Centrelink pays a fortnightly Age Pension payment to retirees to help them fund basic living expenses.
It's an important safety net that ensures older Australians can meet basic living standards regardless of the amount of savings, assets, or superannuation they own.
But it's not available to everyone. Your eligibility is subject to several key criteria, including your age, residency, and an income and asset test.
The problem is that while many understand the assets they own could affect the payment they receive, many overlook the income limits.
Here's a breakdown of everything you need to know about the Age Pension and the income test.
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Age Pension age limit and maximum payment
The Age Pension is available only to Australians aged 67 years and older.
It is paid on a fortnightly basis up to a maximum total payment of $1,200.90 per fortnight for singles and $1,810.40 for couples combined.
These sums include the maximum basic rate, the maximum pension supplement, and the energy supplement.
As I mentioned above, the final amount you'll receive (if anything) is heavily dependent on Centerlink's income and asset test.
What is the Age Pension income test?
The income test assesses all of your income pooled from all sources. That includes anything from a superannuation income stream, a super pension fund, investment income, part-time wages, bonuses or commission payments. It's applicable regardless of your age.
Centrelink assesses you under both tests and applies what it calls the 'lower rule of two'. This means your potential fortnightly Age Pension is calculated under both tests, and the one that results in the lower payment is the amount you will actually receive.
What are the income test limits?
The good news is that the amount you can earn in retirement has just increased to account for higher inflation and everyday costs.
In order to receive the full Age Pension, single Australians (as of the 1st of July) can earn a total of $226 per fortnight.
Meanwhile, couples can earn up to $396 per fortnight from all pooled sources, including superannuation income and still get the maximum payment.
What if I earn over that threshold?
If you earn more than the $226 or $396 per fortnight thresholds it's still possible to receive a part pension.
As of this month, singles can earn up to $2,627.80 per fortnight. Meanwhile, couples (living together) can earn up to $4,016.80 per fortnight and still qualify for at least a part-Age Pension.
But, it's important to note that your income is assessed on a sliding scale.
For a single person, your Age Pension will reduce by 50 cents for each dollar over $226. For couples it will reduce by 25 cents for each dollar over $396.
It means that the more you earn, the lower your Age Pension payment will be, until it reaches the cut-off point and reduces to zero.
The fortnightly cut-off point is $2,627.80 for single Australians, and $4,016.80 combined for couples living together.
How does it compare to the actual cost of retirement?
According to ASFA, a comfortable retirement is expected to cost approximately $55,923 per year for individuals and $78,566 per year for couples.
That translates to approximately $2,150 per fortnight for singles and around $3,020 per fortnight for couples.
