Most Australians don’t realise how much their superannuation can affect their Age Pension entitlements.

Depending on how it’s structured, your super could either increase your pension or reduce it significantly.

In this article, we explore how super and the Age Pension work together –  I’ll explain exactly how Centrelink assesses your super and share strategies that could help you maximise your payments in retirement.

Prefer watching? This video breaks down the same topic:

Super and the age pension: Why it’s improtant

There are 3 main reasons why you need to understand how super and the age pension interact:

1. Super directly affects your Age Pension: Your super is one of your largest assets in retirement and Centrelink’s assessment of it determines how much Age Pension you’re eligible for. The less that’s assessed, the more you could receive.
2. Your eligibility can change over time: Even if you don’t qualify for the Age Pension today, that can change as you draw down your super. Planning ahead helps ensure you’re in the best position when you do become eligible.
3. Your partner’s pension could be reduced: If your partner has already reached Age Pension age, your super balance may still count towards their assessment – potentially lowering their entitlements without you realising.

That’s why understanding how your super is assessed is so important – it helps you structure things in a way that maximises your entitlements.

How is your superannuation assessed by Centrelink?

When you’re assessed, Centrelink looks at how much you own, and earn, to figure out if you can get the Age Pension, and how much you’ll be paid.

Your superannuation is assessed by Centrelink under both the income test and assets tests. I’ll explain each one shortly, However, how it’s treated depends on the type of account your super is held in.

Let’s start with super in the accumulation phase. This is the stage where you’re still working and making contributions, and your super remains in an accumulation account.

Accumulation Phase

Even after you stop working or retire, you can choose to keep it in the accumulation account, where it stays invested and has the potential to keep growing.

During this phase, If the account holder is under Age Pension age, 67 years old, Centrelink does not assess the super accumulation account.

If the account holder is 67 or older, Centrelink includes the balance in both the income test and assets test.

Now, what if your super is moved into the transition to retirement phase?

Transition to retirement phase

The transition to retirement phase applies when you’re between ages 60 and 65 and start a transition to retirement (TTR) pension while still working.

In this phase, a TTR pension is fully assessed for the income test and assets test, regardless of your age.

And finally…Pension Phase.

Pension Phase

Once you retire and convert super to an account-based pension, your superannuation is assessed in both the income test and assets test for the Age Pension.

Now If you have a defined benefit pension, it will only count towards the Centrelink income test not the assets test.

So how is the assets test different from the income test?

The assets test

When Centrelink assesses your Age Pension eligibility, one of the key factors it looks at is your assets (what you own).

This includes both financial assets (like super and savings) and non-financial assets (like cars or contents).

If you’re under age 67:

• The full balance of your accumulation account is not counted towards the assets test.
• However, for TTR pensions and Account-Based Pensions, the full balance is included in the assessment.

If you’re over 67:

• The full balance of your accumulation account, TTR pension and Account-based pension is treated as an assessable financial investment for the assets test.

This balance is added to all your other assets.

So how does it affect your Age Pension?

Your total assets determine whether you’re eligible for the full Age Pension, a part pension, or no pension at all.

For every $1,000 your assets exceed the full Age Pension threshold, your payment reduces by:

• $3 per fortnight if you’re single, or
• $1.50 per fortnight for each member of a couple.

You can check the current asset thresholds here: View Centrelink Assets Test Table

Ok so now that we’ve covered how your super is treated under the assets test, let’s take a look at how super is treated under the income test.

The income test

The income test is used by Centrelink to assess how much income you earn (or are deemed to earn) from all sources, including superannuation.

For the income test, an accumulation account, if you’re over 67, TTR pension or account-based pension, is treated as a financial asset.

But instead of looking at the actual income you receive, Centrelink uses something called deeming.

What is deeming?

Well, rather than assess the actual pension payments you withdraw or the real investment earnings in the account, Centrelink assumes or deems that your balance earns income based on fixed deeming rates set by the Government.

Current deeming rates are:

Singles:

• 0.75% p.a. on the first $64,200, then
• 2.75% p.a. on the balance above that.

