Deeming is central to how Centrelink calculates Age Pension entitlements, but it’s often misunderstood. Whether your investments earn less (or more) than expected, deeming assumes a standard rate of return – which can affect your pension. Here are three things many retirees don’t know.
1. Centrelink looks at your total balance, not actual earnings
Many think Age Pension assessment will be based on what their bank or super actually pays, or what they are drawing down from their Account-Based Pension (ABP). Instead, Centrelink applies ‘deeming’ rates to financial assets, regardless of real returns.
From 20 September 2025, the lower deeming rate will be 0.75% (on up to $64,200 for singles or $106,200 for couples combined). Anything above that will be deemed to earn 2.75%. (Centrelink announcement). If your assessed income is already affecting your entitlement, this change could reduce your fortnightly payments.
2. Cash for a new home isn’t immune
If you’ve sold your principal home and are holding the proceeds for your next one, those funds are exempt from the assets test for up to 24 months (or 36 with valid delays). But what’s less known is that all that money is still counted under the income test and deemed at the lower rate.
With the deeming rate rising in September, this could now reduce your Age Pension. For example:
- $800,000 from a home sale was previously deemed at 0.25%, generating about $2,000 a year in deemed income.
- From 20 September 2025, the lower rate rises to 0.75%, increasing deemed income to roughly $6,000 a year.
- Under the income test, this could reduce fortnightly Age Pension payments by around $76 while the money sits in the bank until the purchase of a new home is settled.
Whether the income test affects you depends upon which test – assets or income – produces the lower payment. This matters especially for retirees who are still working or have a spouse under Age Pension age earning income.
3. You can be under the asset limit and still get less than the full Age Pension
Even below the Age Pension asset limit, the income test can reduce payments. Take Greg, a single homeowner with $300,000 in financial assets and $20,000 of personal assets. He qualifies for the full rate under the asset test, but deeming changes the picture. Under the previous rates, his deemed income was $5,466 per year, keeping him below the income test threshold for a full Age Pension.
From 20 September 2025, deeming rates rose to:
- 0.75% on the first $64,200
- 2.75% on the remainder
Greg’s total deemed income under the new rates will be about $6,966 per year, or $268 per fortnight. The ‘free area’ is $5,668 per year, or $218 per fortnight; then $50 above it reduces the pension by 50 cents per dollar.
With previous deeming rates: Greg gets the full single Age Pension – $1,179 per fortnight, or $30,646.20 per year.
With increased deeming rates: The income test reduces his pension by $25 per fortnight ($650 per year), bringing it down to $1,154 per fortnight, or about $29,997 per year.
So even though Greg is comfortably under the current asset threshold, the change in deeming rates could see his Age Pension trimmed.
What this means for you
Deeming isn’t intended to be a penalty – it’s how Centrelink simplifies calculations. But understanding it helps you plan, especially if you’re close to income or asset test thresholds or holding home sale proceeds. Staying informed and seeking guidance can assist you to maximise entitlements and avoid surprises.
Understanding deeming can feel like reading the fine print. If any of this resonates, why not check how your own assets are treated.
To see how your assets and income might be assessed, try the Retirement Essentials free Age Pension Eligibility Calculator – it’s a simple way to get a clearer picture of what’s coming your way.
Pause and consider…
- Could the cash from your home sale be quietly affecting your fortnightly pension, even if it’s safely in the bank?
- When you total up your investments, does the ‘deemed’ income match what you actually earn – or are there gaps that could change your Age Pension entitlement?
