Age Pension income test guide for work, deeming and passive income.
The income test can reduce an Age Pension estimate even when the assets test looks acceptable. Employment income, deemed income from financial assets, passive income, foreign pensions and some defined-benefit income can all matter.
Use the Age Pension test trio together.
If you are checking one test, you should usually check the other two as well. These pages work as a cluster:
Rules checked 14 June 2026 against the current Services Australia pages.
Income-test figures RetireAI uses for modelling.
The income test starts with the relevant income free area, then reduces the maximum Age Pension when assessable income sits above that amount. The assets test still needs to be checked separately, because the lower payment estimate usually applies.
| Household | Income free area | Reduction above free area |
|---|---|---|
| Single | $218 per fortnight | 50 cents per dollar |
| Couple combined | $380 per fortnight | 50 cents per dollar combined |
Income that can affect an Age Pension estimate.
Deemed income
Financial assets such as bank accounts, term deposits, shares and managed funds can produce deemed income for the income test, even if actual returns are different.
Employment income
Paid work can affect the income test, but Work Bonus treatment may reduce how much employment income is counted.
Passive income
Rent, private pensions, foreign pensions, annuities and some defined-benefit income can need careful treatment.
Why the income test can bind before the assets test.
A retiree may sit under the assets-test threshold but still have assessable income above the income free area. That can happen where financial assets produce deemed income, where a person keeps working part-time, or where passive income continues into retirement.
- Financial assets can affect the assets test and also create deemed income.
- Employment income should be separated from investment income because Work Bonus treatment can apply differently.
- Foreign pension income, rental income and defined-benefit income should be flagged for official checking.
Common income-test traps.
Ignoring deeming
Actual interest is not always the income-test number. Deeming can apply to financial assets.
Mixing income types
Work income, passive income and deemed income should not be treated as one generic number.
Forgetting Work Bonus
Employment income may receive Work Bonus treatment, but the details need to be checked carefully.
Skipping the assets test
The income test is only half the means-test picture. The assets test can still produce the lower estimate.
Before using an income-test calculator
- List bank accounts, term deposits, shares and managed funds.
- Separate employment income from investment income.
- Record passive income, rent, foreign pensions and defined-benefit income.
- Check whether Work Bonus treatment may apply.
- Compare the result against the assets-test estimate.
How RetireAI uses the income test
RetireAI keeps the income-test estimate next to the assets test, deeming, retirement spending, super drawdowns and timing assumptions, so the household can see what is actually driving pension pressure.
Income test questions people ask.
Does deeming replace actual interest?
For income-test purposes, deeming estimates income from financial assets even if actual returns are different.
Can part-time work reduce the pension?
Yes, but Work Bonus treatment can affect how much employment income is counted.
Which test decides the result?
The assets test and income test are both checked. The lower payment estimate after reductions usually matters.