It won’t. Thanks to the Work Bonus, the first $300 of Pat’s work income each fortnight is ignored completely, and any unused amount builds up in an “income bank” she can draw on later. Pat would keep most of what she earns. Here’s how it works, with real numbers.

What the Work Bonus is

The Work Bonus isn’t an extra payment. It reduces how much of your work income counts under the Age Pension income test. You don’t need to apply. Centrelink applies it automatically, as long as you report your earnings.

You can get it if you’re Age Pension age (currently 67) and you receive the Age Pension, Carer Payment or Disability Support Pension. People on the transitional rate of pension are not eligible.

It has two parts:

• $300 a fortnight. Up to $300 of eligible work income each fortnight is taken out before the income test applies.
• The income bank (Work Bonus balance). In any fortnight where you earn less than $300, including fortnights where you earn nothing, the unused part is added to your balance. The balance can build to a maximum of $11,800 and is used to offset work income above $300 in later fortnights.

The $11,800 cap was confirmed on Services Australia’s How the Work Bonus works page in October 2026. It was raised from $7,800 to $11,800 on 1 December 2022.

The $4,000 head start

Under rules that apply to claims made from 1 July 2024, when you claim an eligible pension for the first time you start with a Work Bonus balance of $4,000 rather than zero. If you’re re-claiming, your old balance carries over, and if it’s below $4,000 it may be topped up to $4,000 (no more than once every two years).

That head start is useful if you’re thinking about taking a short contract or casual job soon after you start on the pension.

If you’re not working at all right now, your balance still grows by $300 every fortnight until it reaches the cap. Starting from $4,000, it takes 26 fortnights, or about a year, to reach $11,800. In other words, a pensioner who hasn’t worked for a year or so is sitting on a buffer that can cover a decent stretch of casual or contract work with no effect on their pension. Many people don’t realise they have it. Our view is that it’s one of the most underused parts of the pension system.

What income counts, and what doesn’t

According to Services Australia’s list of types of income the Work Bonus applies to, it covers:

• wages and salary from work in or outside Australia
• paid leave while you’re still employed
• director’s fees
• self-employment income where you’re actively working, such as bookkeeping, lawn mowing or plumbing.

It doesn’t apply to:

• leave paid out after your job has ended
• investment income, including interest, dividends and rent
• superannuation
• passive self-employment income, such as managing your own share portfolio or rental properties.

Each person has their own Work Bonus. You can’t use yours to offset your partner’s wages, though reducing your own assessable income lowers your combined income as a couple, which helps you both.

How the income test works on top of it

Once the Work Bonus has been applied, whatever work income is left is added to your other assessable income, such as deemed income from savings. Then the normal Age Pension income test applies. As published by Services Australia in October 2026:

So a single pensioner with no other income can earn $526 a fortnight from work ($300 Work Bonus plus the $226 free area) before their pension drops at all. Most people do have some deemed income from savings, which uses up part of that free area. Our article on deeming rates shows how to work that out.

Worked examples

These use the free areas and rates above. They’re simplified and leave out things like Rent Assistance.

Pat: regular part-time work

Pat is single, earns $500 a fortnight and has $80 a fortnight of deemed income from savings. Her balance is empty.

• Work income after the $300 Work Bonus: $200
• Plus deemed income: $280 total assessable income
• Over the $226 free area by $54, so her pension drops by $27 a fortnight

Without the Work Bonus, her assessable income would be $580, and her pension would drop by $177. The Work Bonus saves her $150 a fortnight.

Joan: a seasonal job

Joan, 70, has not worked for over a year, so her balance has built up to the $11,800 maximum. She takes a six-week Christmas job paying $2,000 a fortnight for three fortnights.

• Each fortnight, the first $300 is offset by the fortnightly Work Bonus.
• The remaining $1,700 is offset from her balance.
• Her work income counts as zero for all three fortnights. Her pension is unaffected by the job.
• Her balance falls by $5,100 to $6,700, and starts rebuilding by $300 a fortnight once the job ends.

This is where the income bank really earns its keep. For occasional or seasonal work, it can shelter a surprising amount.

