Deeming rates 1 July:
Here come higher thresholds
Last week we alerted you to changes in income and assets thresholds for Age Pension eligibility, starting 1 July. We also noted that there would be an important change to the thresholds for deeming rates. This change offers a good opportunity for a refresher on deeming rates – what they are and how they can affect your retirement income.
What are deeming rates?
Deeming rates are used by Centrelink as part of their assessment as to how much, if any, Age Pension you can receive. They are a universal, shortcut rate used by Centrelink to calculate earnings on financial (e.g. income earning) assets. These assets include, but are not limited to, superannuation balances, Account-Based Pension amounts, bank balances, shares and managed funds.
The deeming rate is used on all ‘deemed’ assets, as working through actual earnings for each eligible retiree, across a range of investments, would be an impossible task. So Centrelink uses an upper and lower deeming rate to work out what you might be earning in order to determine Age Pension eligibility and calculate fortnightly payments. Essentially Centrelink “deems” that you have earned a certain amount but you could actually earn more or less than this amount.
The current rates are:
- Singles 0.25% on assets up to $56,400 and 2.25% on assets above that amount
- Couples (combined) 0.25% on assets up to $98,600 and 2.25% on assets above that amount
These percentage rates are frozen until 30 June 30 2024 as part of the Federal government’s response to the uncertainty of the economy during the Covid pandemic. This attempt to give some certainty to retirees means that, considering cash interest rates of around 4%, many retirees are receiving far higher returns than the current deeming rates. And this is likely to continue until July 2024. It makes a nice change from the situation three years ago where most retirees were very unlikely to be earning nearly as much on their cash deposits as Centrelink deemed.
What is about to change?
It is the thresholds which will increase on 1 July this year. And the increase will mean more of your financial assets are deemed at the lower 0.25% rate.
They will move to:
- Singles 0.25% on assets up to $60,400 and 2.25% on assets above that amount – an increase of $4000
- Couples (combined) 0.25% on assets up to $100,200 and 2.25% on assets above that amount – an increase of $6600
Here’s an example of the change in income deemed for singles and couples, using total deemed assets of $185,000.
| Single (current) | Single (from 1 July) | Couple combined (current) | Couple combined (from 1 July) | |
| Total financial assets | $185,000 | $185,000 | $185,000 | $185,000 |
| Deemed Income | $3,034.50 | $2,954.50 | $2,190.50 | $2158.50 |
Whilst the above example shows small decreases in the amounts that are calculated to be deemed using the new rates, any decrease in income can translate into a higher fortnightly part-Age Pension payment, or perhaps becoming eligible if you were ‘borderline’ previously.
Deeming rates thresholds will be reviewed again on 1 July 2024, at the same time that the rates will be ‘unfrozen’. Depending upon the economic climate the rates of 0.25% and 2.25% could be increased.
If you are wondering how deeming will affect your own payments or eligibility, you don’t need to do all the maths yourself. Retirement Essentials Age Pension Eligibility Calculator has deeming rates built in to all calculations. We have now added the new deeming rates for 1 July, so that you can use this free calculator anytime you wish to check your own eligibility.
And should you need further support to understand your situation, an entitlements consultation is just a click away.
if you have any pressing concerns about Age Pension eligibility or other Centrelink rules, you can book an entitlements consultation today.
Are these new thresholds fair?
What are your thoughts on deeming rate changes? Are they fair? Or would you suggest different amounts?
Threshold rates should not change with the death of your spouse. It’s not fair.
No, expecting taxpayers to continue to subsidise a single person’s living expenses on the same basis as a couple’s would be unfair.
It will be interesting to hear your views again when it’s your turn to take up a pension, “Mark”, It’s not easy my friend
I agree, your bills and the majority of other living expenses will not change too much.
As the saying goes “ Two can live almost as cheaply as one”, when you arrive at Pensionable age.
I placed a deposit on an apartment back in 2021 (off the plan). As I understood it at the time, interest would not be credited to the sum. That being the case how should centrelink treat this sum. Is it deemed or simply treated as an asset.
Hi Christopher, thanks for reaching out! Based on the wording you have used the deposit would not be counted as an asset nor have deeming applied. You have not gifted the money, as you will be getting something of equal value in return once the house is finished. Nor is the amount earning you any kind of financial return as it is no longer in your possession.
Far to many buzz words in an industry plagued by bureaucracy speak and nonsense. The system is broken and obviously so, when the average person is overwhelmed and we are. It’s now all geared to supporting bureaucrats and highly paid nobodies. No wonder people are so lacking in trust and so cynical about government and superannuation. I give up.
Exactly how I feel. The whole thing is a monster sucking the lifeblood out of the productive economy (well, the little we have left) and peoples’ retirement savings.
