The Australian government has confirmed that deeming rates will remain unchanged for another year, offering relief to pensioners by allowing them to retain more of their Centrelink payments.
This decision comes as part of the 2025 Federal Budget, and it aims to help older Australians cope with the increasing cost of living.
What Are Deeming Rates?
Deeming rates are essentially the assumed rate of return the government uses when calculating the income from a person’s financial assets, regardless of the actual earnings. These rates are applied to various financial assets such as shares, superannuation, and bank accounts.
If your actual earnings exceed the deemed rate, the government does not count the extra income when calculating Centrelink payments.
The government assumes that individuals will earn a specific rate on their financial assets, and this is used to determine their eligibility for benefits. If your actual returns surpass the deemed rate, the extra earnings are not included in the calculation.
Who Does This Affect?
The freeze on deeming rates will impact all recipients of Centrelink payments, including the approximately 460,000 age pensioners. These pensioners’ payment rates are influenced by deeming.
Current Deeming Rate Levels
Since May 2020, the deeming rates have been fixed at two levels:
- Lower rate: 0.25% for the first portion of financial assets
- Upper rate: 2.25% for assets beyond certain thresholds
Typically, deeming rates are adjusted to align with the Reserve Bank of Australia’s cash rate, which currently stands at 4.10%. However, despite this benchmark, the government has decided to keep the rates steady for the upcoming year.
Historical Context of the Freeze
The Coalition government first froze the deeming rates in 2022 for two years as part of a cost-of-living measure following the Reserve Bank of Australia’s interest rate hikes. The current Labor government has extended this freeze until July 1, 2025.
This continued freeze means the government will miss out on potential savings. It has been estimated that a 1% increase in deeming rates could save the budget around $1.8 billion over the next four years, which equates to $450 million annually.
Specific Deeming Rates for Pensioners
The current deeming rates for age pensioners are as follows:
| Asset Type | Deeming Rate |
|---|---|
| First $62,600 (Singles) | 0.25% |
| Above $62,600 (Singles) | 2.25% |
| First $103,800 (Couples) | 0.25% |
| Above $103,800 (Couples) | 2.25% |
How Does the Threshold Work?
- For singles: The first $62,600 of financial assets are deemed to earn 0.25%. Any amount over $62,600 is deemed to earn 2.25%.
- For couples: If at least one person is receiving the pension, the first $103,800 of combined assets are deemed to earn 0.25%. Anything over $103,800 is deemed to earn 2.25%.
The deeming rate thresholds are reviewed and adjusted every July 1, in line with inflation and other cost-of-living increases.
You can find more detailed information on how deeming rates affect your pension and how they are calculated on the official government website.
Budget Measures for Pensioners
Aside from the deeming rate freeze, the Labor government has also made a significant promise for pensioners in the 2025 Federal Budget.
If re-elected, the government plans to lower the cost of medicines listed under the Pharmaceutical Benefits Scheme (PBS), capping the price at $25 per script.
This change would apply to four out of five PBS medicines and reduce the maximum cost of prescriptions by more than 20%, starting on January 1, 2026.
PBS Medicine Cost Freeze for Pensioners
For pensioners and holders of concession cards, the cost of medicine will remain frozen at $7.70 per script until 2030.
The government’s decision to maintain frozen deeming rates for the upcoming year offers continued financial relief to pensioners, helping them keep more of their Centrelink payments despite the ongoing economic challenges.
Along with this, the Labor government’s promise to reduce PBS medicine costs for pensioners further demonstrates their commitment to easing the financial burden on older Australians. These measures are crucial as they provide tangible assistance in managing the rising cost of living.
FAQs
What is the current deeming rate for pensioners?
As of now, the deeming rates are set at 0.25% for assets up to $62,600 for singles (and up to $103,800 for couples) and 2.25% for assets above these thresholds.
How does the deeming rate affect my pension?
If your actual income from assets exceeds the deemed rate, the extra earnings will not be counted towards your Centrelink payments. This means you can earn more without it affecting the amount you receive.
Will the deeming rates increase in 2025?
No, the deeming rates will remain frozen for another year, as confirmed in the 2025 Federal Budget.