Deeming rates and the recent announcement of no changes until 30th of June 2025

For those on Centrelink entitlements or looking to move onto Centrelink entitlements such as the Age Pension, Disability Support Pension or JobSeeker – you may have heard of the terminology called “deeming rates”.

What is it? – Well a deeming rate is what Centrelink use to determine the level of income you earn from your financial assets – regardless of what they actually earn. This level of income will then be used to calculate and potentially reduce your entitlement as part of the income test Centrelink use to calculate what you are entitled to. (Note there is an asset test also for the above mentioned Centrelink payments – for the purpose of this article I am just focusing on the income test).

So say for example you are single, age 67, own your own home and your only asset is $280,000 in the bank earning 5% interest. The interest on this is $14,000 p.a. – Centrelink won’t actually look at this interest, they will essentially use their “deeming rates” to calculate what they assumed you to earn. Currently the rates are 0.25% assumed to be earnt on any financial asset up to $60,400 for singles and $100,200 for couples. Then for financial assets over this amount the excess is assumed to be earnt at a rate of 2.25%.

Using these rates, this person would only in fact be earning in Centrelink’s eyes $5,092 p.a. of income (much less than what they actually are earning at a rate of 5% interest equal to $14,000 p.a.). Based on this they would be entitled to the full age pension for a single person which is currently $1,116.30 p.f. at the time of writing.

Recently the federal government handed down their budget on the 14th of May 2024 and highlighted that deeming rates would be frozen until 30th of June 2025 at the above mentioned rates which is good news for recipients of social security.

If these rates were to increase (this is just an example of made up numbers I used) – it could have had a significant impact on those who are receiving income tested entitlements from Centrelink. Following on from the example mentioned above, if deeming rates increased to lets say 4% for the lower threshold and 5% for the upper threshold, the same person above who was originally deemed to earn $5,092 p.a. by Centrelink will now be deemed to earn $13,396 p.a. This would intern reduce their age pension by approximately $155.62 p.f. ($4,046 p.a.).

For the moment it is good news that these deeming rates have been frozen at the lower amounts as you can see in the above scenario if they did increase, it would have a significant disadvantage to a lot of people in receipt of income tested Centrelink payments.

If you have any questions about your situation in particular and how deeming might affect you, please feel free to contact me. For more general information on deeming – please see the Services Australia website here.