Age Pension Deeming Rates and Assets Test Strategies in Australia 2026: A Financial Planner Guide

For millions of Australians approaching or already in retirement, the Age Pension remains a critical component of their financial security. Yet the rules governing eligibility — particularly the assets test and the income test's deeming provisions — are complex, frequently updated, and easy to misunderstand. In 2026, with new thresholds effective from 1 July and 20 September, working with a qualified financial planner has never been more important for maximising your Centrelink entitlement.

Understanding the Age Pension Means Test

The Age Pension is subject to a two-part means test administered by Services Australia. Both an income test and an assets test are applied to every applicant, and the test that produces the lower pension entitlement is the one that determines your payment.

This interaction is frequently misunderstood. Many retirees assume they are assets-tested when, in fact, the income test — particularly through deeming — is the binding constraint on their pension. A financial planner can model both tests simultaneously to identify which one limits your entitlement and what strategies may improve your position.

The Assets Test: 2026 Thresholds

The assets test assesses the market value of your assessable assets, excluding your principal home. As of 20 September 2026, the following thresholds apply:

• Single homeowner: Full pension up to $333,000 in assets; pension cuts out at $745,750
• Single non-homeowner: Full pension up to $600,000; cuts out at $1,012,750
• Couple homeowners (combined): Full pension up to $499,000; cuts out at $1,121,000
• Couple non-homeowners (combined): Full pension up to $766,000; cuts out at $1,388,000

For every $1,000 of assets above the full pension threshold, the fortnightly pension reduces by $3. This taper rate means that even partial pension entitlements can be significant — and worth preserving through careful planning.

The Income Test and Deeming Rates

The income test assesses actual income from employment, rental properties, and superannuation pensions, as well as "deemed" income from financial assets. Deeming assumes your financial assets earn a set rate of return, regardless of what they actually earn.

As of 1 July 2026, the deeming rates are:

• 1.25% on the first $66,800 of financial assets for singles (or $110,600 for couples)
• 3.25% on financial assets above those thresholds

The income test free area — the amount of income you can receive before your pension begins to reduce — is $226 per fortnight for singles and $396 per fortnight for couples combined. Beyond these amounts, the pension reduces by 50 cents for every dollar of income.

Key Strategies a Financial Planner Can Implement

A licensed financial planner with expertise in retirement income can model your specific situation and identify legal, compliant strategies to improve your Age Pension entitlement. Common approaches include the following.

Superannuation Timing Before Age Pension Age

Superannuation in the accumulation phase is not assessed under the assets test or income test until you reach Age Pension age (currently 67). This creates a planning window for individuals approaching pension age who have a younger spouse still below 67.

A financial planner may recommend contributing additional funds into the younger spouse's superannuation accumulation account, effectively sheltering those assets from the means test until the younger spouse also reaches pension age. This strategy requires careful modelling to ensure it aligns with contribution caps and other rules.

Gifting Within Allowable Limits

Services Australia applies strict gifting rules to prevent deliberate asset reduction. You may gift up to $10,000 in a single financial year, or $30,000 over a rolling five-year period, without those amounts being treated as "deprived assets." Gifts above these limits remain assessable for five years.

A financial planner can help you structure legitimate gifting — for example, to adult children or grandchildren — within these limits as part of a broader estate and retirement income strategy.

Exempt Asset Strategies

Certain assets are exempt from the means test and can be used to reduce your assessable asset base. Key exempt assets include:

• Principal home: The family home is fully exempt, regardless of its value
• Prepaid funeral expenses: Amounts paid directly to a funeral director are fully exempt with no dollar limit
• Funeral bonds: Exempt up to $16,250 per person as of 1 July 2026
• Certain accommodation bonds: Refundable accommodation deposits (RADs) paid to aged care facilities are exempt

Strategically directing funds into exempt assets — where appropriate and consistent with your overall financial goals — can reduce your assessable asset base and increase your pension entitlement.

Annuities and Account-Based Pensions

The way different retirement income products are assessed under the means test varies significantly. Lifetime annuities and certain complying income streams receive concessional treatment under both the assets test and the income test, which can make them attractive for retirees with assets near the threshold.

Account-based pensions, by contrast, are assessed under deeming for the income test and at their account balance for the assets test. A financial planner can compare the means-test treatment of different product structures to identify the most efficient approach for your circumstances.

Common Mistakes to Avoid

Many Australians make avoidable errors when managing their Age Pension entitlement. Understanding these pitfalls can help you engage more effectively with your financial planner.

• Assuming the assets test is the only constraint: Many retirees with significant financial assets find the income test (via deeming) is actually the binding constraint, not the assets test. Both must be modelled.
• Gifting above the allowable limits: Gifts above $10,000 per year or $30,000 over five years are treated as deprived assets and remain assessable for five years, potentially reducing your pension.
• Failing to update Centrelink after asset changes: You are legally required to notify Services Australia within 14 days of a change in your assets or income. Failure to do so can result in overpayments that must be repaid.
• Overlooking the home sale proceeds exemption: If you sell your home and intend to purchase another, the proceeds are exempt from the assets test for up to 24 months. This window requires careful planning.
• Ignoring the impact of account-based pension drawdowns: Drawing down your account-based pension reduces your assessable assets, which may increase your Age Pension entitlement. A financial planner can model the optimal drawdown rate.

Australian Regulatory Context

The Age Pension is administered by Services Australia under the Social Security Act 1991. Thresholds are indexed twice yearly — on 1 July and 20 September — to reflect changes in the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI).

Financial planners who provide advice on Age Pension strategies must hold an Australian Financial Services Licence (AFSL) or operate as an authorised representative of an AFSL holder, as regulated by the Australian Securities and Investments Commission (ASIC). Under the Delivering Better Financial Outcomes (DBFO) reforms, financial planners are subject to a modernised best interests duty and must provide advice that is genuinely in the client's best interests.

The Australian Taxation Office (ATO) also plays a role in retirement income planning, particularly in relation to superannuation tax treatment, the transfer balance cap (currently $1.9 million for 2026-27), and the interaction between superannuation and the means test.

Questions to Ask Your Financial Planner

When engaging a financial planner to review your Age Pension position, consider asking the following questions to ensure you receive comprehensive, tailored advice:

1. Are you licensed to provide advice on Centrelink and Age Pension strategies, and are you registered on the ASIC Financial Advisers Register?
2. Will you model both the assets test and the income test for my specific situation, including the impact of deeming on my financial assets?
3. What strategies do you recommend to reduce my assessable assets or income, and what are the risks and costs of each?
4. How will my superannuation drawdown strategy interact with my Age Pension entitlement over time?
5. What are my obligations to notify Services Australia of changes to my assets or income?
6. How will you review and update my strategy as thresholds change each year?

How MyMoney® Can Help

Navigating the Age Pension means test — with its interacting assets test, income test, deeming rates, and exempt asset rules — requires specialist expertise. A qualified financial planner can model your complete financial picture, identify strategies to maximise your entitlement, and ensure you remain compliant with your Centrelink obligations.

MyMoney® connects Australians with licensed financial planners who specialise in retirement income, Centrelink strategies, and superannuation planning. You can post a brief describing your retirement planning needs and receive proposals from qualified professionals, or browse financial planners on the MyMoney® marketplace to find an adviser with the right expertise for your situation.

Taking the time to review your Age Pension position with a financial planner — particularly as thresholds change each year — can make a meaningful difference to your retirement income and financial security.