Bob and Mary: a couple, one working

Bob earns $1,000 a fortnight. Mary doesn’t work. Their combined deemed income is $150 a fortnight and Bob’s balance is empty.

• Bob’s work income after the $300 Work Bonus: $700
• Plus $150 deemed income: $850 combined
• Over the $396 couple free area by $454, so each of their pensions drops by 25c in the dollar, or $113.50 each

Mary’s unused Work Bonus can’t be applied to Bob’s wages.

Is working worth it?

For most part-pensioners, yes. Even above the Work Bonus, you lose 50 cents of pension per extra dollar as a single, or 25 cents each as a couple, so you’re always better off in total. There’s also a lot more to it than money. Staying in work, even a few hours a week, keeps you connected, which is a big part of why we like stories such as seniors volunteering with kids.

A few things to watch:

• Report your earnings on time, every fortnight. The Work Bonus is applied to what you report.
• Very high earnings can still take you past the income cut-off point for that fortnight, even with the Work Bonus.
• Your income tax is separate. The Work Bonus doesn’t change how your wages are taxed.
• Be wary of anyone offering “cash jobs” that skip reporting. That puts your pension at risk, and some offers are outright scams aimed at older Australians.

You can check your current Work Bonus balance in your Centrelink online account through myGov.

FAQ

How much can I earn on the Age Pension before it drops?

With no other income, a single pensioner can earn $526 a fortnight from work ($300 Work Bonus plus the $226 income free area, as at October 2026) before the pension reduces. Any deemed income from savings reduces that amount.

What is the maximum Work Bonus income bank?

$11,800, as confirmed by Services Australia in October 2026. Your balance grows by up to $300 a fortnight when you earn less than $300 from work.

Does the Work Bonus apply to rental or investment income?

No. It only applies to employment income and self-employment income where you’re actively working. Interest, dividends, rent and super don’t qualify.

Do I need to apply for the Work Bonus?

No. Centrelink applies it automatically if you’re eligible. You just need to report your employment income.

Can my partner use my Work Bonus balance?

No. Each eligible pensioner has their own Work Bonus and balance, and it can’t be transferred.

This article is general information only and isn’t financial advice. Rates, thresholds and rules change regularly, so check your own situation with Services Australia (or a Financial Information Service officer) before making decisions.

The Commonwealth Seniors Health Card (CSHC) is the card for self-funded retirees. It has no assets test at all, the income limit is far higher than most people expect, and plenty of retirees who would qualify have never applied. Here’s who gets it, what it’s worth, and how it compares with the Pensioner Concession Card.

Who can get the card

According to Services Australia, you need to meet all of these:

• You’ve reached Age Pension age, which is currently 67.
• You meet the residence rules.
• You’re not getting an income support payment (like the Age Pension) from Centrelink or the Department of Veterans’ Affairs.
• You give your tax file number (and your partner’s, if you have one), unless you’re exempt.
• You meet identity requirements and the income test.

That third point matters. If you get even a small part Age Pension, you already have the Pensioner Concession Card, which is the better card, so you can’t hold both. The CSHC is for people who earn or own too much for the pension.

The income test, in plain terms

There’s no assets test. You could have millions in super, shares and property and still qualify, as long as your income is under the limit. From 20 September 2026, the income limits are:

Add $639.60 to these amounts for each child in your care. The limits are reviewed every 20 September in line with the Consumer Price Index, so check the official page for the current figures.

What counts as “income” is the part people get wrong. Centrelink adds together two things.

1. Your adjusted taxable income

This starts with your taxable income from your tax return (wages, rent, dividends, interest, capital gains and so on), then adds back some items that don’t show up there. According to Services Australia’s explanation of adjusted taxable income, these include foreign income, total net investment losses (so negative gearing gets added back), reportable fringe benefits, reportable super contributions and certain tax-free pensions or benefits. If you have a partner, their adjusted taxable income counts too.

2. Deemed income from account-based pensions

Here’s the twist. For most people over 60, payments from an account-based pension in super are tax-free, so they don’t appear in taxable income at all. Instead, Centrelink applies deeming to the account balance. It doesn’t matter how much you actually draw down. It assumes the balance earns a set rate and adds that figure to your income.

