Services Australia runs two tests and pays whichever gives the lower payment. Each works the same way: start from the maximum pension, work out how far you're over a tax-free threshold (the free area), taper the pension down by a set rate, and the result is that test's entitlement.
The assets test
Counts your assessable assets — savings outside super, super, and any investment-property equity — but not your family home. Above the free area (currently around $333,000 for a single homeowner) the pension reduces by $78 a year for every $1,000 over.
Maximum pension − (assets over the free area ÷ $1,000 × $78) = assets-test entitlementThe income test
Your financial assets are deemed to earn a set rate (regardless of what they actually earn), and that deemed income is added to other assessable income — rent, and any income streams like a defined-benefit or foreign pension. Above the income free area (around $5,900/yr single) the pension reduces by 50c for every $1 over.
Maximum pension − (income over the free area × 50c) = income-test entitlementWhich one binds
You get the lower of the two. For most retirees with modest savings the assets test binds early on; with a large income stream the income test can bind instead. The planner shows both tests side by side for every year — click any year on the income chart to see the full working, including which test is binding.