Account-Based Pension and the Age Pension: How Centrelink Counts Your Super Income
For most retirees, your account-based pension is not counted as the income you actually draw. Centrelink applies deeming — a fixed assumed rate of return — to your balance for the income test, while the full account balance counts dollar-for-dollar under the assets test. The lower of the two tests sets your Age Pension. Below, a real $400,000 example walks through both.
Two tests, two completely different treatments
This is the single biggest source of confusion when people first claim the Age Pension. Your account-based pension (sometimes called an allocated pension) gets assessed twice — once under the income test and once under the assets test — and the two methods bear no resemblance to each other.
- Income test: Centrelink ignores the actual income you withdraw. Instead it deems your balance to earn a set rate of return, regardless of how the fund actually performs.
- Assets test: The entire current balance is counted as an assessable financial asset.
Services Australia then runs both tests and pays you under whichever one produces the lower pension. You can't pick; the system always lands on the more restrictive result. (Services Australia — income and assets tests.)
Account-based pensions started on or after 1 January 2015 are deemed under the income test, exactly like a bank account or share portfolio. Pensions that started before that date may be grandfathered and assessed under the old "deductible amount" rules — but only if strict conditions are met (covered below). (DSS Social Security Guide 3.9.3.31.)
How deeming works for the income test
Deeming assumes your financial assets earn a fixed return — currently a two-tier rate. It doesn't matter whether your account-based pension grew 12% or fell 5% last year; Centrelink only ever counts the deemed figure.
The rates and thresholds below apply from 20 March 2026 to 19 September 2026 (after the deeming-rate freeze ended on 20 March 2026):
| Situation | Lower rate (1.25%) applies to | Higher rate (3.25%) applies to |
|---|---|---|
| Single | First $64,200 of financial assets | Everything above $64,200 |
| Couple (at least one on a pension) | First $106,200 combined | Everything above $106,200 |
Source: Services Australia — Deeming. Deeming rates are reviewed regularly; always confirm the current figures before relying on them.
Your deemed income from all financial assets is added together — bank accounts, term deposits, shares and your account-based pension all sit in one pool. The total is then run through the income test, where the maximum single pension is reduced by 50 cents for every dollar of fortnightly income above the free area of $218 (single) or $380 combined (couple). (Services Australia — income test.)
Worked example: a $400,000 account-based pension
Patricia, 67, single, homeowner. She has an account-based pension worth $400,000 (started in 2019, so it is deemed, not grandfathered), $15,000 in a savings account, and $20,000 of personal contents and a small car. She has no other income. Here is exactly how Centrelink assesses her.
Step 1 — Pool her financial assets for deeming.
Account-based pension $400,000 + savings $15,000 = $415,000 in deemed financial assets. (Her home, car and contents are not financial assets, so they aren't deemed.)
Step 2 — Apply the deeming rates.
| Tier | Amount | Rate | Deemed income / year |
|---|---|---|---|
| Lower tier | $64,200 | 1.25% | $802.50 |
| Higher tier | $350,800 | 3.25% | $11,401.00 |
| Total deemed income | $415,000 | — | $12,203.50 / year |
That works out to about $467.78 per fortnight ($12,203.50 ÷ 26.0893 fortnights). Note: her actual minimum drawdown might be far higher than this — but Centrelink ignores the real withdrawal entirely.
Step 3 — Run the income test.
Income above the free area: $467.78 − $218 = $249.78.
Reduction at 50c per dollar: $249.78 × 0.50 = $124.89 per fortnight.
Income-test pension: $1,200.90 (max single rate, incl. supplements, from 20 March 2026) − $124.89 = $1,076.01 per fortnight.
Step 4 — Run the assets test.
Assessable assets: $400,000 + $15,000 + $20,000 = $435,000 (the home is exempt).
Single-homeowner full-pension threshold: $321,500. She is $113,500 over.
Reduction: ($113,500 ÷ $1,000) × $3 = 113.5 × $3 = $340.50 per fortnight.
Assets-test pension: $1,200.90 − $340.50 = $860.40 per fortnight.
Step 5 — Take the lower result.
Income test pays $1,076.01; assets test pays $860.40. Centrelink pays the lower figure, so Patricia receives roughly $860.40 per fortnight — about $22,366 a year — under the assets test. For someone with a balance this size, the assets test is usually the binding one.
The lesson: even though her income assessment looks generous (deemed income is modest), it's the asset value of the same $400,000 that drags her pension down. Understanding which test binds you is the key to every Age Pension planning decision.
The full balance counts under the assets test
There's no discount, no exemption and no special treatment for super once you're Age Pension age. Whatever your account-based pension is worth on the day Centrelink reviews it — the full balance — is an assessable financial asset. (Services Australia — assets test.)
