Good news in pension changes

From 1 July 2026, the Federal Government has increased a range of Age Pension means-testing thresholds, allowing some retirees to earn more income, hold more assets, or have more financial investments before their pension entitlement is reduced. 

These changes form part of the regular July indexation process. While the Age Pension payment rate itself is not increasing this month, the updated thresholds may result in higher pension entitlements for some existing part-pensioners and may allow others who were previously ineligible to qualify for a pension. 

The biggest pension changes typically occur in March and September, when pension payment rates and deeming rates are reviewed. However, the July indexation adjustments remain important because they affect the tests used to determine Age Pension eligibility. 

Higher income thresholds 

Under the income test, single pensioners can now earn up to $226 per fortnight before their pension begins to reduce, up from $218. For couples, the combined income-free area has increased from $380 to $396 per fortnight. 

While the increases may appear modest, they effectively allow pensioners to retain more income before their pension is affected. This is particularly relevant for retirees undertaking part-time work alongside initiatives such as the Government's Work Bonus arrangements designed to encourage older Australians to remain in the workforce. The fortnightly Work Bonus amount remains at $300. 

The upper income-test limits have also increased. A single pensioner may still qualify for a pension with assessable income of up to $2,628 per fortnight, while couples may remain eligible with combined income of up to $4,017 per fortnight. 

Assets test limits increase 

The asset-test thresholds have also increased. 

Single homeowners can now hold up to $333,000 in assessable assets and retain eligibility for the full Age Pension, while homeowner couples can hold up to $499,000. For non-homeowners, the equivalent thresholds have increased to $600,000 for singles and $766,000 for couples. 

The family home remains exempt from the assets test. 

Importantly, higher asset limits do not automatically determine pension eligibility. Centrelink applies both the income test and the assets test, with the test producing the lower pension entitlement determining the final payment rate. 

The cut-off asset limits for pension eligibility have also increased. For example, a single homeowner may now remain eligible for a part Age Pension with assets up to $733,500, while homeowner couples may qualify with assets up to $1,102,500. 

These changes may particularly benefit retirees whose assets sit just above previous thresholds. In some cases, retaining even a small part-pension entitlement can unlock access to valuable concessions and planning opportunities. 

Deeming thresholds rise

The Government has also increased deeming thresholds, which are used by Centrelink to estimate income from financial assets such as bank accounts, term deposits and managed investments. 

From 1 July, the lower deeming threshold rises from $64,200 to $66,800 for singles and from $106,200 to $110,600 for couples. 

Assets below these thresholds are deemed to earn 1.25%, with balances above the thresholds deemed to earn 3.25%. Though these rates may change in September, with the government set to announce the new rates by 20 August. 

The increase is particularly relevant in a higher interest-rate environment and may provide some relief for retirees whose financial assets are assessed under the deeming rules. Further changes to deeming arrangements may occur in future indexation rounds. 

Retirement villages and granny flats 

The additional allowable asset amount for retirement village and granny flat residents has increased from $258,000 to $267,000, helping ensure these arrangements continue to be assessed fairly under the pension assets test.

Aged care changes 

Several aged care thresholds have also increased. 

The Refundable Accommodation Deposit (RAD) threshold above which aged care providers must obtain approval to charge a higher accommodation deposit has increased from $758,627 to $789,686. 

In addition, the Maximum Permissible Interest Rate (MPIR) used to calculate Daily Accommodation Payments (DAPs) has increased from 7.96% to 8.43%. 

For new residents paying accommodation costs through a DAP rather than a lump-sum RAD, the increase in the MPIR means a higher DAP for the same room price. For example, a room with a $760,000 RAD paid via a DAP under the old MPIR would be $165.74 a day, but with the new rate of 8.43% that rises to $175.52. New aged care residents would also likely have the new twice-yearly indexation apply to their DAP. 

Looking ahead 

While the July changes primarily affect eligibility thresholds rather than pension payment rates, they may improve outcomes for retirees receiving a part pension, approaching Age Pension age, or those who narrowly missed out on eligibility in the past. 

The next major areas to watch are the September indexation adjustments, including the annual update to the Commonwealth Seniors Health Card income limits and any future changes to deeming arrangements. 

Early indications are that the next pension indexation is likely to be the lowest since March 2025. The indexation of the Age Pension on 20 September is based on inflation for the six months from January 2026 to June 2026.  

The ABS will be releasing these figures in late July and early August. But so far inflation has been heading down (prices are still going up, but not as fast), meaning a lower increase in maximum pension rates. Based on the data available, the next indexation could be less than $20 a fortnight for a couple: