The short answer

An inheritance is not counted as income under the Age Pension income test. It affects your pension through the assets test from the time you receive it, and through deeming once the money is invested. You must tell Centrelink within 14 days of getting any assets or income from a deceased estate.

The link between an inheritance and the Age Pension comes down to those two tests. Whether your payment actually changes depends on the size of the inheritance, what you already own and what you do with the money. A modest inheritance may not move your pension at all, while a larger one can reduce your fortnightly payment or, above the cut-off points, cancel it.

When you must tell Centrelink

The rule is 14 days. If you do not report to Centrelink fortnightly, you must report a lump sum within 14 days of the earlier of the date you are able to get it and the date you actually get it. If you report fortnightly, you tell Centrelink in the reporting period in which you get it.

This applies even though an inheritance is exempt from the income test. Centrelink still needs to know because your assets have changed. If you do not report it and you are overpaid Age Pension, you will have to pay the overpaid amount back.

You usually have breathing room while the estate is finalised

Estates take time to administer, and Centrelink recognises this. It generally will not assess assets you are entitled to under a will until you get them, you are able to get them, or you benefit from them.

In practice this means your pension is not affected the day the will is read. Assessment starts when the executor distributes your share, or from the point you are able to get it. Once your share is available to you, it can be assessed whether or not you have collected it.

If the person who died was your partner, different mechanics apply. Assets you owned jointly transfer to you automatically, and you must tell Centrelink within 14 days when that happens.

Anything your partner owned outright forms part of their estate and is not assessed until you get it or can get it.

How a lump sum inheritance is assessed

The assets test applies straight away

Once received, an inheritance counts as an asset.  Inherited cash is added to your existing savings and bank accounts for Centrelink purposes. Other inherited assets, such as shares or property, are generally counted at their current market value.

An inherited house or unit counts at market value under the assets test unless it becomes your principal home, which is exempt.

From 1 July 2026, the full pension assets test limits are $333,000 for a single homeowner, $499,000 combined for a homeowner couple, $600,000 for a single non-homeowner and $766,000 combined for a non-homeowner couple.

Above those limits, the pension reduces by $3.00 per fortnight for every $1,000 of assessable assets over the free area. The pension cancels entirely at the cut off points, which from 1 July 2026 are $733,500 for a single homeowner, $1,102,500 for a homeowner couple combined, $1,000,500 for a single non-homeowner and $1,369,500 for a non-homeowner couple combined.

The income test catches up through deeming

Receiving an inheritance doesn’t count as income. Once you bank or invest the money, it becomes a financial asset and deeming applies. Deeming assumes your financial assets earn a set rate of income regardless of what they actually earn.

The first $66,800 of a single person’s financial assets is deemed to earn 1.25% and the balance 3.25%. For a couple where at least one person gets a pension, the 1.25% rate applies to the first $110,600 of combined financial assets and 3.25% above that.

Your pension is then paid at the lower of the rates produced by the two tests. For many part pensioners an inheritance bites through the assets test first, but the deemed income can matter for larger sums.

Why ”just spending it” has rules attached

What you do with the money changes how it is assessed, and Centrelink looks at where it goes. Spending on your principal home is the clearest example. The family home is exempt from the assets test, so paying down your mortgage or renovating reduces your assessable assets.

Money spent on living costs or exempt assets such as medical equipment also means the cash will no longer be assessed. But buying a non-financial asset such as a holiday home, a caravan or artwork does not help, because those assets still count in the assets test. They simply stop being deemed.

Spending to reduce assessable assets involves a trade-off. Each $1,000 of assets over the free area currently costs $3.00 of pension a fortnight, so the amount spent is usually far larger than the pension it restores. A licensed financial adviser can model whether any particular use of the money leaves you better off overall.

Why giving it away does not take it out of the tests

Giving away part of your inheritance is considered gifting, and Centrelink applies its deprivation rules. You can gift up to $10,000 in a financial year, and no more than $30,000 over 5 financial years, without it affecting your pension.

Anything above those free areas is still counted in your assets test, and deemed under the income test, for 5 years from the date of the gift. Giving away an asset you inherit from an estate, or one you owned jointly with the person who died, is treated as gifting in the same way.

Redirecting your share does not avoid this. Centrelink assesses assets from the point you are able to get them, so asking the executor to pay your entitlement to your children is still giving away an asset that was available to you. Before making any gift, Centrelink’s free Financial Information Service can explain how it would affect your payment, and our guide to how gifts affect aged care fees and the Age Pension covers the rules in more detail.

Tax and super: the other things an inheritance touches

Australia has no inheritance or estate taxes, so the amount you receive is not taxed on the way in. Tax can still arise later. Capital gains tax may apply when you sell inherited assets, and income from inherited shares or property is taxable as usual.

Superannuation death benefits have their own tax treatment, which depends on whether you were a dependent of the person who died. We cover this in our guide to tax and super after death.

Superannuation can also be part of the answer. Money contributed to super is not counted by Centrelink while you are under Age Pension age and not drawing on the fund, and contribution caps and age limits set by the ATO determine what you can put in. Our guide to boosting super with a lump sum explains the mechanics, and for tax questions specific to your situation, speak to a registered tax agent or Alteris Accounting.

When advice helps

An inheritance often lands at a difficult time, and some of the decisions carry real deadlines. The 14-day reporting rule starts as soon as you get, or can get, your share. Gifts stay in the tests for 5 years, and super contributions are subject to age limits, so the order in which you act can matter as much as what you do.

Advice is most useful when the inheritance is large relative to your other assets, or when only one member of a couple gets the pension. It also earns its keep when the estate includes property or super death benefits, or when aged care may be approaching. A licensed financial adviser can model how each option affects your pension rate before you commit to any of them.

Alteris Financial Group provides wealth management advice on a fee for service basis, including superannuation and retirement income strategies and how Centrelink’s tests apply to them. Our advisers are salaried and do not receive commissions.

If you would like to talk through an inheritance you have received or expect to receive, contact our wealth team, or read our guide to planning your inheritance.

Frequently asked questions

Will I lose my Age pension if I get an inheritance?

Eligibility is assessed by Services Australia against the income and assets tests, so the outcome depends on your circumstances. From 1 July 2026 a single homeowner’s pension cancels at $733,500 of assessable assets. Below the cut offs, your pension may reduce rather than stop.

Does an inheritance count as income for the Age Pension?

No. An inheritance is exempt from the income test as a one-off lump sum. Once invested, the money is deemed to earn income, and that deemed income counts.

How long do I have to tell Centrelink about an inheritance?

14 days from when you get, or are able to get, assets or income from a deceased estate.

Can I give some of my inheritance to my children?

Yes, but gifting rules apply. Amounts above $10,000 in a financial year, or $30,000 over 5 financial years, remain in your assets test and are deemed for 5 years.

Alteris Financial Group Pty Ltd (ABN 59 133 479 115) holder of AFSL No.402370. The information contained in this article is general in nature and does not take into account your personal circumstances. We recommend you consult a financial adviser whose advice will take into account your particular objectives, financial situation and individual needs.

Rates and thresholds cited are current at the date of publication and are subject to change. Check the responsible authority for current figures.

Last updated: August 2026