continued employment in retirement.
- Traditional employment
- Consulting & freelancing
- Self-employment & gig work
Investment Income: Your Money Working for You
Investment income is money generated by assets you own — without you having to actively work for it. This includes dividends from shares, interest from bank accounts, rental income from property, and capital gains when you sell assets.
The strategic question for retirees is often: where should you hold these investments? Inside super (tax-advantaged but with restrictions) or outside super (more flexible but potentially higher tax)? The answer depends on your total super balance, age, Centrelink situation, and how much flexibility you need.
📊 Investment Income Overview
Understanding the main types of passive income.
- Dividends & distributions
- Interest income
- Capital gains
- Centrelink deeming explained
💵 Franking Credits
How dividend imputation can boost your returns.
- What franking credits are
- How refunds work for low-income earners
- ETFs vs LICs for dividends
🏠 Rental Property Income
Managing investment property in retirement.
- Rental income (not deemed by Centrelink)
- Negative gearing decisions
- Sell vs hold in retirement
⚖️ Inside vs Outside Super
Where should you hold your investments?
- Tax treatment comparison
- Flexibility considerations
- Centrelink implications
How Centrelink Treats Different Income
If you're receiving (or may receive) the Age Pension, understanding how Centrelink assesses different income sources is crucial. The rules vary significantly depending on the income type:
| Income Type | Centrelink Treatment | Key Consideration |
|---|---|---|
| Work income | Actual income assessed, less Work Bonus | Work Bonus shelters up to $11,800/year |
| Financial assets (shares, cash, managed funds) | Deemed income based on balance | Actual returns don't matter — deeming rates apply |
| Rental property | Net rental income (actual, not deemed) | Expenses reduce assessable income |
| Account-based pension (retirement phase) | Deemed income on balance | Actual withdrawals don't affect income test |
| Super in accumulation | Asset tested, not income tested | No income attributed until you access it |
The deeming system often works in retirees' favour when actual investment returns exceed the deeming rates — but can work against you when returns are low (like during periods of low interest rates).
Building a Diversified Retirement Income
The most resilient retirement income strategies typically draw from multiple sources. Consider how each piece fits together:
A Typical Retirement Income Mix
Foundation: Age Pension (if eligible) provides a guaranteed baseline that adjusts with living costs.
Core: Account-based pension from super — your main flexible income source.
Supplement: Investment income from shares, property, or other assets held outside super.
Top-up: Part-time work income — especially valuable in early retirement before Age Pension age.
The exact mix will depend on your circumstances. Someone with $2 million in super might not need any Age Pension and could focus entirely on super drawdowns. Someone with $300,000 in super might rely heavily on the pension, topped up with investment income and perhaps some part-time work.
Need Help With Your Retirement Income Strategy?
Understanding how different income sources work together can be complex. Get the support you need to make confident decisions.
Important Information
This information is general in nature and does not consider your personal circumstances. The rules around Centrelink, taxation, and superannuation are complex and change frequently. Always verify current rates with Services Australia or the ATO, and consider seeking professional advice for your specific situation.
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Last updated: January 2026