Super in Pension Phase: How $500k Counts in the Age Pension Assets Test
Once you reach Age Pension age, the super you have moved into the pension (drawdown) phase is counted in full under the assets test — and the same balance is also assessed under the income test through deeming. For a single homeowner with $500,000 in pension-phase super and no other assets, the assets test cuts the maximum single pension from $1,200.90 a fortnight to about $665.40, because every $1,000 above the $321,500 free area shaves $3.00 a fortnight off the payment.
The rule in one line: accumulation phase is hidden, pension phase is not
Centrelink treats your superannuation completely differently depending on your age and which "phase" the money sits in.
Before you reach Age Pension age (currently 67): super held in the accumulation phase is exempt from both the assets test and the income test — as long as you have not started drawing an income stream from it. This is why a 64-year-old can have a large super balance and still receive, say, a part Age Pension on the basis of a younger spouse, or qualify for other payments, without the super counting.
From the day you reach Age Pension age: your super becomes fully assessable, whether it stays in accumulation or you have moved it into a retirement income stream (an account-based pension). Services Australia is explicit on this point: super "becomes assessable" once you reach pension age, and is then counted under both tests. The phase no longer hides it — reaching pension age is the trigger, not the act of starting a pension. (Services Australia — how super affects your payment)
Many people believe that "moving super into pension phase" is what makes it count. It is the other way around. Reaching Age Pension age is the trigger. Once you hit 67, your super is assessed regardless of phase. Starting an account-based pension can still be a smart move — it makes the earnings tax-free and lets you draw an income — but it does not change how Centrelink counts the capital.
How super counts under the assets test
The current account balance of your super (or account-based pension) is the asset value Centrelink uses. There is no discount and no exemption for a homeowner couple's super, no matter how the fund is invested. That balance is added to your other assessable assets — car, contents, bank accounts, shares, investment property — while your principal home is exempt (the land it sits on up to two hectares is also exempt for most people). (Services Australia — asset types)
The thresholds and the $3/$1,000 taper
Under the assets test, you get the full pension while your assessable assets stay under the asset-free area. Above that, the pension reduces by $3.00 per fortnight for every $1,000 of assets over the limit, until it cuts off entirely at the upper threshold. These figures apply from 20 March 2026. (Services Australia — assets test)
| Situation (homeowner) | Full pension if assets under | Part pension cuts off at |
|---|---|---|
| Single | $321,500 | $722,000 |
| Couple (combined) | $481,500 | $1,085,000 |
Non-homeowners get higher free areas (an extra $252,000 on the lower threshold), reflecting that they do not have an exempt home. The $3.00 per $1,000 taper is the same for everyone. (Services Australia — assets test)
Worked example: $500,000 of pension-phase super, single homeowner
Meet Dorothy. She is 67, single, owns her home outright, and has just moved $500,000 of super into an account-based pension. She has $5,000 in the bank, a car worth $15,000 and home contents she values at $10,000 — so $30,000 of "other" assessable assets. Her total assessable assets are $530,000 (her home is exempt). Here is how Centrelink runs both tests against the maximum single rate of $1,200.90 a fortnight (base $1,100.30 + pension supplement $86.50 + energy supplement $14.10).
Step 1 — Assets test.
Assets over the free area: $530,000 − $321,500 = $208,500.
Number of whole $1,000 blocks: 208 (Centrelink works in $250 steps; we use whole thousands here for clarity).
Reduction: 208.5 × $3.00 = $625.50 a fortnight.
Assets-test entitlement: $1,200.90 − $625.50 = $575.40 a fortnight.
Step 2 — Income test (deeming). Centrelink does not use the actual earnings of the pension; it deems the $500,000 (plus the $5,000 bank account) to earn a set rate. For a single person from 20 March 2026 the first $64,200 is deemed at 1.25% and the rest at 3.25%.
Deemed financial assets: $505,000.
$64,200 × 1.25% = $802.50/yr.
$440,800 × 3.25% = $14,326/yr.
Total deemed income ≈ $15,128.50/yr ≈ $580 a fortnight.
Income over the $218 free area: $580 − $218 = $362.
Reduction at 50c per $1: $181 a fortnight.
Income-test entitlement: $1,200.90 − $181 = $1,019.90 a fortnight.
Step 3 — Centrelink pays the lower of the two. The assets test gives $575.40; the income test gives $1,019.90. Centrelink uses whichever produces the smaller payment, so Dorothy is assets-tested and receives roughly $575 a fortnight (about $14,960 a year), plus her Pensioner Concession Card. Both tests run on the same $500,000 — the asset value drives the assets test and the deemed income drives the income test — but only one ends up binding.