From 20 September 2026, the deeming rates are 1.75% and 3.75%. For a couple where neither of you gets a pension, the lower rate applies to the first $55,300 of each person’s financial assets, and the higher rate to the rest. For a single person the lower-rate threshold is $66,800. Our guide to how deeming rates work goes into this in more detail.

There’s an older exception. An account-based pension isn’t deemed for CSHC purposes if you bought it before 1 January 2015, haven’t changed it since, and have held the card continuously since before that date. Most people applying today won’t fall into that group, but if you do, don’t roll your pension over without checking first. You could lose the exemption.

Worked examples

All figures use the rates and limits in place from 20 September 2026.

Margaret, single, $500,000 account-based pension, $8,000 of other taxable income. Her deemed income is $66,800 at 1.75% ($1,169) plus $433,200 at 3.75% ($16,245), so $17,414. Add her $8,000 and her test income is about $25,400. That’s a long way under $105,048. She qualifies easily.

Ron and Helen, a couple, $700,000 each in account-based pensions, plus $40,000 of rent from an investment unit. Each of them is deemed to earn $967.75 on the first $55,300 and $24,176.25 on the remaining $644,700, which is $25,144 each, or $50,288 together. Add the $40,000 rent and they’re at roughly $90,300, well under the $168,076 couple limit, even with $1.4 million in super between them.

Graham, single, $1.5 million account-based pension, $55,000 of dividends and rent. His deemed income is $54,914. Add $55,000 and he’s at about $109,900, which is just over the $105,048 limit. No card, at least for now.

The lesson is that the income test is generous to retirees whose wealth sits in super, and tougher on those with large taxable investments outside super. If you’re anywhere near the line, it’s worth running your own numbers.

What the card actually gets you

The CSHC is mainly a health card. According to the Department of Veterans’ Affairs, which issues the same card to eligible veterans, the benefits include:

• Cheaper PBS medicines. You pay the concessional rate for prescriptions on the Pharmaceutical Benefits Scheme, which is $7.70 per script at the time of writing, instead of the general rate.
• Free scripts after the PBS Safety Net. Once your spending reaches the PBS Safety Net limit in a calendar year, further PBS scripts are free for the rest of that year.
• Possible bulk billing. GPs may bulk bill concession card holders, though it’s up to each practice.
• Medicare Safety Net help, so you get more back on medical costs once you’ve spent up to the limit, which matters if you see the doctor or have tests often.
• Other concessions that may cover electricity and gas, property and water rates, ambulance, dental, eye care and public transport. These are set by state and territory governments and businesses, not the federal government, so they vary a lot from place to place.

Our honest view is that if you take several regular medications, the card pays for itself within months. Even if you’re healthy now, it costs nothing to hold and the card is valid for two years at a time. Services Australia sends a replacement before it expires if you’re still eligible.

How it differs from the Pensioner Concession Card

The Pensioner Concession Card (PCC) comes automatically with the Age Pension and some other payments. You don’t apply for it. The two cards overlap on the federal health benefits, but they’re not the same.

The gap is mainly at state and council level. Depending on where you live, some concessions, such as council rate rebates, may be limited to Pensioner Concession Card holders. It’s worth checking your own state’s concessions list or our guide to Seniors Cards by state, which is a separate card again with its own discounts.

One practical point: if your income or assets fall enough that you start getting a part Age Pension, you’ll move onto the PCC automatically. As our article on the Age Pension assets test explains, some people with substantial wealth still qualify for a part pension, so check that first before settling for the CSHC.

How to apply

You can claim through your Centrelink online account in myGov, or through DVA if you’re eligible there. You’ll need details of your income, any account-based pensions (your fund can give you a Centrelink schedule) and your partner’s details. If you estimate your income when you apply, you’ll need to send in your tax notice of assessment later.

Once you have the card, tell Services Australia within 14 days if your income goes over the limit, you start a new account-based pension, or your family situation changes.

Our honest advice: if you’re 67 or over and not on the pension, assume you might qualify until the numbers prove otherwise. Too many self-funded retirees rule themselves out without checking.

FAQ

Does the Commonwealth Seniors Health Card have an assets test?

