Taper Trap Quick Reference

The Hidden Trap

For every $1,000 of assets above the threshold, your Age Pension reduces by $78 per year. This is effectively a 7.8% annual penalty. Unless your super earns more than 7.8%, you're forced to draw down principal just to recover the pension loss.

How the Taper Rate Works

Taper rate per $1,000: $3 per fortnight

Fortnights per year: 26

↓

$78 per year per $1,000

$100K Over Threshold

Assets over: $100,000
÷ $1,000 = 100 units
× $78 = $7,800/year
($150/week)

$200K Over Threshold

Assets over: $200,000
÷ $1,000 = 200 units
× $78 = $15,600/year
($300/week)

$300K Over Threshold

Assets over: $300,000
÷ $1,000 = 300 units
× $78 = $23,400/year
($450/week)

$400K Over Threshold

Assets over: $400,000
÷ $1,000 = 400 units
× $78 = $31,200/year
($600/week)

The 7.8% Reality Check

$78 per $1,000 = 7.8% per year. This means:

If your super earns 5%, you lose 7.8% to taper → Net -2.8% per year
If your super earns 6%, you lose 7.8% to taper → Net -1.8% per year
If your super earns 8%, you lose 7.8% to taper → Net +0.2% per year

You need returns above 7.8% just to break even. Most conservative/balanced funds don't achieve this.

Real-World Impact Examples

Scenario	Assets	Over Threshold	Annual Loss	Weekly Loss
Single Homeowner	$400,000	$73,000	$5,694	$109
Single Homeowner	$500,000	$173,000	$13,494	$260
Single Homeowner	$600,000	$273,000	$21,294	$409
Couple Homeowner	$700,000	$209,500	$16,341	$314
Couple Homeowner	$900,000	$409,500	$31,941	$614

When the Taper Zone Helps

You have substantial balances that can generate returns above 7.8%
You're young (55-66) with many years for compounding to work
You're in growth assets with realistic long-term returns above 7.8%
You have decades until life expectancy to benefit from the assets

When the Taper Zone Hurts

You're in conservative/balanced funds earning 4-6% per year
You're older (70+) with limited time for growth
You have modest balances that can't generate enough returns
You're drawing income that reduces the balance available for growth
Market volatility means actual returns often fall short of targets

The Critical Question

Can your super consistently earn more than 7.8% per year? If not, the taper is eating your principal. You're always better off with more assets long-term, but the taper dramatically reduces the benefit of extra savings in the short to medium term.

Important: This doesn't mean you should spend down assets to get under the threshold. You're always better off with more money. But it does mean the marginal benefit of each additional $10,000 is dramatically reduced when you're in the taper zone.

The Taper Trap