Superannuation and the Age Pension: How the Assets and Income Tests Work
For many Australians, retirement income comes from a combination of superannuation and the Age Pension, not one or the other exclusively. Understanding how they interact matters for planning how much you'll actually have to live on.
Eligibility basics
The Age Pension has its own age eligibility (linked to your date of birth) and residency requirements, separate from your super's preservation age — it's entirely possible to be eligible to access your super before you're eligible for any Age Pension, or vice versa in some circumstances.
The assets test
Once you're eligible by age, Services Australia assesses your assets (including your super balance once you're of Age Pension age, plus most other assets excluding your principal home) against thresholds that differ depending on whether you're single or partnered, and whether you own your home. Above a certain asset level, your pension reduces; above a higher threshold, it cuts out entirely.
The income test
Separately, Services Australia also assesses deemed income from your financial assets (including account-based pensions, generally using a deeming rate rather than your actual investment returns) against income thresholds. Whichever test — assets or income — results in the lower pension amount is the one that applies to you.
Why the interaction matters for how you structure your retirement
Because both your accessible super and how you draw an income from it can affect your Age Pension entitlement, decisions like how much to draw down each year, whether to take a lump sum versus a pension (see Lump Sum or Income Stream?), and how downsizer contributions are treated (see Downsizer Contributions Explained) can all have flow-on effects on your pension entitlement, not just your super balance directly.
A part-pension can bring value beyond the payment itself
Even a partial Age Pension can bring value beyond the direct payment for some people, since it can come with access to the Pensioner Concession Card and associated discounts on health, transport and utilities in many cases. Whether it's worth applying for a smaller part-pension is a personal call that depends on individual circumstances — many people find it's worth factoring in rather than assuming it "isn't worth the paperwork," but a licensed financial adviser or Services Australia can help weigh this up for your specific situation.
Frequently asked questions
Does my super count toward the assets test before I retire?
Generally, super in accumulation phase that you haven't yet accessed isn't counted until you reach Age Pension age, at which point it typically is included regardless of whether you've started drawing on it.
Does my home count toward the assets test?
Your principal home is generally exempt from the assets test, though this can affect which asset threshold applies to you (homeowners generally have a lower threshold than non-homeowners, reflecting that a home is excluded).
Can working part-time in retirement affect my Age Pension?
Yes, employment income is assessed under the income test, alongside deemed income from financial assets — see Working Part-Time After 60 for how this specifically interacts with the pension.
Age Pension eligibility rules, asset and income test thresholds, and taper rates are set by Services Australia and indexed periodically — confirm current figures on servicesaustralia.gov.au before publishing.
This article contains general advice only. It has been prepared without taking into account your personal objectives, financial situation or needs, and does not constitute a recommendation to acquire, hold, or dispose of any financial product. Before acting on this information, consider its appropriateness to your own circumstances, and seek independent financial, tax and/or legal advice, or speak with a licensed financial adviser, before making any decision.
