Centrelink Income Test Calculator

Understanding centrelink income tests in Australia

The income-free area and the 50-cent taper

The income test gives you an income-free area you can earn before your pension is touched at all: about $218 a fortnight for a single and $380 combined for a couple from March 2026. Above that area, every extra dollar of assessable income cuts the pension by 50 cents. For couples the reduction is split, so it works out to 25 cents off each partner's payment per dollar over the combined free area. The taper keeps biting until the payment hits nil: the single pension cuts out completely once assessable income reaches roughly $2,620 a fortnight, and a couple's combined pension at around $4,000 a fortnight. Between the free area and those cut-offs you're on a part pension that shrinks smoothly as your income rises.

What actually counts as income

The part that trips people up is the definition of 'income', because it's far broader than wages and rent. Centrelink counts employment income, net rental income, income from a private business, trust or company, certain foreign pensions and income streams, and, crucially, deemed income from your financial assets. It does not count things like your principal home or, generally, the actual interest and dividends your investments pay, because those are replaced by the deemed figure. That swap is the whole reason a self-funded retiree with a big share portfolio can be over the income cut-off even in a year their shares paid little.

Deeming: the rate that drives the result

Deeming assumes your financial assets earn a set return no matter what they really do. From 20 March 2026 the first $64,200 of a single's financial assets is deemed to earn 1.25%, and anything above that 3.25%; for a couple the lower-rate threshold is $106,200 combined. So a term deposit paying almost nothing and a share fund paying handsomely are both assessed on these notional rates rather than your real interest or dividends. Deeming applies to savings accounts, term deposits, shares, managed funds, most account-based pensions and money in offset accounts. For most part-pensioners, the deemed figure, not their wages, is the single biggest number flowing into this test, which is why a small change in your cash holdings can move the pension more than a pay rise would. The deeming rates have been frozen by the government at times in recent years to protect pensioners when real interest rates fell, so the published 1.25% and 3.25% figures can lag the actual cash rate in either direction. The practical upshot is the same: your assessment follows the deeming rate, not the interest your bank pays, so chasing a higher term-deposit rate doesn't raise your assessed income, and parking money in a low-rate account doesn't lower it.

The Work Bonus softens employment income

Wages get a concession that deemed income and rent don't. The Work Bonus shields the first $300 a fortnight of employment income before the income test even looks at it, and any unused portion banks up to a maximum of $11,800 to offset future earnings, with new pensioners starting on a $4,000 credit. That makes part-time, casual or seasonal work far less punishing than the headline 50-cent taper suggests: a pensioner earning $300 a fortnight from a job typically sees no reduction at all on that income. The bonus only covers active work income, though. Rent, dividends, interest and deemed income get no equivalent shelter and are tested in full. New pensioners also begin with a $4,000 credit already in their income bank, which means someone easing into retirement with occasional shifts can often draw a few thousand dollars of wages in the early months without any pension reduction at all. The combination of the income-free area, the $300 fortnightly shelter and the banked credit is why the headline 50-cent taper overstates how harshly work is really treated.

This test never runs alone

It's vital to remember the income test is only half the assessment. Centrelink runs the assets test in parallel and pays you under whichever test leaves you worse off, so a comfortable income-test result can still be overridden by a high asset total, and vice versa. That means improving your income-test position only helps if the income test is the one binding your pension; if the assets test is the constraint, reducing income changes nothing. Use this tool as an indicative guide, then check your own deemed income figure in your Centrelink online account, because it usually drives more of the result than people expect, and confirm anything material with Services Australia or a licensed adviser.