Couples (combined):

• 0.75% p.a. on the first $106,200, then
• 2.75% p.a. on anything above that.

This deemed income is then added to any other assessable income you receive.

So how does it affect your Age Pension?

For every $1 your income exceeds the full Age Pension threshold, your payment reduces by:

• 50 cents per fortnight if you’re single, or
• 25 cents per fortnight for each member of a couple.

Again, defined benefit pensions are treated differently here. Instead of deeming, the actual income amount, minus the deductible amount (as advised by your defined benefit provider) is assessed.

Also, as a side note, investment properties are not deemed. The actual rent received, minus the rental expenses, is the amount assessed.

Which test applies: the income test or assets test?

Centrelink applies both tests to your financial situation and bases your Age Pension entitlement on the lower of the two results. In other words, whichever test results in a lower pension entitlement is the one that determines what you receive.

For example, If you qualify for the full Age Pension under the income test, but only half under the assets Test, because your assets are too high, then you’ll only receive 50% of the Age Pension rate.

So to bring this to life, let’s look at a real-world example.

Case Study: How Centrelink Assesses Graham and Catherine’s Age Pension

Let’s look at a real-world example of how Centrelink applies both the income test and assets test when calculating Age Pension payments.

Background

Graham, 68, and Catherine, 63, are a retired couple who own their home.

Because only Graham has reached Age Pension age, he’s the only one eligible for payments, but Centrelink still assesses their assets and income as a couple.

Their Financial Situation

• Home: $1,000,000 – completely exempt from assessment
• Home contents: $20,000 – assessed, but not income-producing
• Vehicles: $30,000 – assessed, but not income-producing
• Graham’s account-based pension: $450,000 (pays $2,500/month)
• Catherine’s account-based pension: $450,000 (pays $2,500/month)
• Bank accounts: $70,000
• Shares: $20,000

Since Graham is the only one who has reached Age Pension age, he’s the only one eligible for payments.

Even though Catherine isn’t yet eligible for the Age Pension, her account based pension balance is still counted and deemed when calculating Graham’s entitlement.

Now, even though Graham is the only one eligible for Age Pension payments, all assets are combined and assessed as a couple – they are not halved.

Step 1: The Income Test

Under the income test, Centrelink doesn’t look at Graham’s actual pension payments or investment returns.

Instead, they use deeming rates to estimate the income his and Catherine’s financial assets earn.

Financial assets include:

• Both account-based pensions
• Bank savings
• Shares

Adding these together gives total financial assets of $960,000 ($450,000 + $450,000 + $50,000 + $10,000).

Applying the Deeming Rates (for couples)

• The first $106,200 is deemed to earn 0.75% = $796.50
• The remaining $883,800 is deemed to earn 2.75% = $24,304.50

That gives total deemed income of $25,101 per year, or $965.42 per fortnight.

Calculating Graham’s Pension Under the Income Test

• Deemed income: $965.42 per fortnight
• Less income threshold: $380 per fortnight
• Over the threshold: $585.42
• Reduction: 25 cents for every $1 over = $146.36 reduction
• Full pension: $888.50 per fortnight
• Final entitlement: $888.50 − $146.36 = $742.14 per fortnight

So under the income test, Graham’s Age Pension would be $742.14 per fortnight.

But we can’t stop at the income test because remember, both tests are applied, and the one that results in the lowest Age Pension is the one that’s used.

Step 2: The Assets Test

Now let’s look at how the same assets are assessed under the assets test.

Assessable assets include:

• Home contents: $20,000
• Vehicles: $30,000
• Account-based pensions: $900,000 combined
• Bank accounts: $70,000
• Shares: $20,000

This gives total assessable assets of $1,040,000.

Calculating Graham’s Pension Under the Assets Test

• Asset threshold for a homeowner couple: $481,500
• Amount over threshold: $558,500 ($1,040,000 − $481,500)
• Pension reduces by $1.50 per $1,000 over the threshold

So, $528,500 ÷ 1,000 × $1.50 = $837.75 reduction. Subtract that from the full pension of $888.50 per fortnight = $50.75 per fortnight.