No. Only income counts. Your home, super balance, shares and investment properties don’t count as assets, although income from them, and deemed income from account-based pensions, does count towards the income test.

Do my super pension payments count as income for the card?

Not the payments themselves. Instead, Centrelink deems your account-based pension balance to earn income at the current deeming rates and adds that amount to your adjusted taxable income.

Can I have the CSHC and the Pensioner Concession Card at the same time?

No. If you get the Age Pension you’ll have the Pensioner Concession Card instead, which generally comes with more concessions.

Is the income limit indexed?

Yes. The limits are reviewed on 20 September each year in line with the Consumer Price Index. The figures in this article apply from 20 September 2026.

Can I lose the card if my investments do well?

Yes, if a big capital gain or extra income pushes your adjusted taxable income over the limit. You need to tell Services Australia within 14 days if your income goes over the limit.

This article is general information only and isn’t financial advice. Rates, thresholds and rules change regularly, so check your own situation with Services Australia (or a Financial Information Service officer) before making decisions.

Neither. Centrelink treats them exactly the same, because it doesn’t look at what their money actually earns. It uses deeming, a set of assumed rates, to decide what their savings “should” be earning. Keith gets to keep his extra interest without it touching his pension. Bev is assessed on income she isn’t getting. That’s deeming in a nutshell.

What deeming is

According to Services Australia, deeming assumes your financial assets earn a set rate of income, no matter what they really earn. That deemed income is added to your other income, and the total goes through the income test for the Age Pension and other payments.

The government’s reasoning is that it keeps payments steady rather than bouncing around with markets, and it rewards people who earn more than the deemed rate, because the extra doesn’t count.

Current deeming rates and thresholds

Deeming rates were frozen at very low levels for several years after COVID. That freeze ended in 2025, and the rates have been rising in steps since, most recently on 20 September 2026. According to the Department of Veterans’ Affairs rate tables, the low rate went from 1.25% to 1.75% and the high rate from 3.25% to 3.75% on 20 September 2026. The thresholds were set from 1 July 2026 and didn’t change in September.

These rates apply from 20 September 2026. The Minister for Social Services sets the rates, and they can change at any time, so check the Services Australia deeming page linked above for the current figures.

What gets deemed

Deeming applies to financial assets. Services Australia lists the main types as:

• savings accounts and term deposits
• managed investments, loans and debentures
• listed shares and securities
• some income streams, including most account-based pensions
• some gifts you make.

Things that aren’t deemed include your home, cars, household contents and investment property. Rent from an investment property is assessed on what you actually receive, not deemed. Your home is also exempt from the assets test, which we cover in our piece on the Age Pension assets test and the family home.

A few special cases are worth knowing:

• Home sale proceeds. If you sell your home and intend to use the money to buy, build or renovate another one, the proceeds set aside for that are deemed at the lower rate only. This applies to home sales from 1 January 2023.
• Home Equity Access Scheme payments. Advance payments are subject to deeming. See our guide to the Home Equity Access Scheme.
• Failed investments. You can apply for a deeming exemption if an investment has failed and you can’t get your money back, but not just because an investment performed poorly.

Account-based pensions

If you’ve moved your super into an account-based pension, the balance is treated as a financial asset and deemed like your bank savings. The payments you draw don’t count as income themselves. Only the deemed amount does.

There’s an important older exception. According to Services Australia’s guide to income streams, an account-based pension is assessed the old way (gross payments less a deduction amount, rather than deeming) if both of these apply:

• you started it before 1 January 2015, and
• you’ve been on a pension or allowance without a break since 31 December 2014.

Lose either condition, for example by rolling the pension into a new product or going off the pension for a while, and deeming applies from then on. If you have one of these older pensions, talk to Centrelink before you change anything. The grandfathered treatment is often more generous and you can’t get it back.

Deeming of account-based pensions also matters for the Commonwealth Seniors Health Card, which uses deemed income from these pensions in its income test.

Worked examples

Centrelink works in fortnights, so we’ve divided the annual deemed income by 26. These use the rates from 20 September 2026 and the income test free areas published by Services Australia in October 2026 ($226 a fortnight for singles, $396 combined for couples).

