All people reaching their sixties should understand how superannuation and the Australian Age Pension work together. There have been substantial changes to how Services Australia treats your retirement savings in the manner they have deemed and set assets thresholds, which will apply in 2026. Most Australians’ superannuation will be their largest asset besides the family home. Understanding how superannuation and government support work together is integral to having a good retirement.
Your superannuation is designed to provide you a better lifestyle, but at the same time, it is a critical part of the Centrelink means test. Your superannuation support and the length of time you have been over 67 will determine how your balances are treated. Your informed strategies will determine how your drawdowns will be set to ensure you have retirement income.
Centrelink and Superannuation Assessments
The first rule about superannuation and Centrelink is the account holder’s age. If the account holder is under 67, their superannuation is not visible to Centrelink. When funds have not been drawn down from, they are usually not counted under the asset or income tests while the funds are still in the accumulation phase. This gives an advantage to couples when one partner is younger; maintaining funds in the younger spouse’s name can retain a higher pension rate for the older spouse.
This all changes once you hit 67. From 67, any superannuation you have is counted as a financial asset, regardless of whether you’ve used any of the funds or started a pension. Centrelink considers any unaccessed super as capital that can be used to support you. This assessment can be even more complicated for Self-Managed Super Funds, wherein a current valuation of all the underlying assets is required.
The Role of Deeming Rates in the Income Test
When you have a Self-Managed Super Fund, Centrelink doesn’t look at the real dividends or interest your super fund earns when considering your income. Centrelink works on a deeming system, which means that the actual performance of your assets is irrelevant, as it is assumed that your financial assets earn income at a certain rate. Deeming rates were updated as of March 20, 2026, reflecting the current economic conditions.
If your super investments do better than the deeming rate, then the extra profit stays yours, and there’s no impact on your pension. On the other hand, if your investments do worse, Centrelink still assumes you earned the deemed amount. This is why the income test is so important for retirees who have large sums in super, because the deemed income is combined with all other income, including income from working part-time and income from renting out properties, and that total determines the amount of pension you receive every two weeks.
Effect of the Assets Test and 2026 Thresholds
While the income test is concerned with the money that is coming in, the assets test is concerned with what you possess. For a lot of retirees, the assets test is the one that is “tighter,” and it is often the one that first causes a reduction in the pension they receive. Superannuation balances are counted along with your cars, home contents, and other investments. The family home is still excluded, and that’s why so many retirees choose to upgrade their house instead of keeping a lot of liquid super.
Starting March 20, 2026, the limits for receiving a full pension will, due to indexation, have a very small increase, which is a small protection from the effects of inflation. When your total assets go above a certain limit, your pension payment reduces. For every full thousand dollars over the limit, payment reduces by 3 dollars for every 14 days. Because of these calculations, a super balance is able to quickly change a person from a full pensioner to a part pensioner, or in some cases, complete loss of pension if assets surpass the maximum limit.
2026 Age Pension Thresholds and Rates
| Situation | Full Pension Asset Limit (Homeowner) | Part Pension Cut-off (Homeowner) | Max Fortnightly Rate (Incl. Supps) |
|---|---|---|---|
| Single | $321,500 | $722,000 | $1,200.90 |
| Couple (Combined) | $481,500 | $1,085,000 | $1,810.40 |
| Couple (Illness Separated) | $481,500 | $1,282,500 | $1,200.90 (each) |
Transitioning to an Account-Based Pension
Many Australians choose to move their super into an account-based pension once they retire. This allows for regular tax-free payments into your bank account. For Centrelink purposes, these accounts are still treated as financial assets subject to deeming. However, there are nuances for older “legacy” income streams which may have different assessment rules. If you started an income stream before certain legislative changes in 2015, you might still benefit from a “deductible amount” that reduces the amount of income Centrelink counts. For most new retirees in 2026, the simplicity of deeming applies.
Superannuation lump-sum withdrawals are not usually considered income, and assessment will continue on the remaining balance withdrawn. Withdrawing lump-sum balances strategically can help you better manage the timing of your pension eligibility, particularly as you anticipate large expenses from medical bills and travel. As you plan for retirement, consider the interaction of the Age Pension and superannuation as a safety net, leaving a gap for your personal savings.
Starting in July 2026, a key element of successful retirement strategies will be the flexibility to navigate this gap. With the increase in concessional contribution caps to $32,500, some Australians are positioned to “top-up” their super in the last few working years. Others are looking to the Home Equity Access Scheme to balance out a lower part pension due to a high super balance. The ideal scenario is to find the “sweet spot” to maintain the balance on your super to continue to provide sufficient growth and income to compensate for any reduction in support from the government.
You must do regular reviews on your assets and income reporting because payments and Centrelink rules change in March and September and can result in overpayments or missing payments you are entitled to.
FAQs
Q1 Does my partner’s super affect my pension?
Yes. If your partner is 67 and eligible for the Age Pension, their superannuation is included in your income and asset test for yourselves, regardless of your Age Pension eligibility. If your partner is under 67 and their super is in accumulation, it is typically out of your assessment.
Q2 What are the current deeming rates for 2026?
On March 20, 2026, the lower deeming rate is 1.25% for assets that are equal to or below the threshold ($64,200 for singles; $106,200 for couples). If you have financial assets above the thresholds, those assets are deemed to earn 3.25%. Centrelink uses those rates to calculate your investment income.
Q3 Can I give my super away to get a higher pension?
Gifting rules must be considered carefully. Centrelink allows a gift of up to $10,000 a year (and a maximum of $30,000 over a rolling 5-year period). If you gift more than this by moving super to others, the excess amount will be counted as your asset for 5 years due to the deprivation rules.
