The reporting during last week’s Federal Budget that deeming rates would be frozen for another year from 1 July 2025 was a welcome one for many retirees. It was also on Retirement Essentials adviser, Nicole Bell’s wishlist when we published our preferred Budget initiatives back in February.
Nicole is pleased that this is likely to be actioned as she feels this gives retirees more confidence in their entitlements and decision-making for another year. But she couldn’t help but note the disadvantage faced by singles who she believes are disproportionately affected by deeming on their financial assets.
How does deeming work?
To understand this situation, we’ll need to take a step back and explain the factors at work here. Deeming rates are rates applied to financial assets by Centrelink in order to assess eligibility for the Age Pension. They have been historically low since the Covid pandemic and while market returns are more robust, Centrelink continues to apply a rate of 0.25% for the first $62,600 (single) or $103,800 (couple) and 2.25% for any amount which is above these thresholds.
The current income limits for a full Age Pension are:
Singles per annum – $5512
Couples per annum $9672
To receive the FULL Age Pension your income must be less than these amounts.
The current assets limits for a full Age Pension are:
Single non-homeowner, $566,000 Single homeowner, $314,000
Couple non-homeowners, $722,000 Couple homeowners, $470,000
To receive the FULL Age Pension your assets must be less than these amounts.
You can read more about these limits here.
This week Nicole shared a recent situation where her client Jane (not real name) was not eligible for the full Age Pension, even though technically she is below the stated asset limit. Here’s how the eligibility tests will be applied.
Jane is a 70 year old non-homeowner with $320,000 in super, and an old car worth around $5,000. She pays rent of $450pw ($23,400 per annum). Her lease ended last year on the home she had been renting for 20 years and the son of the landlord decided to sell the property so she had to move on. She submitted around 20 different rental applications and was finally approved to rent a two-bedroom unit in the outer suburbs of Melbourne. She needs to remain close to friends and medical specialists as she has mobility issues and an autoimmune condition.
Under the assets assessment Jane is eligible for a full Age Pension entitlement as long as she keeps her assets below $566,000 as a non-homeowner. However, Jane is not eligible for a full Age Pension entitlement because, under the income test calculation, the deemed income on her super is $5,948 which puts her over the maximum income allowable to receiving a full Age Pension. She therefore receives slightly less than the full payment.
Higher asset test thresholds exist for non-homeowners to acknowledge the disadvantage of not owning a home of your own in retirement. Single homeowners start to see a reduction in the Age Pension with total assets of greater than $314,000. However, single Age Pensioners will start to see a reduction in their entitlements once their financial assets are $301,000 due to the deemed income. Keeping the deeming rates on hold has not further disadvantaged non-homeowners but nor has it addressed the existing disadvantage that is inherent in the system.
Maximum rent assistance available for a single non-homeowner is $5,491p.a. This will cover 23% of Jane’s rent. On top of the Commonwealth Rent Assistance, Jane then needs to use 60% of her $29,656 Age Pension entitlement to meet her rental costs. A single homeowner with the same assets would not be using 60% of their $29,016 per annum pension payment to meet council rates and house maintenance costs.
It’s far from clear how Jane can and will cover her rent. When every penny counts, there is a strong case to be made for a review of the way the Age Pension means test is applied.
If you are struggling to understand the (many) Age Pension rules or to apply for your entitlements, a Retirement Essentials Age Pension Consultation may be exactly the support you require. Separately, you may wish to check your fortnightly payments are what they should be by booking a Maximising Entitlements Consultation.
Are you happy with the way the deeming rates are applied?
Do you feel you benefit from these rules – or are you concerned you’re being unfairly discriminated against?
Discrimination against the Untethered/Non codependents happens throughout their entire lives. For example, they pay *far* more PER PERSON for private health insurance. SOmeone can pump out 5 kids, adding to planetary disaster – yet be subsidised because they pay a LOT less *per person* for their ‘household’ health insurance. Why on earth is health insurance per HOUSEHOLD but not for those who share a household but presumably do not have sex with each other? Why should they be subsidised by those who do not have that choice in life? It is FAR more expensive to be an Untethered / Non codependent than to share costs. Oh and of course, when there is an election, they just bang on and on about ‘families’…as if the singles do not even exist. Nearly half of all US households are one ‘singles’ and in Australia it is nearly 34%. The Couples (codependents) cost taxpayers BILLIONS when they go through their inevitable breakup and divorce. Not to mention the billions more that couples cost in DV support. Singles don’t get 10 days paid leave to deal with a ‘relationship problem’. Singles never cost the country that money. Single wimmin are the happiest group of people in society – for obvious reasons! Yet they are punished, financially, on so many levels and throughout their lives. And sneered at as being ‘a failure’.
Hi, sorry but I read your comment and to be honest you sound just like my sister. just a few pointers.
1. Families pay higher fees for health insurance
2. Couples are asset and income tested a lot higher than if they were single yet would be better off under the pension being single instead of married
3. A single person has not had to pay for the bringing up and education of children which frankly takes pretty much two people’s wages along with mortgage payments.
4. a single person who has been single for a long time has only had themselves to buy for, can have partners that don’t affect their income – assets but still contribute to many things, have much higher asset limits than if you were to treat married as two singles.
I know a lot of people on their own and trust me if they have a house they are ten times better off than us as a couple.
Interesting article and comments. However, I do not understand why you compare a non-homeowner’s rental costs to only a homeowner’s rates and maintenance costs. For a fair and logical comparison, the rental costs should be compared to a homeowner’s mortgage costs as well. Buying a house both now and in the past took careful planning and budgeting with many homeowners going without non-essentials for many years. I was divorced when my children were very young and can remember having to be creative with mince, rice, cabbage and carrots for weeks on end to be able to pay the mortgage and now I reap the benefits of that. I think we have to remember that the government age pension is intended to only provide a basic means of living. The rest is up to us. Also in your example Jane is already getting an extra $5,491 in rental assistance that a homeowner does not get and surely she would draw an income stream on her super as well. I think we should be grateful that we live in our wonderful country.
You put forward a very good story ,BUT, you left out a couple of things.
you stated she has to use 60% of her $29656 pension towards rent which is approx $17790, leaving a pension of $11866, what you failed to mention she has to draw down a min 5% pa min from the super , which is $16000 giving her a total of $27843, and if her super is growing at a modest 7% pa her super would grow at over $4k pa, if she drew out her total capital growth each year her pension would be over $31k pa after her rent is paid, am I right or wrong
Hi Garry, my apologies that we weren’t specifically clear in the case study. The super in this instance was still in accumulation not ABP so was not paying regular amounts. It is possible to do so though so your point is overall a valid one.