This guide explains general concepts for educational purposes. It is not financial, tax or legal advice, or a recommendation to buy, sell, hold or change a financial product or strategy. It does not take into account your objectives, financial situation or needs. Rules, caps, thresholds and product terms can change. Check the current official information and obtain advice appropriate to your circumstances before making a financial decision.
Four parts of the assessment
Age Pension entitlement depends on meeting age and residency conditions and then being assessed under both the income test and assets test. Services Australia generally applies the test that produces the lower payment.
Relationship status, homeownership, overseas assets, financial investments, income streams and employment income can all influence the result.
- Age and residency requirements
- Income test
- Assets test
- Personal and household circumstances
Financial investments are usually deemed
For many financial assets, Services Australia applies deeming rates rather than using the actual interest or investment return. The deemed amount is then included in the income test.
The assets test separately considers the value of assessable assets. Because both tests operate at the same time, simply changing an investment does not necessarily improve entitlement.
Rates and thresholds change
Pension rates and thresholds are adjusted periodically. This article deliberately avoids embedding figures that can quickly become outdated. Services Australia publishes the current amounts and determines entitlement from the person’s circumstances.
A household assessment
For a couple, the assessment generally considers combined income and assets, including assets held in separate names. Being the sole owner of an investment does not necessarily keep it outside the couple's means tests. Different rules can also apply to a partner's super depending on their age and the account's status.
Homeownership affects the assets-test settings even though the principal home is generally exempt. Personal belongings, vehicles and other assessable assets also form part of the picture. A bank balance alone therefore cannot establish an entitlement.
An entitlement can change over time
The result is an assessment of circumstances at a particular time, rather than a permanent amount. Employment income, relationship changes, asset values and the commencement of a pension account can all affect it. The income and assets tests operate separately, so the test limiting a payment can change.
Financial planning projections may include an estimated Age Pension amount, but Services Australia determines the actual entitlement. Keeping the assumptions separate from a confirmed payment helps explain why projected retirement income and the eventual assessment may differ.