Deeming Rate Change Calculator
Estimate how changes in deeming rates affect your income support payments
Comprehensive Guide: Understanding Deeming Rate Changes and Their Impact
Deeming rates are a critical component of Australia’s social security system, determining how financial assets affect income support payments. When these rates change, they can significantly impact the payments received by pensioners and benefit recipients. This guide explains how deeming rates work, how changes are calculated, and what you can do to manage their effects.
What Are Deeming Rates?
Deeming rates are used by Services Australia to calculate income from financial assets when assessing eligibility for income support payments. Instead of using actual earnings, the government assumes (or “deems”) that financial assets earn a certain rate of return, regardless of their actual performance.
There are two deeming rates:
- Lower deeming rate: Applied to the first portion of financial assets (currently $56,400 for singles and $93,600 for couples)
- Higher deeming rate: Applied to assets above these thresholds
How Deeming Rate Changes Affect Payments
When deeming rates increase:
- Your deemed income increases
- Your assessable income for Centrelink purposes rises
- Your income support payment may decrease (or stop if you exceed the income test)
When deeming rates decrease:
- Your deemed income decreases
- Your assessable income for Centrelink purposes falls
- Your income support payment may increase
Current Deeming Rates (as of July 2023)
| Relationship Status | Lower Rate Threshold | Lower Deeming Rate | Higher Deeming Rate |
|---|---|---|---|
| Single | $56,400 | 0.25% | 2.25% |
| Couple (combined) | $93,600 | 0.25% | 2.25% |
Historical Deeming Rate Changes
Deeming rates have changed significantly over time in response to economic conditions:
| Date | Lower Rate | Higher Rate | Economic Context |
|---|---|---|---|
| July 2022 | 0.25% | 2.25% | Post-pandemic recovery, rising inflation |
| July 2020 | 0.25% | 2.25% | COVID-19 pandemic response |
| March 2020 | 0.25% | 2.25% | Emergency rate cuts due to COVID-19 |
| July 2019 | 1.00% | 3.00% | Pre-pandemic normal rates |
How to Calculate the Impact of Deeming Rate Changes
The calculation involves several steps:
- Determine your financial assets: Include savings, term deposits, managed investments, listed shares and securities, and some income streams.
- Apply the threshold: Use $56,400 for singles or $93,600 for couples as the cutoff for the lower rate.
- Calculate deemed income:
- Lower rate portion = (threshold × lower rate) ÷ 12
- Higher rate portion = [(total assets – threshold) × higher rate] ÷ 12
- Total deemed income = lower portion + higher portion
- Compare scenarios: Calculate deemed income under both current and proposed rates.
- Estimate payment impact: The difference in deemed income affects your income test assessment.
Strategies to Manage Deeming Rate Changes
If deeming rate increases are likely to reduce your payments, consider these strategies:
- Review asset allocation: Some assets are exempt from deeming (e.g., your principal home, some superannuation products).
- Consider spending down assets: If you’re close to the threshold, strategic spending might reduce your assessable assets.
- Explore alternative investments: Some investments may have different assessment rules under the assets test.
- Seek financial advice: A financial adviser specializing in Centrelink can help optimize your situation.
- Grandfathered products: Some older financial products have different deeming rules – check if you hold any.
Common Misconceptions About Deeming Rates
Many people misunderstand how deeming works:
- Myth: “Deeming rates are the same as interest rates.”
Reality: Deeming rates are assessment tools, not actual earnings rates. - Myth: “If my actual earnings are lower than deemed income, I’ll be better off.”
Reality: Centrelink uses deemed income regardless of actual earnings. - Myth: “All my assets are subject to deeming.”
Reality: Many assets (like your home) are exempt from deeming. - Myth: “Deeming rates change with the cash rate.”
Reality: While related, deeming rates are set by government policy and don’t automatically move with RBA rates.
Government Resources and Support
For official information about deeming rates:
- Services Australia – Deeming Information
- Department of Social Services – Policy Updates
- Treasury Budget Papers (for economic context)
Important Disclaimer: This calculator provides estimates only. Actual payment amounts are determined by Services Australia based on your complete financial situation. For precise calculations, use the official Services Australia online account or consult a financial adviser. Deeming rates and thresholds may change – always check the latest information from official sources.