Keith and Bev, single, $250,000 each

The first $66,800 is deemed at 1.75%, or $1,169. The other $183,200 is deemed at 3.75%, or $6,870. That makes $8,039 a year, or $309.19 a fortnight. With no other income, that’s $83.19 over the $226 free area, so the pension is reduced by about $41.60 a fortnight under the income test. (Whichever of the income and assets tests gives the lower pension is the one that applies.)

Keith’s term deposit actually pays $10,000 a year, but only the $8,039 counts. Bev’s account pays almost nothing, but she’s still assessed on $8,039.

A couple with $400,000

The first $110,600 at 1.75% is $1,935.50. The remaining $289,400 at 3.75% is $10,852.50. Total: $12,788 a year, or $491.85 a fortnight. That’s $95.85 over the $396 couple free area, so each partner’s pension drops by about $23.96 a fortnight under the income test.

What the September 2026 rise cost

Under the old rates of 1.25% and 3.25%, the same $250,000 was deemed to earn $6,789 a year. The 0.5 percentage point rise adds $1,250 a year of deemed income. For a single pensioner affected by the income test, that’s roughly $24 a fortnight less pension, partly offset by the September pension indexation.

What you can do about it

Deeming isn’t something to fight, but it is something to plan around:

• Don’t leave big sums earning nothing. If you’re deemed to earn 3.75% anyway, letting cash sit in a 0% account is the worst of both worlds.
• Know your exempt assets. Money spent on your home or genuine home improvements isn’t deemed, but don’t make big decisions purely to chase a pension.
• Check before rolling over an old account-based pension. You may lose grandfathered treatment.
• Update Centrelink when your balances change, so you’re paid correctly and avoid a debt later.

Moneysmart has a clear overview of how the Age Pension and other government benefits fit together, and Centrelink’s free Financial Information Service can run through your own numbers.

FAQ

What are the deeming rates right now?

From 20 September 2026, 1.75% applies to the first $66,800 of financial assets for a single person (or $110,600 combined for a pensioner couple) and 3.75% to anything above that. Check Services Australia for the latest rates.

Is my account-based pension deemed?

Usually yes. It’s only assessed under the older rules if you started it before 1 January 2015 and have received a pension or allowance without a break since 31 December 2014.

Does my house get deemed?

No. Your principal home isn’t a financial asset. Money from selling it may be deemed, though proceeds you intend to put towards a new home are deemed at the lower rate only.

If my savings earn more than the deeming rate, do I lose pension?

No. Anything you earn above the deemed amount doesn’t count as income for the income test.

Why did my pension drop in September 2026?

The deeming rates rose by half a percentage point from 20 September 2026. If your pension is set by the income test and you have significant savings, the higher deemed income may have reduced your payment.

This article is general information only and isn’t financial advice. Rates, thresholds and rules change regularly, so check your own situation with Services Australia (or a Financial Information Service officer) before making decisions.

The homeowner with the multi-million-dollar house, by a long way. That isn’t a loophole. It’s how the Age Pension assets test is designed, and once you understand it, a lot of retirement decisions start to look different.

The home is exempt, whatever it’s worth

Services Australia doesn’t count your principal home as an asset for the Age Pension. A modest unit and a waterfront mansion are treated the same: neither is counted. What is counted is almost everything else, including bank accounts, shares, super (once you’ve reached Age Pension age), investment properties, caravans, cars and boats. Household contents count too, at what they’d fetch at a garage sale rather than what they’d cost to replace.

To even things up slightly, homeowners and non-homeowners have different thresholds.

The numbers, as at 20 September 2026

You can receive the full Age Pension if your assessable assets are at or below:

Above those amounts, the pension reduces by $3 a fortnight for every $1,000 over the threshold, until it stops completely. As at 20 September 2026, a single homeowner stops receiving a part pension at around $745,750 in assets, and a homeowner couple at around $1,121,000 combined.

These figures change several times a year, so check the current amounts on the Services Australia assets test page before you rely on them.

The gap between the homeowner and non-homeowner thresholds is $267,000. That’s meant to make up for renters not having a home that’s protected. In most capital cities, $267,000 doesn’t come close to buying a home, which is why renters in retirement often feel the system is stacked against them. It’s hard to argue with them.

