Deeming Rates: What is it and what’s changing?

If you’re one of the nearly 3 million Australians who are above age 67 and receiving some form of Government pension, the word “deeming” may come up in conversation about your pension eligibility.

Deeming does sound like a technical term and there is confusion about what role deeming plays in someone’s Age Pension eligibility.  As a financial planner, I have heard many different misconceptions, so the purpose of this presentation to explain what deeming is, what changes are on the horizon and what it means to your overall pension entitlement.

On this channel we present topics for those who are preparing financially for retirement or those who have already retired and looking for education on all matter’s retirement. 

What is Deeming?

Now as most people are aware, Centrelink can provide full Age pension, part Age pension or no Age pension for people 67 and above, depending on your ability to pay for your own retirement.

They will assess your overall financial means applying two test – the “Assets” test and “Income” test, and whichever provides a lower assessment or fortnightly payment, they will use.  

If you are receiving no age pension, you have too much assets or income above their allowable thresholds. Most Australians who are receiving Part Age Pension, are caught under the “Asset test”, which is in part to the generous thresholds that are applied to the “Income test” and also the low deeming rates since the covid period. 

Essentially, Centrelink uses a process called deeming for the purposes of the “Income test” now this helps determine your assumed investment earnings on financial assets like:

• Bank savings and term deposits
• Most account based pension accounts
• Superannuation from age 67
• Direct shares, ETFs and managed investments 

There are other assets that get deemed, but it’s important to know that deeming doesn’t apply to:

• The family home and investment properties
• Lifestyle assets (i.e. car, home contents, caravan)
• Superannuation under age 67 – Doesn’t get deem

More information on what assets are deemed can be found on Services Australia website.

So when Centrelink look at your direct shares, banks savings or account based pension, they don’t care what earnings you may be receiving whether you get… 10%, 20% or negative 20%, it doesn’t matter for the purposes of the  “Income” test. Also for account based pension holders, it also doesn’t matter what pension income you are drawing and paying yourself in retirement.

So let’s take a look at the deeming rates… As I mentioned from my recent video on “What’s changing from July 2025”, deeming rates have been frozen since year 2020, but are now set to rise from mid-September 2025.

As can be seen in this table, for both single and couple pensioners, the deeming rates will rise by 0.5% from September 2025. As inflation has ease the government has indicated that deeming rates gradually will return to pre-pandemic rates, with the next adjustment likely to take place from March 2026.

To give you some idea of pre-pandemic deeming rates, in 2018/19 the rate ranged from 1.75% to 3.25% for the higher threshold. We can see in this graphic below that the deeming rates show in blue were at their lowest in the last 5-6 years, this was to support retirees in a period of initial economic uncertainty and despite the high cash rates.

So, let’s take a look an example of deeming rates counting towards the income test:

We can see that for $500,000 in  financial assets, under the new rates, $12,500 will be counted towards the income test for a single person and $11,674 for a couple. But what is deeming rates again jump in March 2026 by 0.5%? Well you can expect about $2,500 additional assessment towards the income test.

These may be small increases, but over time we can expect to see larger reductions in Age Pension for people impacted by the “Income” test. 

Implications

So what type of Age Pensioners are adversely impacted by deeming rate rises?

• Typically age pensioners that are still employed in some capacity or have a partner still working.
• Those receiving Government defined benefit pensions – CSS or PSS for example.
• Investment property owners that are receiving high net rental but hold low equity property values counted towards their “Assets” test 

For some of these people, the deeming rate rises could mean the difference from full age pension to part age pension or even worse, moving from part age pension to no age pension, and therefore meaning no pensioner concession card.   

Furthermore, there are other social security recipients that can be negatively impacted by higher deeming rate, including:

• Commonwealth Seniors Health Card holders, depending on their deemed financial assets.
• Aged care residents who contribute to the care costs
• And Lastly Jobseeker and Disability Support Pension recipients 

Everyone’s assessment is different

In summary, the changes to deeming rates may not have an impact for the majority of Age Pensioners for now, but as rates return to more normal levels, over time we can expect more Australians feeling the impact to their fortnightly payments.

Meeting with a qualified adviser may help you understand your Centrelink assessment and also help determine is if there are strategies to reduce either your asset or income test assessment.

A financial adviser can also model different scenarios to protect your entitlements while keeping your broader financial plan on track.

Shaun Jones MAppFin (FP) 
Financial Planner at About Retirement