If you receive a pension from Centrelink, you have likely heard of "deeming." Deeming is a set of rules Centrelink uses to estimate the income you earn from your financial assets, regardless of what they actually earn. This deemed income is then used in the Income Test to calculate your payment rate.
How Deeming Works
Instead of tracking the exact interest rate on your bank accounts, the dividends from your shares, or the returns on your superannuation, Centrelink applies a fixed percentage rate to the total value of your financial assets. This makes the system simpler and ensures you aren't penalised for moving your money to a higher-interest account.
Financial assets subject to deeming include:
- Bank accounts, term deposits, and cash.
- Shares, managed funds, and bonds.
- Superannuation (only if you are over Age Pension age).
- Gifts or loans you have made to family members.
Current Deeming Rates (Frozen until July 2025)
The Australian Government froze deeming rates at historically low levels to help pensioners cope with the cost of living. These rates apply to your total financial assets:
For Singles
- Lower rate (0.25%): Applies to the first $62,600 of your financial assets.
- Upper rate (2.25%): Applies to any amount over $62,600.
For Couples (Combined)
- Lower rate (0.25%): Applies to the first $103,800 of your combined financial assets.
- Upper rate (2.25%): Applies to any amount over $103,800.
Deeming Calculation Example
Let's say you are a single pensioner with $100,000 in a term deposit and $20,000 in a savings account. Your total financial assets are $120,000.
- Step 1: The first $62,600 is deemed at 0.25% = $156.50 per year.
- Step 2: The remaining $57,400 is deemed at 2.25% = $1,291.50 per year.
- Total Deemed Income = $1,448.00 per year (or $55.69 per fortnight).
Centrelink will count $55.69 per fortnight toward your Income Test. Since this is well below the single Income Free Area of $218 per fortnight, your pension would not be reduced (assuming you have no other income).
Why Deeming Can Be an Advantage
When actual bank interest rates are high (e.g., 4.5% to 5%), deeming is highly beneficial for pensioners. If you have money in a term deposit earning 5%, Centrelink is still only assessing that money at the deeming rates of 0.25% and 2.25%. You get to keep the extra interest without it affecting your pension.