Your guide to means testing

Technical resource

A common goal for most people approaching retirement is to ensure they receive as much of their Age Pension allowance as possible. This tech update outlines what is assessed in the assets test and income test, and also provides two examples to assist you in helping your clients achieve this goal.

The assets test

All assets that your client has are assessable under the assets test unless they are specifically excluded. The major non-assessable assets are:

  • the principal home and curtilage of up to two hectares 
  • superannuation in accumulation phase while the client is under age pension age.

But there are many others including, but not restricted to:

  • proceeds from the sale of a former principal home intended to be used to purchase/build a new principal home and it is within 24 months since the sale of the former home if the home was sold after 1 January 2023, or 12 months if it was sold before 1 January 2023
  • funeral bonds (up to an allowed threshold) or a pre-paid funeral
  • medals of valour not held as a collectable
  • Special Disability Trusts
  • complying Asset Test Exempt (ATE) pensions 
  • accommodation bonds in an Aged Care Facility 
  • Life interests in certain circumstances.

An assessable asset is assessed at its market value. The market value is the point at which a willing purchaser and a willing, but not anxious vendor, would reach an agreement on.

There are several ways to determine the market value, depending on the type of asset1:

  • For bank accounts, the client would simply advise Centrelink of the balance. 
  • For listed shares and managed investments, it is only necessary to advise the number of units or shares, as Centrelink can determine their value. 
  • For real estate assets, the client should provide an honest opinion but Centrelink will obtain a professional valuation at their expense, if they consider it necessary.
  • Motor vehicles and home contents - the market value is the amount the asset could be sold for – not the insured or replacement value. For example, home contents would ordinarily not be valued at more than $8,000 - $10,000. 
  • For more complicated business or trust structures, Centrelink have “Complex Assessment Officers” who would make a determination based on the financial accounts etc.

The income test

Centrelink assess ordinary income when determining a person’s entitlements under the income test2. Ordinary income is an amount earned, received or derived by any means from any source, and includes valuable consideration, personal earnings, monies and profits whether of a capital nature or not. However, there are a number of exceptions.

Income from salary and wages

Assessable income is the amount earned before tax plus any employer super contributions above the superannuation guarantee, and any non-grossed up fringe benefits.

Income from non-financial assets

Income from non-financial assets are assessed on a case-by-case basis. Some of the more common sources of income are dealt with in separate sections below, but Centrelink have Complex Assessment Officers that can look at individual circumstances.

Financial assets

Financial assets include: money, managed investments, listed securities, loans, bullion, amounts subject to deprivation, and annuities with a duration of 5 years or less.

Dividends from listed securities, and interest from cash deposits are not assessable income. Instead, a rate of income, whether actually received or not, is assumed (deemed) to be earned. There are two deeming rates used by Centrelink and Department of Veteran Affairs (DVA) to deem income on a person’s or a couple’s total financial assets:

  • A low rate: that applies up to a threshold, and 
  • A high rate: which applies to the balance of financial assets above the threshold.

Any proceeds from the sale of a former principal home intended to be used to purchase/build a new principal home held in financial assets are deemed only at the lower rate if it is within 24 months since the sale of the former home and the sale occurred after 1 January 2023. Where the sale occurred before 1 January 2023, there is no income test concession applied to these financial assets and they are subject to normal deeming as per the table below.

The relevant Minister reviews the rates from time to time in view of changes in the prevailing general interest rates. Effective from 1 July 2022 the applicable deeming rates are3:

RateSinglePartnered Couple
0.25%up to $60,400up to $100,200
2.25%above $60,400above $100,200

Applying the theory

Here are two examples which demonstrate how a client’s assets would be assessed under the current means testing guidelines.


Kate and Brendon are a pensioner couple. Their financial assets are:

AssetsInterest/DividendValueActual Income
Bank cheque account0% interest$40,000$0
Resource sharesNil dividend$40,000$0
Industrial shares4% dividend$20,000$800
Term Deposit5% interest$50,000$2,500

Deemed income on first $100,200 @ 0.25%


Deemed income on remaining $49,800 @ 2.25%


TOTAL deemed income



Deeming – Full Pension as at 1 July 20234

A single pensioner (no children) could have financial assets of $289,420 (assuming their only source of income is from the said financial assets and their total assets were below the relevant threshold e.g. $301,750 (for a homeowner) and still receive a full pension:

Deemed income on first $60,400 @ 0.25%


Deemed income on remaining $229,020 @ 2.25%


TOTAL deemed income

$5,303.95 ($204 per fortnight)

A pensioner couple (no children) could have financial assets of $451,500 (assuming their only source of income is from the said financial assets, in accordance with the relevant asset test threshold e.g. $451,500 for homeowners) and continue to receive a full pension:

Deemed income on first $100,200 @ 0.25%


Deemed income on remaining $351,300 @ 2.25%


TOTAL deemed income

$8,154.75 ($313.65 per fortnight)

While the assessable income is below the income free area of $360 per fortnight for a couple, the amount is at the asset test free area for a couple of $451,500. Any additional assets would reduce the couple’s rate of pension under the asset test.

For any retirement planning queries, please contact a BDM.

Next: Transition to retirement tax strategies


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This publication is current as at July 2023, and has been prepared by BT, part of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714 (Westpac), which is part of the Westpac group of companies (Westpac Group). This publication has been prepared for use by advisers only.  It must not be made available to any client and any information in it must not be communicated to any client. The information contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. This publication has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this publication, consider its appropriateness to your clients, having regard to their objectives, financial situation or needs. Any taxation information contained in this publication is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual client’s situation may differ, and your clients should seek independent professional taxation advice on any taxation matters. Any graph, case study or example contained in this publication is for illustrative purposes only, and is not to be construed as an indication or prediction of future performance or results. This publication may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, the Westpac Group accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material.