Why both the asset value and the deemed income are assessed
This trips up a lot of people: it feels like the same $500,000 is being counted twice. It is — but for two different purposes. The assets test asks "how much wealth do you hold?" and the income test asks "how much income could that wealth reasonably produce?" Centrelink calculates a result under each, then pays the lower one. You are never penalised twice in the same calculation, but you do need to clear both hurdles. For most retirees with a substantial super balance and a paid-off home, the assets test is the binding one. (Services Australia — income test) (Services Australia — deeming)
| Test | What it looks at | Dorothy's result |
|---|---|---|
| Assets test | $530,000 total assets; $3/$1,000 over $321,500 | ~$575/fortnight (binding) |
| Income test | Deemed income on $505,000; 50c/$1 over $218 | ~$1,020/fortnight |
| Pension paid | The lower of the two | ~$575/fortnight |
- Reaching Age Pension age (67) is the trigger — not starting a pension. Before then, super in accumulation phase is exempt; after then, it is fully assessable in any phase.
- Your super's current balance is the asset value — no discount, no special treatment.
- Above the single homeowner free area of $321,500, the pension drops $3.00 a fortnight per $1,000 of assets, cutting off at $722,000.
- The same balance is also deemed for the income test (1.25% / 3.25% for a single from 20 March 2026), but Centrelink pays only the lower of the two results.
- For a single homeowner, $500,000 of pension-phase super typically means a part Age Pension of roughly $575–$665 a fortnight, depending on other assets, plus the concession card.
Strategy: timing the move into pension phase around your claim
Because phase does not change whether super counts, the timing decisions that actually move the needle are about your age and your partner's age, not the accumulation-to-pension switch itself.
1. The younger-spouse window
If one member of a couple is under Age Pension age, that person's super held in accumulation phase is exempt until they reach 67. Couples sometimes hold more of the household super in the younger partner's accumulation account to keep it off the books while the older partner claims. This is legitimate, but watch the day the younger partner turns 67 — the family's assessable assets can jump overnight and trip the cut-off.
2. Don't rush to start a pension before pension age expecting a Centrelink benefit
Starting an account-based pension at, say, 65 makes the fund's earnings tax-free and gives you an income — good tax planning. But it will not help your Centrelink position, because the super is exempt anyway until you turn 67. The Centrelink-relevant question is simply whether you have reached pension age.
3. Spending or repositioning before you claim
Legitimate steps people take before lodging a claim include paying down the mortgage on the (exempt) home, doing deferred home maintenance, or pre-paying a funeral bond (exempt up to a cap). These genuinely reduce assessable assets. Centrelink applies gifting rules — you can give away up to $10,000 per financial year and $30,000 over five years before the excess is still counted as your asset for five years — so simply handing money to the kids does not work. (Services Australia — gifting)
Back to Dorothy. Suppose that, before claiming, she finds an extra $40,000 in a term deposit she had forgotten about, taking her total assessable assets to $570,000. She has overdue home repairs to do anyway. If she spends $30,000 on those repairs (money spent on the exempt home leaves the assessable pile), her assessable assets fall from $570,000 to $540,000. At $3/$1,000, every $1,000 she removes from the assessable pile adds $3 a fortnight back to her pension — so that $30,000 is worth about $90 a fortnight, or ~$2,340 a year, for as long as she stays in the taper zone. The same logic does not apply once she is below the free area or above the cut-off.
Frequently asked questions
Does moving my super into pension phase make it count for the Age Pension?
No. The trigger is reaching Age Pension age (currently 67), not the phase. Once you turn 67, your super is fully assessable whether it stays in accumulation or you start an account-based pension. Starting a pension changes the tax treatment (earnings become tax-free) but not how Centrelink counts the capital.
How much does $500,000 in pension-phase super reduce a single homeowner's Age Pension?
With no other assets, $500,000 is $178,500 over the $321,500 free area, reducing the pension by about $535.50 a fortnight under the assets test — leaving roughly $665 a fortnight of the $1,200.90 maximum. Adding ~$30,000 of car, contents and bank assets pushes the reduction to about $625 a fortnight, leaving around $575. Figures are for 20 March 2026.
Why is my super counted under both the assets test and the income test?
The assets test measures your wealth; the income test deems your financial assets to earn a set rate and measures that. Centrelink runs both and pays the lower result, so you are not penalised twice in one calculation — but you must satisfy both. For most retirees with a large super balance and a paid-off home, the assets test is the binding one.
What is the $3 per $1,000 taper?
Under the assets test, for every $1,000 of assessable assets above your free area, your Age Pension is cut by $3.00 a fortnight (about $78 a year). It applies until your assets reach the cut-off point, where the pension stops entirely — $722,000 for a single homeowner from 20 March 2026.
Can I gift money to my kids to qualify for more pension?
Only within limits. You can give away up to $10,000 in a financial year and $30,000 over five years. Anything above those amounts is still counted as your asset (and deemed for income) for five years under the "deprivation" rules. So large gifts do not reduce your assessable assets in the way people hope.
Is my super in accumulation phase ever assessed before I reach pension age?
Generally no. If you are under Age Pension age and have not started an income stream, super in accumulation phase is exempt from both tests. This is the basis of the "younger spouse" strategy. The exemption ends the day you reach Age Pension age.
Get the free Age Pension claim checklist
The exact assets, documents and timing steps to maximise your pension before you lodge.
You're on the list — we'll be in touch.