Age Pension Income Test: The 50c Taper Explained With a Part-Time Work Example
Under the Age Pension income test, a single pensioner can earn up to $218 a fortnight (a couple $380 combined) before their payment is touched. Above that, a single's pension drops by 50c for every extra $1; for couples it's 25c each per $1 over. The pension stops entirely once income reaches $2,619.80/ft (single) or $4,000.80/ft (couple combined).
That sounds simple, but two things trip people up: the Work Bonus (which shields the first slice of your wages before the taper even runs) and deemed income (the income test counts an assumed return on your savings and investments, not just your pay cheque). This guide walks through both with a real worked example, and explains why Centrelink quietly runs the income test and the assets test side by side and only ever pays you the lower of the two.
The income test in plain English
Centrelink looks at your assessable income each fortnight. The first slice — the income free area — has no effect on your pension at all. Every dollar above it reduces your fortnightly payment by the taper rate. Keep adding income and eventually the reduction wipes the whole pension out: that's the cut-off point.
| Income test setting (from 20 March 2026) | Single | Couple (combined) |
|---|---|---|
| Income free area (no effect below this) | $218 / fortnight | $380 / fortnight |
| Taper rate above the free area | 50c per $1 | 25c each per $1 (50c combined) |
| Income cut-off (pension stops) | $2,619.80 / fortnight | $4,000.80 / fortnight |
Source: Services Australia, Income test for Age Pension. Figures change on 20 March and 20 September each year with indexation — always confirm the current numbers on the official page.
Why couples use 25c, not 50c
For a couple, the income test applies to your combined income, but the taper is split across the two of you — 25c each per dollar over the free area. Across the household that's still 50c per dollar, it's just shared, which is why a couple's free area and cut-off are higher than double a single's free area.
The Work Bonus runs first — before the taper
If you do paid work after pension age, the Work Bonus reduces how much of your employment income counts. Each fortnight, $300 of eligible work income is knocked down to zero before the income test sees it. Unused Work Bonus rolls up into a balance (up to a $11,800 maximum) you can draw on in busier work fortnights. You don't apply for it — Centrelink applies it automatically once you declare your income.
The order matters: Work Bonus is applied first to your wages, and only the leftover counts toward the income test free area and taper. Deemed income from savings and investments does not get the Work Bonus — it's not employment income.
Worked example — Joan, single, working part-time
Joan is 68, single, and over Age Pension age. She works casual shifts at a local nursery and earns $600 per fortnight in wages. She also has $80,000 in a term deposit and savings that the income test "deems" to earn income. Here's how Centrelink works out her assessable income, step by step.
Step 1 — Apply the Work Bonus to her wages.
Wages: $600/ft. Work Bonus offset: −$300/ft.
Assessable employment income = $600 − $300 = $300/ft.
Step 2 — Add deemed income from financial assets.
The income test ignores what her savings actually earn and instead applies the official deeming rates. For a single person, a low rate applies to financial assets up to $64,200 and a higher rate to the balance above it. Joan's $80,000 sits partly under and partly over that threshold, so a portion is deemed at the lower rate and the rest at the higher rate. Suppose this produces deemed income of about $50/ft (deeming rates change with indexation — confirm the current rates and run your own figure on the official page).
Assessable deemed income ≈ $50/ft.
Step 3 — Total her assessable income.
$300 (post–Work Bonus wages) + $50 (deemed) = $350/ft.
Step 4 — Subtract the income free area, then apply the taper.
Free area (single): $218/ft.
Income over the free area: $350 − $218 = $132/ft.
Taper (single): 50c × $132 = $66/ft reduction.
Result: Joan's fortnightly pension is reduced by about $66 under the income test. Notice the power of the Work Bonus: without it, her $600 wages plus $50 deemed = $650 assessable, which is $432 over the free area, tapering off about $216/ft. The Work Bonus saved her roughly $150/ft in pension. (Centrelink then also runs the assets test — Step 5.)
Step 5 — Compare with the assets test.
Centrelink calculates a pension rate under the assets test too, and pays Joan whichever test gives the lower pension. With modest assets, Joan is "income tested" — the income test gives the lower payment, so that's what she gets.
Deemed income: the part people forget
The single biggest income-test surprise is that your savings and investments are assumed to earn income whether they do or not. Centrelink "deems" a return on financial assets — bank accounts, term deposits, shares, managed funds, most super once you're over pension age — using set deeming rates. A lower rate applies up to a threshold ($64,200 for a single, $106,200 for a couple combined from 20 March 2026), and a higher rate applies above it.
This deemed amount is added to your other assessable income (like post–Work Bonus wages) before the free area and taper are applied. So even a retiree with no job can be income-tested purely on deemed income from a large cash balance. The actual interest you earn is irrelevant for the test.
Two tests, lower result wins
The Age Pension always runs two means tests: the income test (above) and the assets test. Centrelink calculates a pension rate under each, then pays you the lower of the two. You don't get to pick.
- Income tested: the income test produces the lower payment — common for people with part-time work or large deemed income but modest non-home assets.
- Assets tested: the assets test produces the lower payment — common for people with significant investments, an investment property, or large super balances.
This is why two retirees with the same bank balance can receive very different pensions — one might be capped by the assets test, the other by the income test.
Quick reference: the income test maths
| Step | What happens |
|---|---|
| 1 | Apply Work Bonus ($300/ft) to employment income only |
| 2 | Add deemed income from financial assets |
| 3 | Total = assessable income |
| 4 | Subtract the free area ($218 single / $380 couple) |
| 5 | Apply the taper (50c single / 25c each per $1 over) |
| 6 | Compare to the assets-test result — lower payment wins |
Frequently asked questions
How much can I earn before my Age Pension is affected?
A single person can have up to $218 a fortnight of assessable income (a couple $380 combined) with no effect on their pension. For employment income, the Work Bonus also shields the first $300/ft of wages before this free area is even reached. Confirm current figures on Services Australia.
What is the 50c taper rate?
For every $1 of assessable income above the income free area, a single pensioner's fortnightly payment is reduced by 50 cents. For couples, the reduction is 25 cents each per $1 of combined income over the free area (50c across the household).
How does the Work Bonus change my income test?
The Work Bonus reduces $300/ft of eligible employment income to zero before the income test runs, and unused amounts build a balance up to $11,800. It applies only to work income, not to deemed income from savings. See how the Work Bonus works.
Is the income from my savings counted even if I don't withdraw it?
Yes. Centrelink applies "deemed" income to financial assets — bank accounts, term deposits, shares, managed funds and super (once over pension age) — using set deeming rates, regardless of the actual return. That deemed amount is added to your assessable income before the free area and taper.
At what income does the Age Pension stop completely?
The pension cuts out at $2,619.80 a fortnight of assessable income for a single person, and $4,000.80 a fortnight combined for a couple living together. These figures move with indexation each March and September.
Why does Centrelink run both an income test and an assets test?
Both tests are run on every claimant, each producing a pension rate. Centrelink pays the lower of the two. This stops people with high income but low assets — or low income but high assets — from receiving a full pension.
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General information, not personal Australia tax/legal advice. Verify with a qualified professional.
Sources: Services Australia — Income test for Age Pension, How a Work Bonus works, Deeming, Assets test for Age Pension. Figures current from 20 March 2026; rates and thresholds are indexed each March and September.