Centrelink Boost: Invest It Without Losing Benefits

You can invest a Centrelink payment increase through small, trackable purchases, such as broad-market ASX ETFs, but buying increases financial assets assessed under deeming and the assets test. Small purchases are unlikely to cause an immediate change, yet market value and thresholds should be reviewed after each indexation round.

This guide explains how Centrelink assesses investment assets under the current 2026 settings and why you should check the rules before investing extra income.

Indexation and current settings

Centrelink adjusts payment rates twice a year using two benchmarks: the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI). The higher of the two applies. For historical context, September 2025 payment changes included:

Indexation does not stop at payment rates. Deeming thresholds, income test free areas, and assets test cut-off limits all shift in the same round. If your financial assets have grown through market returns, updated thresholds can place you closer to a partial or nil payment — even without any action on your part. Review the updated rulebook alongside your new payment rate.

How does the Centrelink payment increase affect investors?

Deeming

Deeming means Services Australia applies a fixed interest rate to the total market value of your financial assets — regardless of what they actually earn. Current deeming rates, from 20 March 2026:

• Lower deeming rate: 1.25% on the first $66,800 (singles) or $110,600 (couples combined)
• Upper deeming rate: 3.25% on the balance above those thresholds

Worked example: You hold a $50,000 ETF portfolio as a single recipient. The full amount falls below the $66,800 lower threshold, so deemed income is $50,000 × 1.25% = $625 per year ($4.81 per fortnight). Your ETF’s actual distribution yield is irrelevant.

Keeping your financial assets under the lower deeming threshold preserves the 1.25% rate — a meaningful advantage worth planning around.

What Counts as a Financial Asset

Shares, ETFs, managed funds, term deposits, and cash in savings or offset accounts all count as financial assets assessed under deeming. Switching from a high-yield share to a low-yield ETF of equal value does not reduce your deemed income. Centrelink measures total market value, not yield.

Your principal home does not count as a financial asset. Most personal assets such as vehicles and household contents are excluded from the income test, though they count under the assets test.

Assets Test Thresholds

Current assets-test limits for Age Pension recipients are reviewed during the year. The following figures are current from 1 July 2026; check Services Australia for your circumstances and any Rent Assistance adjustment.

Above the lower threshold, your payment reduces by $3.00 per fortnight for every $1,000 of assets. Monitor your portfolio value after market rallies.

Investing the Extra Fortnightly Payment Without Breaching the Rules

Dollar Cost Averaging

Dollar cost averaging (DCA) keeps your total asset value growing in small, trackable increments. Redirecting $36.80 per fortnight into a broad-market ASX ETF over 12 months adds roughly $955.80 in contributions. At a conservative 7% annual return, your portfolio grows to approximately $995 at year end — a modest increase unlikely to shift your assets test position on its own.

Watch brokerage costs. On a $36.80 contribution, a $2 fee represents a 5.4% drag. Consider accumulating two or three fortnights before each purchase, or use a broker with no minimum brokerage on small amounts.

Growth vs. High-Distribution ETFs

Because deeming is based on asset value rather than actual yield, a growth-oriented ETF and a high-distribution ETF of equal value produce identical deemed income. A broad-market diversified ETF with a moderate distribution yield is a practical starting point. Review the ETF’s distribution history across at least two financial years before investing.

Dividend Reinvestment Plans (DRPs)

A DRP converts your distribution into additional units rather than cash, supporting compounding without brokerage costs on reinvested amounts. DRPs do not reduce your assessable income for Centrelink purposes — the distribution is still counted, it simply arrives as units. The benefit is lower transaction costs and automatic compounding, not a reduction in your means-tested position.

Franking Credits: A Genuine Benefit With a Catch

Australian companies pay tax at 30% before distributing fully franked dividends. The franking credit represents that pre-paid tax. For investors in low or zero tax brackets, the ATO refunds the difference.

Example: A $1,000 fully franked dividend carries a franking credit of $428.57 (grossed-up dividend: $1,428.57). If your marginal rate is 0%, the ATO refunds the full $428.57.

The grossed-up dividend is the figure used for Centrelink’s income assessment. Factor this in when estimating your income test position.

What are the Centrelink deeming thresholds?

Selling shares or ETFs at a profit triggers a CGT event. That gain forms part of your assessable income for the financial year, reducing your Centrelink payment under the income test. For assets held more than 12 months, the 50% CGT discount applies — only half the gain is assessable. Track holding periods carefully.

Strategies for managing CGT:

• Stage disposals across two financial years. Selling part of a position before 30 June and the remainder after 1 July spreads the income impact across two assessment periods.
• Time sales in lower-income years — for example, after a below-average distribution year.
• Keep purchase and sale records for five years.
• Gifting rules apply strictly. Transferring assets above $10,000 per financial year (capped at $30,000 over five years) triggers Centrelink’s deprivation provisions. The gifted amount remains assessable for up to five years.

How do shares and ETFs affect Centrelink payments?

For recipients under Age Pension age, superannuation in the accumulation phase is generally excluded from the Centrelink assets test — making it a useful vehicle for building wealth without affecting current entitlements.

Once you reach Age Pension age, account-based pension balances are counted under the assets test and deemed under the income test. The transition from accumulation to pension phase is the key trigger point.

If you are already in pension phase, or need access to funds before preservation age, directing your payment increase into ASX ETFs through a standard brokerage account is more appropriate. If accumulation phase super is excluded from your assets test, contributing to super first warrants consideration.

Annual Reviews After Each Indexation Round

Run four checks after each indexation date:

1. Payment rate — confirm your new fortnightly amount
2. Deeming thresholds — recalculate deemed income against updated figures
3. Assets test limits — check whether market growth has moved your portfolio closer to the threshold
4. Income test free area — confirm your free area relative to current income

Keep a record of your total portfolio market value on each indexation date. This gives you a before-and-after reference when thresholds shift. Crowdfolio aggregates your ASX holdings and lets you monitor your total position against Centrelink thresholds without manual spreadsheet work.

Seek a fee-for-service financial adviser if your assets are approaching the assets test threshold, a large CGT event is pending, or your household status changes.

FAQ

Will buying ETFs reduce my Centrelink payment?
Purchasing ETFs increases your total financial assets, assessed under both the assets test and deeming. Small incremental purchases from your fortnightly increase are unlikely to cause an immediate change, but monitor your total assets after each purchase.

How does the deeming rate apply to ASX shares and ETFs in 2025?
Services Australia applies 1.25% to financial assets up to $66,800 (singles) and 3.25% above that (rates current from 20 March 2026; both rise again to 1.75%/3.75% from 20 September 2026). Actual distributions are not directly assessed — deeming replaces them for income test purposes.

Is it better to reinvest ETF dividends or take them as cash on the Age Pension?
A DRP avoids brokerage costs and supports compounding, but the distribution remains assessable income regardless. Base the decision on your broader financial plan.

Does selling shares affect my Age Pension or JobSeeker payment?
Yes. A capital gain increases your assessable income for that financial year. Staging sales across financial years and using the 50% CGT discount for assets held over 12 months reduces the impact. Speak to a fee-for-service adviser before a significant sale.