Step 3: Comparing the Results

• Income test result: $742.14 per fortnight
• Assets test result: $50.75 per fortnight

Centrelink applies both tests and uses the result that gives the lower payment.

In this case, Graham’s Age Pension is reduced to $50.75 per fortnight under the assets test.

Now, $50 a fortnight would barely buy two chicken palmys — even on a Wednesday special at the bowls club.

So, what can Graham and Catherine do to improve their situation?

Since Graham’s pension is limited by the assets test, that’s where the biggest opportunity lies.

Strategy 1: Move Catherine’s Super Back to Accumulation

A simple but effective approach is to transfer Catherine’s super pension back into accumulation phase.

Because Catherine is under Age Pension age, her accumulation account becomes completely exempt from Centrelink assessment.

This single move:

• Reduces their assessable assets from $1,010,000 down to $560,000, and
• Increases Graham’s Age Pension from $56.10 to $731.10 per fortnight

That’s an improvement of $17,550 per year — without changing their lifestyle.

Strategy 2: Rebalance to Reach the Full Pension

We can go one step further.

To help Graham qualify for the full Age Pension, he could:

• Withdraw $90,000 from his account-based pension, and
• Contribute it to Catherine’s accumulation account (where it remains exempt).

This reduces their total assessable assets to $470,000 and brings their deemed income below the threshold, making Graham eligible for the full Age Pension.

A Few Things to Keep in Mind

Before making any changes:

• Tax impact: Money in accumulation phase is no longer tax-free — earnings are taxed at 15%. However, in most cases, the extra Age Pension outweighs the small tax cost.
• Access restrictions: Once funds are moved to a younger spouse’s super, they can’t be accessed until that spouse reaches preservation age. Make sure the money won’t be needed in the meantime.

Now, I am fully aware that the above can only be achieved if one partner is under Age Pension age and if we are talking about a couple.

But what if both partners are over Age Pension age or you’re single?

Strategies for singles or both over age pension age

Here are a few practical strategies for singles, or couples where both partners are over Age Pension age:

1. Gifting Assets

You can gift money or assets to a loved one, for example, helping a child buy a home, to reduce your assessable assets or income.

However, Centrelink applies strict gifting rules:

• You can gift up to $10,000 per financial year, and
• A maximum of $30,000 over any rolling five-year period
  Any amount above these limits will still count as your asset for five years from the date of the gift

A few important notes:

• Once a gift is made, it’s legally the recipient’s property — they don’t have to return it.
• A loan is not a gift — even if you never expect repayment. Loans to family or friends are still counted as your asset for Centrelink purposes.

2. Home Improvements or Paying Down Your Mortgage

Another effective way to reduce assessable assets is to improve your home or pay down your mortgage.

Because your home is exempt from the Age Pension assets test:

• Any home improvements (renovations, landscaping, etc.) won’t increase your assessable assets, and
• Paying off your mortgage increases home equity but does not increase assessable assets.

Just remember, by doing so, you are reducing the funds you have available to achieve your retirement income needs.

3. Prepay Funeral Costs or Purchase a Funeral Bond

A less obvious but legitimate option is to prepay funeral expenses or buy a funeral bond.

Centrelink allows up to $15,500 per person to be exempt from assessment under this strategy.

It’s a practical way to reduce assessable assets while taking care of an inevitable future expense.

Some of these strategies may seem simple, but you would be surprised how easy one little change like this can make a significant difference to your retirement outcome.

Our clients benefit from this every single day and there are literally a dozen strategies just like this – not only in relation to the Age Pension – but in regards to superannuation and retirement planning in general.

So, if you’re someone who wants to optimise their financial position in the leadup to retirement – this is where we can help.

At Toro Wealth, we help Australians 55 and over optimise their finances as they head into retirement. To learn more about our services and costs, click here.

FAQ’s

How much super can I have and still get the age pension?

As a single homeowner, you can have up to $714,500 in super and still receive the Age Pension. If you’re a non-homeowner, the limit increases to $972,500. For couples, the combined super limit is $1,074,000 if you’re homeowners, or $1,332,000 if you’re non-homeowners.