On Tuesday 19 August the Minister for Social Services, Tanya Plibersek, announced significant changes to Age Pension payments and deeming rates. These changes are due to come into effect on 20 September this year.
The base rate of the Age Pension will increase for both singles and couples, as does the pension supplement.
Part-Age Pension income and asset cut-off limits will also increase.
But the biggest news is the first change to deeming rates since they were frozen more than five years ago by the Morrison Government. This freeze was brought in to help retirees faced with the challenge of rapid cost of living increases in the wake of the COVID-19 pandemic.
But now these deeming rates will rise for both singles and couples and this will mean that some Australians may even lose their pension entitlements.
Says Minister Plibersek:
Thanks to indexation, millions of Aussies will receive a boost to their payment to help them cover everyday costs like groceries and healthcare. The government wants to help take the pressure off when it comes to cost of living.
While the Social Services Minister highlights the modest uplift in Age Pension payments many will receive due to indexation, has the government simply given with one hand and taken away with another depending upon your assessment?
Retirement Essentials adviser, Nicole Bell, has modelled the way deeming changes might affect two different retirement situations; Mary, a single who is receiving the full Age Pension and Neil who is planning to downsize.
Here’s Nicole’s brief summary on the way these different retirees will be affected.
How could you be affected?
Let’s say Mary is a single retiree with $280,000 in super, $20,000 in savings, and $20,000 of personal assets. Therefore she is currently receiving a full Age Pension entitlement of $1,149 per fortnight. The increase in deeming rates would see Mary’s Age Pension fall by around $25 per fortnight, even though she has made no changes whatsoever to her circumstances.
Higher deeming rates also have the potential to affect some retirees who are looking to downsize their home. If Neil sells his home but intends to buy a new one in the next two years, the funds he is planning to spend are exempt under the assets test, but deemed at the lower deeming rate. The lower deeming rate is set to triple from 0.25% to 0.75% while the upper deeming rate will rise from 2.25% to 2.75%. Where a home is intended to be purchased for $1,000,000, the assessable income on this amount during this period will increase from $2,500 per annum to $7,500 per annum, resulting in a potential Age Pension reduction of up to $2,500 per annum. This will obviously depend upon Neil’s other assets and income, but this example shows the maximum potential impact.
As always when changes to eligibility or entitlements are announced, there will be a wide range of effects across many different households. We will report on the full changes on Tuesday and in the meantime encourage you to check your current eligibility by using the free Age Pension Entitlements Calculator. The calculator will go live on 20 September with the relevant updates.
If you have pressing concerns beforehand, a consultation to discuss entitlements can be booked here. Or a tailored Retirement Advice Consultation might suit more specific planning and income forecasting needs.
Hi
Q. How will the new deeming law in September 2025 affect our financial circumstance?
Note: Our builder starts building our home late September 2025.
OUR CIRCUMSTANCE.
I am 68 and on the pension, my husband age 61 is on Jobstart. We are building a house and have $600,000 that is exempt by centrelink at the moment. I have no Super, my husband has $124,000, the only other assets we have is a car and furniture worth $30,000. When the house and landscaping is completed the $600,000 will be depleted from our bank account. The property will then become our residential home. PLEASE HELP.
Hi Sylvia, as per the article, if you have pressing concerns please book in a consultation with one of our specialists HERE.
Well now they are after the pensioners lifestyle which in most cases I would say is not lavish . A tiny increase in the pension on one hand and a rise in both the upper and lower levels of the deeming rate – half of 1 % for both , geez there good . That might not seem a lot but in % terms that is big and will affect a lot of pensioners . Add on the fact that interest rates are coming down so pensioners will receive less interest on term deposits . Damn Govt again going after the vulnerable who have no redress.
prior to the election they stated deeming rates would stay frozen once again this goverment has lied to us pensioners
should i be concerned as nothing has changed for me and will it change in $ terms an increase or not and is it automatic we don’t have to do anything
Hi,
Keep up the great work guys, love your weekly updates. It’s always good to keep up with changes.
Basically the Government will give us another half cup of coffee a fortnight. And charge us for the coffee plantation. They don’t just give with one hand and take with the other. They bring a bucket and expect you to fill it with your hard earned money. Deeming is just another form of tax!
If you’re a self funded retiree and get nothing from Centrelink do you still pay deeming rates?
Hi Susan, deeming rates only apply to the financial assets of those receiving the Age Pension. Deeming is a method of determining the income generated by said assets and are not an amount paid by pensioners nor a tax from the ATO.