Why the $3 taper matters more than people think

Three dollars a fortnight sounds trivial. Over a year it’s $78 for every $1,000 of assets. In other words, money sitting in the bank above the threshold costs you about 7.8 per cent a year in lost pension. Most savings accounts don’t earn that.

That has some uncomfortable consequences:

• Spending can make you better off. If you’re a part pensioner and you spend $20,000 on a new roof or a replacement car, your assessable assets drop and your pension rises by around $1,560 a year. The roof is exempt because it’s part of the home. The car is still counted, but cars lose value quickly and are assessed at what they’re worth now.
• Selling the family home can cost you pension. Turning an exempt asset into cash moves money straight into the assessable pile. There is a temporary exemption for proceeds you plan to put towards a new home, for up to 24 months, but if you sell and rent, the cash counts.
• Super can work against you after pension age. Before Age Pension age, money in an accumulation account isn’t counted. Afterwards it is. That’s one reason the downsizer super contribution suits some people and not others.

What you can’t do

The obvious next thought is to give money away to the kids. Centrelink got there first. You can gift up to $10,000 in a financial year, and no more than $30,000 over five financial years. Anything above that is treated as a “deprived asset” and still counted against you for five years from the date of the gift.

Paying off the mortgage on your own home is different. That’s money moving into an exempt asset, so it’s generally fine. Paying off one of your children’s mortgages is a gift.

Is this fair?

Economists and successive government reviews have argued for years about whether the full home exemption makes sense. One side says it encourages older Australians to stay in houses that are too big for them and penalises renters. The other says it protects people who worked for decades to own a home and shouldn’t be forced to sell up to qualify for a pension.

We don’t expect the rule to change any time soon. Any government that touches the family home exemption knows exactly how that would land with older voters. So the practical question isn’t whether it’s fair. It’s how to make decisions with the rules as they are.

Before you make a big move

If you’re thinking about selling, renovating, gifting or restructuring your finances, it’s worth running the numbers before you commit. Services Australia has a free Financial Information Service that will explain how a decision is likely to affect your pension. The Moneysmart retirement planner is also a good place to start.

FAQ

Is my home counted in the Age Pension assets test?

No. Your principal home is exempt, however much it’s worth. Homeowners have a lower assets threshold than non-homeowners to account for this.

How much does the pension drop for assets over the threshold?

The pension reduces by $3 a fortnight for every $1,000 of assessable assets above the full-pension threshold, which works out to $78 a year for every $1,000.

If I sell my home, is the money counted?

Usually yes, once it’s in the bank. Proceeds you intend to use to buy or build a new home can be exempt for up to 24 months, but cash you keep is assessable.

Can I give money to my children to qualify for the pension?

Only within the gifting limits: $10,000 per financial year and $30,000 over five financial years. Gifts above that are still counted for five years.

This article is general information only and isn’t financial advice. Thresholds and rules change regularly, so check the current figures with Services Australia.

Here’s how it works, and how to tell which group you’re in.

What the downsizer contribution actually is

If you’re 55 or older and you sell a home you’ve owned for at least 10 years, you can put up to $300,000 of the sale proceeds into super as a downsizer contribution. If you’re part of a couple, you can each contribute up to $300,000, so up to $600,000 between you, even if only one of you was on the title.

The main conditions, according to the Australian Taxation Office, are:

• You’re 55 or older when you make the contribution. There is no upper age limit and no work test.
• The home is in Australia and you (or your spouse) owned it for 10 years or more before the sale.
• The sale qualifies, at least partly, for the main residence capital gains tax exemption. In plain English, it was your home at some point, not just an investment property.
• You make the contribution within 90 days of receiving the sale proceeds, which usually means settlement day.
• You give your super fund the ATO’s downsizer contribution form before or at the same time as the money arrives.
• You haven’t made a downsizer contribution from the sale of another home before. It’s a once-in-a-lifetime option.

You don’t have to buy a smaller place, or buy anything at all. The name is a bit misleading. You can sell and rent, sell and move in with family, or sell and buy something more expensive in a different suburb, and still use it.