Current assets-test reference points (homeowner, from 20 March 2026):
| Status | Full pension up to | Part pension cuts off at |
|---|---|---|
| Single homeowner | $321,500 | ~$722,000 |
| Couple homeowner (combined) | $481,500 | ~$1,085,000 |
| Single non-homeowner | $579,500 | ~$980,000 |
| Couple non-homeowner (combined) | $739,500 | ~$1,343,000 |
The assets test reduces your pension by $3 per fortnight for every $1,000 of assets above the relevant threshold. Cut-off points move each indexation cycle; verify at the link above.
Grandfathered pre-2015 account-based pensions
If you started your account-based pension before 1 January 2015, it can keep being assessed under the older, often more favourable, deductible-amount method for the income test — meaning it is not deemed. To stay grandfathered you must meet all of these:
- The same account-based pension was in place before 1 January 2015 and has continued unchanged since;
- You were receiving an income support payment (such as the Age Pension) immediately before 1 January 2015; and
- You have received an income support payment continuously ever since — even one gap breaks grandfathering permanently.
(DSS Social Security Guide 3.9.3.31.)
How the deductible amount works
Under grandfathering, the assessable income is the annual payment you draw minus a tax-free "deductible amount" that represents a return of your original capital:
Deductible amount = (purchase price − any commutations) ÷ relevant number (life expectancy at commencement)
Example: a pension commenced with $300,000 and a relevant number of 20 has a deductible amount of $15,000 a year. If the retiree draws $24,000, only $24,000 − $15,000 = $9,000 is assessed as income — often far less than the deemed figure would be.
Critical warning: grandfathering is fragile. Rolling the pension into a new product, switching providers, or "refreshing" it almost always resets the start date and forces it onto deeming. The assets-test treatment is unchanged either way (full balance still counts), so the only thing at stake is the income test. Get advice before touching a grandfathered pension — the loss can be permanent.
How drawing down the balance lifts your pension over time
Because the assets test commonly binds for people with sizable balances, spending your account-based pension generally increases your Age Pension. Every $1,000 you draw down and consume (rather than reinvest into another assessable asset) removes $3 per fortnight of reduction — about $78 a year of pension restored per $10,000 spent under the assets test.
Back to Patricia: if over a few years her balance falls from $400,000 to $300,000 (after using the money on living costs and a holiday), her assessable assets drop to ~$335,000 — only $13,500 over the threshold. Her assets-test reduction shrinks to about $40.50 a fortnight, and her pension climbs toward the income-test figure of roughly $1,090 a fortnight. In other words, the structure is self-correcting: as your super is consumed, the Age Pension steadily backfills the gap.
- Income test: your account-based pension is deemed (1.25% / 3.25% tiers), not assessed on what you actually withdraw — unless it's grandfathered.
- Assets test: the full current balance counts dollar-for-dollar as a financial asset, with no exemption.
- Centrelink pays the lower of the two test results; for larger balances the assets test usually binds.
- Grandfathered pre-2015 pensions use the deductible-amount method for income only — and break permanently if you switch products or lose continuous income support.
- Drawing down your balance reduces assessable assets and generally lifts your Age Pension over time (~$78/year restored per $10,000 spent under the assets test).
Does Centrelink count the actual income I withdraw from my account-based pension?
No — not for a deemed pension. Centrelink ignores your real withdrawals and instead deems your balance to earn a set rate (currently 1.25% on the first tier and 3.25% above it). Your minimum drawdown could be much higher than the deemed amount, but only the deemed figure feeds the income test. The exception is a grandfathered pre-2015 pension, which uses the deductible-amount method instead.
Is my super counted under both the income test and the assets test?
Yes. The same account-based pension is assessed under both tests using completely different methods — deemed income under the income test, and full balance under the assets test. Centrelink runs both and pays you under whichever one produces the lower pension.
How is a $400,000 account-based pension deemed?
For a single person, the first $64,200 is deemed at 1.25% ($802.50) and the remaining $335,800 at 3.25% ($10,913.50), giving roughly $11,716 a year, or about $449 a fortnight, in deemed income from the pension alone. Combine it with any other financial assets to get your total deemed income for the income test.
What makes an account-based pension "grandfathered"?
It must have started before 1 January 2015, stayed unchanged since, and you must have been on an income support payment immediately before that date and continuously ever since. Grandfathering only affects the income test (via the deductible-amount method) — the full balance still counts under the assets test.
Will I lose grandfathering if I move my pension to a new fund?
Almost always, yes. Rolling over, commuting and restarting, or switching providers resets the commencement date and pushes the pension onto deeming permanently. Because the change is irreversible, get personal advice from a qualified financial adviser before touching a grandfathered pension.
Why does spending my super sometimes increase my Age Pension?
When the assets test is the binding test, every $1,000 of assessable assets above the threshold cuts your pension by $3 a fortnight. As you draw down and consume the balance, your assessable assets fall and that reduction shrinks — so your Age Pension rises. The system effectively backfills as your super is used up.
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