Age Pension Income Test: How $218/ft Free Area + 50c Taper Sets Your Payment
From 20 March 2026, a single person can have up to $218 a fortnight in assessable income (a couple $380 a fortnight combined) before the Age Pension starts to reduce. Every dollar above that free area cuts your pension by 50 cents — until, for a single, income reaches $2,619.80 a fortnight and the pension hits $0. This page shows the exact maths with a worked example.
The income test in one sentence
Centrelink looks at how much income you have each fortnight, ignores the first slice (the “income free area”), and then docks 50 cents of pension for every dollar above it. The bigger your income, the smaller your pension — on a smooth, predictable slide rather than a cliff edge.
There are only three numbers you really need:
| Income test setting (from 20 March 2026) | Single | Couple (combined) |
|---|---|---|
| Income free area (full pension up to) | $218 / fortnight | $380 / fortnight |
| Taper rate above the free area | 50c per $1 | 50c per $1 combined* |
| Income cut-off (pension = $0) | $2,619.80 / fortnight | $4,000.80 / fortnight |
*For couples the 50c reduction is split — each partner’s pension drops by 25c for every combined dollar over $380. The combined effect is still 50c. Figures are from Services Australia — Income test for Age Pension, effective 20 March 2026.
What actually counts as “income”
This is where most people guess wrong. Centrelink’s definition of income is broader than your bank deposits. The main components are:
1. Deemed income from financial assets
Centrelink does not use the actual interest or dividends your savings, term deposits, shares and super (once you’re of pension age) earn. Instead it “deems” them to earn a set rate — a low rate on the first slice of financial assets and a higher rate above a threshold — regardless of what they truly return. So $300,000 in the bank earning almost nothing is still treated as producing income for the test. See Services Australia — How deeming works.
2. Employment income (with the Work Bonus)
Wages and salary count, but the Work Bonus lets most pensioners earn a meaningful amount from work before any of it is assessed. This is why a part-time job often costs you far less pension than people fear — the first chunk of employment income is set aside before the income test sees it.
3. Rent and other property income
Net rental income from an investment property is assessed. So is income from a business or sole-trader activity, after allowable expenses.
4. Foreign pensions and other regular payments
Overseas pensions, certain compensation payments, and most regular income streams are counted (converted to Australian dollars). Account-based pensions from your super are assessed under their own rules.
Meet Robert, 68, single, renting. After deeming his savings and adding a small part-time wage (after the Work Bonus), Centrelink assesses his income at $600 a fortnight. He passes the assets test comfortably, so the income test decides his payment.
Step 1 — subtract the free area.
$600 − $218 = $382 of income above the free area.
Step 2 — apply the 50c taper.
$382 × $0.50 = $191 fortnightly reduction.
Step 3 — subtract from the maximum single rate.
Maximum single pension (incl. Pension Supplement + Energy Supplement) is $1,200.90 a fortnight from 20 March 2026.
$1,200.90 − $191 = $1,009.90 a fortnight.
Robert receives roughly $1,009.90 a fortnight (about $26,257 a year) — a part Age Pension. He keeps half of every extra dollar he earns, which is the key intuition: working or earning more never leaves you worse off overall, it just trades pension for income at a 50% rate.
Where the single pension hits exactly $0
Run the taper to its end and you find the cut-off point. The maths: take the maximum single rate of $1,200.90, divide by the 50c taper ($0.50), then add back the $218 free area.
$1,200.90 ÷ $0.50 = $2,401.80 of income that the taper can “eat”.
$2,401.80 + $218 = $2,619.80 a fortnight.
That matches the official single income cut-off of $2,619.80 a fortnight. Above it, a single person gets no pension. For a couple, the combined cut-off is $4,000.80 a fortnight (Services Australia).
Even $1 of pension matters. Losing the pension entirely can also mean losing the Pensioner Concession Card and its discounts on medicines, transport and utilities. People sitting just above the cut-off sometimes restructure their income to stay marginally inside it — worth a conversation with an adviser before you write the pension off.
Why both the income test AND the assets test run
Centrelink doesn’t pick one test for you. It runs both the income test and the assets test, calculates a pension under each, and then pays you the lower of the two results. The test that gives the smaller payment is the one “binding” you.
| Scenario | Income test says | Assets test says | You receive |
|---|---|---|---|
| Low assets, decent income | $900 / ft | $1,200.90 / ft | $900 / ft (income test binds) |
| High assets, low income | $1,150 / ft | $700 / ft | $700 / ft (assets test binds) |
| Comfortably under both | $1,200.90 / ft | $1,200.90 / ft | $1,200.90 / ft (full pension) |
The practical lesson: passing the income test with room to spare doesn’t guarantee a big pension if your assets are high — and vice versa. Always check both before assuming a figure.
- Free area (from 20 Mar 2026): $218/ft single, $380/ft couple combined — income up to here doesn’t reduce your pension.
- Taper: every $1 above the free area cuts pension by 50c (for couples, 25c each from the combined total).
- Worked example: a single with $600/ft assessable income gets ($600−$218)×$0.50 = $191 off, so $1,200.90−$191 = $1,009.90/ft.
- Cut-off: the single pension reaches $0 at $2,619.80/ft ($4,000.80/ft for a couple combined).
- Income is broader than you think: deemed income, net rent, foreign pensions and employment income (less the Work Bonus) all count.
- Both tests run, lower result wins — check the assets test too.
Official sources
- Services Australia — Income test for Age Pension (free areas, taper, cut-off points)
- Services Australia — How much Age Pension you can get (maximum rates & supplements)
- Services Australia — How deeming works
- Services Australia — Work Bonus
What is the Age Pension income free area in 2026?
From 20 March 2026, the income free area is $218 a fortnight for a single person and $380 a fortnight combined for a couple. Assessable income up to these amounts does not reduce your pension. Above them, the 50c taper applies.
How much does the pension drop for every dollar I earn?
The single rate (and the combined couple rate) reduces by 50 cents for every $1 of assessable income above the free area. For couples this is split as 25 cents off each partner’s pension per combined dollar.
At what income does the single Age Pension reach $0?
A single person’s pension cuts out at $2,619.80 a fortnight of assessable income (from 20 March 2026). For a couple, the combined cut-off is $4,000.80 a fortnight. These are the income-test cut-offs; the assets test may cut your pension out sooner.
What counts as income for the Age Pension test?
Deemed income from financial assets (savings, term deposits, shares, super in pension phase), net rental income, business income, foreign pensions, and employment income (after the Work Bonus). Centrelink uses deemed rates for financial assets, not the actual return.
Why does Centrelink run two tests?
Centrelink calculates your pension under both the income test and the assets test, then pays the lower of the two amounts. This stops people with high assets but low income (or vice versa) receiving a full pension when one measure shows they have more means.
Does a part-time job always reduce my pension?
Not as much as people expect. The Work Bonus sets aside a portion of employment income before the income test sees it, so part-time wages often have little or no impact until they’re sizeable. Check current Work Bonus limits on the Services Australia page.
Get the free Age Pension income-test checklist
A one-page worksheet to estimate your fortnightly payment in five minutes — deeming, Work Bonus and both tests.
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