In the table above, I think the calculation of deemed income for couples is incorrect?
Hi Daniel, thanks for double checking our numbers! You are correct, there were 2 minor typos made and these have been now been corrected. Thank you for double checking and letting us know!
Can I ask how private company shares are assessed please.
It is criminal the way pensioners are treated. A life of work boiled down to penny pinching at the end.
Why can’t workers at the age of 60 forego paying tax on income in order to fund their own retirement? This would reduce the burden on the pension system, encourage longer work years and encourage self sufficiency/security.
Does the government want us dependant on their policy and holding our withered hands out for crumbs?
I agree that pensioners are treated horribly with all the penny pinching. It’s hard enough to exist let alone live. The fat cat politicians will never experience what we have to and simply do not understand nor do they want to. Deeming rates are not a fair instrument either, and are raised much faster than they are lowered. Then of course there are the billions and billions that the Government wastes each year which could help more worthy causes including pensioners.
Recently we joined the CENTRE LINK line for Age Pension entitlement.I worked till I was 74 yrs young and my wife worked till she was 70 and we both decided to go to Centre link for our Age Pension entitlement.
Asset test required for us to declare the following:Jewelry,Cars and other vehicles,Boats etc.PLEASE EXPLAIN HOW I CAN TAKE THESE ITEMS WHICH ARE NECESSARY FOR OUR LIVING to a grocery shop and offer these items in exchange for
our DAILY BREAD.It just does not make sense and yet the super rich get a Tax cut and us middle income who support the poor and the rich both being penalised for our own savings which we worked hard for.Rip offs by Government.Please explain.
Hi Vijendra, thank you for sharing your thoughts! Regarding why Centrelink assess personal contents, the reason is because you could potentially sell them for cash to then spend on your living expenses. If contents and cars were exempt then what’s to stop someone from buying mass amounts of them to get the full pension and then just sell some off if they ever need a cash boost.
Easily fixed just only allow 2 cars for example. But I would not hold my breath for Government to make simple rules, as it would require a benevolent governing body deciding the rules.
I have been waiting seven months for my small apartment to be ready. I am
Being deemed on that money. So I’m not getting my full single pension because of this money I can’t spend.
Paying storage fees living costs living on next to nothing. because of the money I have for my apartment. What I get a fortnight doesn’t add up to all my living costs at all. I don’t smoke drink don’t go out except to my gym. I need to be able to still enjoy life but I can’t afford to with not getting my full pension. It not fair at all. I thought at least I wouldn’t be deemed on the money I have saved to pay for my apartment which is not a lot. I can’t afford to join a swimming club go out for dinner do any activities I like doing. Scrimping and saving to eat and pay bills. It shouldn’t be this hard. For a person who has never been on CL worked all her life paid my taxes asked for absolutely nothing. So unfair and being on my own now with no where to turn its just isn’t right.
I”m not impressed with any of this. Having been a self-funded retiree for 22 years and having sold property to continue living, then to discover that the government will extract tens of thousands of dollars in Capitol Gains. Nothing is fair for those who have worked hard, saved and cared for themselves. Why save to become a SELF-FUNDED RETIREE, when you can be a pensioner and live off the government???????
CGT is applied to any investment when it makes a profit.
Buy and sell art for a profit, you pay tax on that profit.
Buy and sell cars for a profit – pay tax on the profit
Buy and sell shares for a profit – pay tax on the profit.
Its the way Governments make sure everyone helps to pay for the stuff that Governments do. Otherwise the wage earners will be the only ones paying for the stuff that Governments do. Which will mean people who make an income by selling stuff for a profit will be using the stuff Governments provide but not paying their share.
Buy and sell a house for a profit? Why shouldn’t you pay a fair tax on that investment?
Well, you don’t. You only pay tax on a half of the profit!
Of course, if its the family home you wouldn’t expect to pay any tax, even though it is on a huge profit. And no, you don’t.
(BTW, I have owned 4 properties. One we live in, so no tax when I sell it, One I sold for a loss, so no tax payable, the other two I still own and I am quite willing to pay my fair share of tax on them when I sell them).
Can you explain how deeming works with a superannuation account in the retirement phase?
If the fund is already paying out (say) 5% (the minimum withdrawl amount). Is that 5% “offset”against the deeming rate?
How can they count the interest from the fund as income, then assess it again as deeming.
Your explanation says the Government “deems” you to have made 2.25% on the total super balance. Surely then they cant add the super fund’s actual income as well.
Hi Jeff, I think you have misunderstood. Centrelink only apply the deeming rate to the total balance of the account. They do not apply deeming to the payments you receive nor do they class those payments as income. Think of it like a bank account, money you withdraw from your account is not income and does not have deeming applied but the balance sitting in the account does.