Age Pension Assets Test: Why "Gross vs Net" Depends on Which Test You're Asking About

"I still owe $200,000 on the investment property — surely Centrelink takes that off?"

The honest answer is: usually, yes — and this is one of the most commonly misunderstood corners of the assets test, in both directions. Some people assume debt never counts against them. Others assume it always does. Neither is quite right, and mixing up two different Centrelink calculations — the assets test and deeming — is exactly how the confusion happens.

The short version: for the assets test, Centrelink generally assesses your net equity in an asset — market value minus a genuine loan secured specifically against that asset. But for deeming (which works out your assessable income), the calculation uses the gross value, regardless of any loan against it. Same asset, two different figures, two different purposes.

The assets test: net value, if the loan is secured against that asset

Under the Social Security Act, most assets are valued at their current market value less any valid encumbrance or charge secured over that specific asset. In plain terms: if there's a genuine loan attached to the asset itself, that loan generally comes off before Centrelink counts it.

A property worth $800,000 with a $200,000 mortgage secured against it: Centrelink assesses your net equity of $600,000 for the assets test — not the full $800,000.

The same logic applies to a geared share portfolio. If you hold $400,000 in shares funded partly by a $150,000 margin loan secured against those shares, the assessable value for the assets test is your equity — $250,000, not $400,000.

The qualifier that matters: the loan has to be secured against the specific asset being assessed. A mortgage on your investment property reduces that property's assessed value. A loan secured against something else — including your own home — does not.

One further condition worth knowing: a charge or encumbrance generally can't be deducted if it's for the benefit of someone other than you or your partner. If you've guaranteed a loan for someone else's benefit and it happens to be secured against your asset, that's treated differently, and it's worth getting specific advice on your situation.

Deeming is the other calculation — and it does use the gross figure

This is where the genuine "no, the debt doesn't help you" rule actually lives, and it's a different test entirely.

Deeming is how Centrelink works out the income your financial investments are assumed to earn, for the income test. And deeming is calculated on the gross market value of a financial investment — a loan secured against that same investment does not reduce the figure used for deeming.

So take that same $400,000 share portfolio with the $150,000 margin loan. The assets test uses your $250,000 equity. But deeming is calculated on the full $400,000, regardless of the loan or the interest you're paying on it. You can genuinely be assessed as if the whole portfolio is generating income, while paying interest on part of it out of your own pocket.

That's the double-edged part worth understanding: the assets test is kinder to a geared position than most people expect, and deeming is less forgiving than most people expect — in the same transaction, at the same time.

Why the confusion happens

Two things trip people up, and it's rarely stupidity — it's that the two Centrelink calculations point in opposite directions on the same fact.

The first is simply not knowing there are two separate tests running at once, each with its own valuation rule. People hear "Centrelink doesn't care about your debt" — which is true for deeming — and assume it must also be true for the assets test, where it generally isn't.

The second is the security question. People assume a debt reduces something just because it's real and it's theirs, without checking what the loan is actually secured against. That distinction — this specific asset, versus something else entirely — decides everything, and it's covered properly below.

Business assets, companies and trusts: related, but their own methodology

Sole traders, partnerships, private companies and trusts aren't exceptions to a no-deduction rule — they're simply assessed by their own methodology, which also nets liabilities off, just structured differently.

Sole traders and partnerships. Business assets are assessed net of genuine business liabilities — a business overdraft, equipment finance, or a mortgage on business premises can reduce the assessed value, provided the liability is clearly attributable to the business rather than personal.

Private companies and trusts. Centrelink assesses your interest in the entity, using the net asset value (NAV) method — entity assets minus entity liabilities, attributed to you proportionally. Entity-level liabilities come into it because that's how the interest itself is valued, not because personal debt is separately deductible.

Where debt genuinely doesn't help: the home equity case

This is the one place the "gross, no deduction" instinct is actually correct — and it's worth understanding exactly why, because the mechanism is different from what most people assume.

Your principal home is exempt from the assets test entirely. If you draw equity from it and invest the proceeds, the loan is secured against your exempt home — not against the new investment. So there's no assessable asset for that loan to be secured against, and nothing for it to reduce.

The new investments are assessed at their full value, because they have no loan secured against them. The debt is real, but it's attached to the one asset Centrelink never counted in the first place.

Net result: your assessable assets increase by the investment amount, and the mortgage against your home does nothing to offset it. This is genuinely a case where debt provides no assets-test benefit — but it's the exception created by the home's exemption, not a general rule about debt.

What this means practically

If you've been assuming your investment debt is simply ignored, the position is actually more favourable than that for the assets test — get the net equity figure right rather than assuming the worst.

If you've been assuming a geared position shelters you from deeming as well, check that separately — it generally doesn't, and the gross figure can produce a higher assessed income than the net figure would suggest.

And always check what the loan is actually secured against before assuming either way. The security, not just the existence of the debt, is what decides the outcome. Given how easy it is to mix these two calculations up, and how much a mistake here can affect a pension assessment, this is a good one to run past a financial adviser or a Financial Information Service officer before you rely on your own estimate.

Sources

• DSS Social Security Guide 4.6.6.10 — General provisions for valuation of assets
• DSS Social Security Guide 4.6.6.30 — Encumbrances & loans against assets
• DSS Social Security Guide 4.4.1.30 — Scope of deeming
• Services Australia — Real estate assets and your assets test
• Services Australia — Deeming

This article contains general information only. It does not constitute personal financial advice and does not take into account your individual financial situation, objectives, or needs. Whether a loan reduces the assessed value of a particular asset depends on the specific security arrangement and the facts of your case, and Age Pension means testing involves detailed interactions between the assets test, the income test and deeming — specialist advice is recommended before you rely on your own calculation. Information is current as at 7 August 2026.

Theodore Karoumbalis is an Authorised Representative (No. 1237098) of iAdvice Technology Pty Ltd, AFSL 526700.