Deeming Rates Calculator
Calculate how deeming rates affect your government benefits based on your financial assets
Your Deeming Calculation Results
Comprehensive Guide: How Are Deeming Rates Calculated?
Deeming rates are a critical component of Australia’s social security system, used to estimate the income you earn from your financial assets when assessing eligibility for government benefits like the Age Pension, Disability Support Pension, and other Centrelink payments. Unlike actual income assessment, deeming assumes your financial assets earn a certain rate of return regardless of what they actually earn.
What Are Deeming Rates?
Deeming rates are benchmark rates of return that the Australian Government applies to your financial assets to work out how much income you’re “deemed” to earn from them. This deemed income is then used to calculate your eligibility for income-tested payments.
The system exists because:
- It simplifies the assessment process (no need to track actual investment returns)
- It provides consistency in how different types of financial assets are treated
- It prevents people from structuring their finances to maximize benefits
Current Deeming Rates (as of July 2024)
The Australian Government sets two deeming rates:
- Lower deeming rate: 0.25% per annum (applies to the first portion of your financial assets)
- Higher deeming rate: 2.25% per annum (applies to assets above the threshold)
| Situation | Lower Threshold | Higher Threshold |
|---|---|---|
| Single | $56,400 | Above $56,400 |
| Couple (combined) | $93,600 | Above $93,600 |
| Couple (separate due to illness) | $56,400 each | Above $56,400 each |
| Couple (one partner in care) | $56,400 (non-resident) $93,600 (combined) |
Above thresholds |
How Deeming Rates Are Applied
The calculation follows these steps:
- Identify financial assets: These include:
- Bank accounts
- Term deposits
- Managed investments
- Shares and securities
- Loans and debts owed to you
- Some income streams
- Superannuation if you’ve reached Age Pension age
- Determine your threshold: Based on your relationship status (single or couple)
- Split your assets:
- Assets up to the threshold get the lower deeming rate
- Assets above the threshold get the higher deeming rate
- Calculate deemed income:
- Lower portion × lower rate
- Higher portion × higher rate
- Sum both amounts for total deemed income
- Assess eligibility: Your deemed income is added to other income to determine your payment rate
Example Calculation
Let’s say you’re single with $120,000 in financial assets:
- First $56,400 at 0.25% = $141 per year
- Remaining $63,600 at 2.25% = $1,431 per year
- Total deemed income = $1,572 per year ($30.23 per fortnight)
This $1,572 would be added to any other income you receive when assessing your eligibility for government benefits.
Why Deeming Rates Change
Deeming rates are reviewed regularly and can change based on:
- Economic conditions (particularly interest rate movements)
- Government policy decisions
- Inflation rates
- Financial market performance
Historically, deeming rates have ranged from as low as 0.25% to as high as 5% during different economic periods. The rates are typically set lower than actual market returns to provide a buffer for pensioners.
Assets Not Subject to Deeming
Not all assets are deemed. Exempt assets include:
- Your principal home
- Some pre-paid funerals
- Certain income streams (like some annuities)
- Some compensation payments
- Certain loans to family members under specific conditions
How Deeming Affects Different Benefits
| Benefit Type | Deeming Applies? | Impact |
|---|---|---|
| Age Pension | Yes | Reduces pension amount as deemed income increases |
| Disability Support Pension | Yes | May affect eligibility or payment amount |
| Carer Payment | Yes | Income test includes deemed income |
| JobSeeker Payment | Yes | Affects payment rate for those over Age Pension age |
| Commonwealth Seniors Health Card | Yes | Deemed income counted in income test |
| Veterans’ Affairs Pensions | Yes | Similar rules to Age Pension |
Strategies to Manage Deeming
While you can’t avoid deeming entirely, some legitimate strategies can help manage its impact:
- Asset structuring: Holding assets in superannuation (if under Age Pension age) or in exempt forms
- Spending down assets: Using assets for home improvements or other exempt purposes
- Gifting rules: Within allowable limits (currently $10,000 per year, $30,000 over 5 years)
- Income stream products: Some annuities have different assessment rules
- Couple strategies: Splitting assets between partners may optimize thresholds
Important note: Any financial structuring should be done with professional financial advice to ensure compliance with Centrelink rules.
Common Misconceptions About Deeming
Many people misunderstand how deeming works. Here are some common myths:
- Myth 1: “Deeming only applies to cash in the bank” – Reality: It applies to most financial assets
- Myth 2: “If my investments earn less than the deeming rate, I’m penalized” – Reality: Deeming is about assumed income, not actual returns
- Myth 3: “Deeming rates are the same as interest rates” – Reality: They’re set by government policy, not market rates
- Myth 4: “I can avoid deeming by putting money in my home” – Reality: Only the principal home is exempt, not money spent on it
- Myth 5: “Deeming rates change monthly” – Reality: They typically change only when the government announces updates
Historical Deeming Rate Changes
Deeming rates have varied significantly over time in response to economic conditions:
| Date | Lower Rate | Higher Rate | Economic Context |
|---|---|---|---|
| July 2024 | 0.25% | 2.25% | Post-pandemic recovery, high inflation |
| July 2022 | 0.25% | 2.25% | Pandemic recovery, rising interest rates |
| May 2020 | 0.25% | 2.25% | COVID-19 pandemic, emergency rate cuts |
| July 2019 | 1.00% | 3.00% | Pre-pandemic, stable economy |
| March 2015 | 1.75% | 3.25% | Post-GFC recovery |
| September 2012 | 2.00% | 3.50% | European debt crisis |
| July 2009 | 3.00% | 4.00% | Global Financial Crisis aftermath |
How to Check Your Deeming Calculation
You can verify how deeming affects you through:
- Using our calculator above
- Checking your Centrelink online account
- Requesting a statement from Services Australia
- Consulting a financial adviser specializing in aged care
If you believe your deeming calculation is incorrect, you can request a review from Centrelink. Common reasons for errors include:
- Incorrect asset valuation
- Wrong relationship status
- Assets incorrectly classified as financial assets
- Outdated information in your Centrelink record
The Future of Deeming Rates
Deeming rates will continue to evolve based on:
- Economic conditions: Particularly interest rate movements by the Reserve Bank
- Government policy: Potential reforms to simplify the system
- Demographics: Australia’s aging population may influence rate settings
- Investment trends: Changes in how Australians hold financial assets
Some policy experts have suggested potential future changes such as:
- Single deeming rate instead of two-tiered system
- Different rates for different asset classes
- Automatic adjustment mechanism linked to RBA cash rate
- Higher thresholds to account for increased cost of living