Question 1

What is the Age Pension taper trap?

Accepted Answer

The taper trap occurs when assets above the lower asset test threshold reduce your Age Pension at a rate of $3 per fortnight ($78 per year) per $1,000 of assets over the threshold. This produces an effective marginal tax rate on those assets that often exceeds 6-7% per year, meaning earning more on your investments than you lose in pension can be very difficult in the taper zone.

Question 2

What are the 2025-26 Age Pension asset test thresholds?

Accepted Answer

For 2025-26, a single homeowner receives the full pension with assets up to $314,000 and loses entitlement entirely at $695,500. A couple homeowner receives the full pension with combined assets up to $470,000 and loses entitlement at $1,045,000. Non-homeowner thresholds are $566,000 and $947,500 (single) and $722,000 and $1,197,500 (couple). Amounts are indexed periodically.

Question 3

How can I reduce my exposure to the taper trap?

Accepted Answer

Common strategies include: superannuation contributions by a younger non-pension-age partner (assets in their super are assessed differently); gifts within the 5-year gifting rules; prepaying funeral bonds; investing in the family home (exempt asset); and careful sequencing of drawdowns. A licensed financial adviser should be consulted before implementing any strategy, as individual circumstances vary significantly.

Question 4

Does the taper trap affect everyone on the Age Pension?

Accepted Answer

No. You are only in the taper zone if your assessable assets are above the lower threshold (full pension threshold) but below the upper threshold (cut-off). If your assets are below the lower threshold you receive the full pension; if above the upper threshold you receive nothing. The taper trap most affects people with assets in the middle range, typically between $400,000 and $900,000 for homeowners.

Age Pension Taper Trap Analyzer

Open Taper Trap Modelling in the Advanced Calculator

Age Pension Taper Trap Analyzer

Open Taper Trap Modelling in the Advanced Calculator

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