What is the Income Test?
Quick answer
The income test is one of two means tests Centrelink uses for the Age Pension. It looks at your assessable fortnightly income, including deemed returns on financial assets, and reduces your pension by 50 cents for every dollar over the free area. Both tests run at the same time, and whichever produces the lower pension is what's paid.
How it works
Centrelink adds up your assessable income for the fortnight, wages, rental income, income stream payments, and deemed income from financial assets like super and savings. It subtracts the free area to find the excess, then reduces your fortnightly pension by 50 cents for every dollar over. If that result is higher than what the assets test would produce, the assets test applies instead. You always get the lower of the two.
What counts as income
Employment income, rental income, account-based pensions and annuities, overseas pensions, and deemed income from financial assets all count. Your family home doesn't, and most compensation payments and some carer payments are excluded too, though the exact rules have a few nuances worth checking with Services Australia if they apply to you.
Current free areas and taper
As of the current 2026 rates, a single person can earn around $226 a fortnight before the pension starts reducing, and a couple can earn around $396 a fortnight combined. Above that, the pension reduces 50 cents for every dollar over (for a couple, that's 25 cents each, 50 cents combined). These figures are reviewed several times a year, so confirm the exact current number at Services Australia.
Worked example: a single person with $326 a fortnight in assessable income is $100 over the free area, so their pension drops by $50 a fortnight. A couple with $596 combined is $200 over their free area, a combined reduction of $100 a fortnight between them.
Income test vs assets test
Both tests run every time, and the lower result wins. The income test tends to bind harder for people still earning wages or rental income, or with a lot of financial assets subject to deeming. The assets test tends to bind harder for large super balances or investment properties with modest actual income. Our Retirement Income & Age Pension Calculator runs both on your own numbers and shows which one applies to you.
📚 Recommended reading
Retirement Made Simple
Noel Whittaker
Retirement Made Simple
Australia's godfather of personal finance demystifies super, the pension and making your savings last. The plain-English retirement handbook every Aussie should read before they stop working.
The Barefoot Investor
Scott Pape
The Barefoot Investor
Australia's best-selling money book ever. A simple system for accounts, budgeting, debt and a real emergency fund in one.
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🧮 Retirement Income & Age Pension Calculator
See your estimated Age Pension based on both the income test and assets test.
The Age Pension in Australia, in full
A deeper walkthrough of eligibility, the income test, the assets test, super, and how to apply.
Frequently asked questions
Does super count under the income test?
It depends on your age and phase. Super in accumulation phase generally isn't counted while you're under Age Pension age. Once you reach Age Pension age it becomes a financial asset subject to deeming, and account-based pensions are deemed too rather than assessed on your actual drawdowns.
What if my income spikes temporarily, like from selling shares?
A one-off capital gain generally isn't counted as income, since it isn't a regular income stream. But the cash that ends up in your bank account afterward becomes a financial asset, and will be subject to deeming from that point on.
Are the free areas the same for singles and couples?
No. A couple's free area is a combined figure covering both partners together, not each. Each partner's pension then reduces by 25 cents for every dollar of combined income over that amount, adding up to a 50 cent combined taper.
Related terms
Sources
Disclaimer
This is general information only, not personal financial or Centrelink advice. Age Pension income test thresholds are set by the government and reviewed periodically, always confirm current figures at servicesaustralia.gov.au or with a Financial Information Service officer before making decisions about your retirement income.