The Age Pension assets test reduces your pension by $3 per fortnight for every $1,000 of assessable assets above the full-pension threshold. Annualised that's $78/year per $1,000, or an effective 7.8% taper rate. If your investment return on the marginal dollar is less than 7.8%, every extra dollar of savings costs you more in lost pension than it earns. This is the 'taper trap' — a band of assets where saving more leaves you worse off in cash flow terms.

The trap zone runs from the full-pension threshold ($321,500 for a single homeowner from 20 March 2026) up to the cut-off threshold ($722,000). Inside this band, pension reduces at $78/yr per $1,000 — a hurdle rate most defensive portfolios can't beat. Cash savings and conservative bond portfolios at 4-5% net are squarely losing on the margin; balanced super at 6-7% net is borderline; growth-tilted portfolios at 8%+ break out. Above the cut-off threshold, pension is zero and the trap disappears (you're back to investing with no Centrelink interaction).

Common responses are: 1) gift assets down to the full-pension threshold (subject to the $10,000/year and $30,000/5-year gifting limits — anything above is still 'deemed' for 5 years); 2) tilt the portfolio to growth to beat the effective taper; 3) accept the trap and treat the lost pension as an implicit tax on saving. Pair this with our Assets Test Calculator for the absolute pension figure, and the Income Test Calculator for the other half of the equation.