Why people like it

The appeal comes down to the caps. Normally the amount you can put into super each year is limited, and once your total super balance passes a certain level you can’t make after-tax contributions at all. Downsizer contributions sit outside those limits. That’s what makes them useful for people who have most of their wealth tied up in the house and not much in super, which describes a lot of Australians who bought decades ago.

Once the money is in super and moved into a retirement income account, earnings are generally tax-free. Leaving the same money in a bank account or shares in your own name means paying tax on the interest or dividends at your marginal rate. For someone with a decent private income, that difference adds up.

The catch most people miss: the Age Pension

This is where the barbecue version of the story usually falls apart.

Your home is exempt from the Age Pension assets test. It doesn’t matter if it’s worth $600,000 or $6 million. Super is different. Once you reach Age Pension age (currently 67), your super balance counts as an asset, and it’s deemed to earn income under the income test.

So when you sell the family home and move $300,000 or $600,000 into super, you’re turning an asset Centrelink ignores into one it counts. If you’re receiving a part pension, or expect to, that can reduce your fortnightly payment, or end it altogether.

As a rough guide, the assets test reduces the pension by $3 a fortnight for every $1,000 of assessable assets above the threshold. That’s $78 a year for every $1,000. Put $300,000 into super above the threshold and you could be looking at a pension cut of around $23,000 a year. Very few investments reliably earn that.

We’ve written a separate piece on how the family home changes the Age Pension assets test, because it surprises a lot of people.

Keep in mind the money doesn’t escape the assets test just because it stays in the bank instead of super. Sale proceeds are counted wherever they sit. There is a temporary exemption for proceeds you intend to use to buy your next home, for up to 24 months, but that’s about buying another home, not about super.

Who it suits

The downsizer contribution tends to work best for:

• People who won’t get the Age Pension anyway. If your other assets or income already put you over the cut-off, Centrelink isn’t a factor and the tax benefits of super are pure upside.
• People under Age Pension age. If you’re 58 and won’t touch the pension for years, super isn’t counted until you reach pension age. It might still affect you later, but there’s time to plan.
• People with a large super balance who can’t otherwise contribute. Because downsizer contributions aren’t limited by the usual balance tests, they’re one of the few ways left to add more.
• Couples where one partner has much less super. Each partner can contribute up to $300,000, which is a straightforward way to even things up.

Who should think twice

• Part pensioners close to the thresholds. Moving money from the home into any assessable asset, super included, could cost more in lost pension than you’d gain in tax savings.
• People who will need the money soon. If you’re planning to buy another home, help the kids with a deposit, or fund aged care in the next year or two, putting the money in super and pulling it straight out again is mostly paperwork.
• Anyone who’d miss the 90-day window. Settlement day starts the clock. If you’re not organised, you can lose the option. The ATO can grant extensions, but only in limited circumstances.

Questions worth asking before you sell

1. Will I receive any Age Pension now or in the next few years, and how close am I to the thresholds?
2. What will I do with the sale proceeds: buy, rent, gift, invest or spend?
3. Does my partner have room in their super that would make more sense to use?
4. How will the sale and contribution interact with any aged care costs down the track?

Services Australia’s free Financial Information Service can talk you through how a home sale would affect your pension, and it won’t try to sell you anything. For the super side, a licensed financial adviser is worth the fee when this much money is involved.

FAQ

Can I make a downsizer contribution if I’m still working?

Yes. There’s no work test and no requirement to be retired. You just need to be 55 or older and meet the home and timing conditions.

Does the downsizer contribution count towards my contribution caps?

No. It sits outside the concessional and non-concessional caps. It does count towards your total super balance, and towards your transfer balance cap if you later move it into a retirement income account.

Can I contribute if my partner owned the home and I didn’t?

Yes. A spouse who wasn’t on the title can still make their own downsizer contribution from the sale, provided the other conditions are met.

Will a downsizer contribution reduce my Age Pension?

It can. Once you’re over Age Pension age, super is counted in both the assets and income tests, while your home is not. Check your situation with Services Australia before you contribute.

This article is general information only and isn’t financial advice. Rules and thresholds change, so check the current details with the ATO and Services Australia before acting.