From 20 September, deeming rates have increased for the first time since the Covid-era freeze. This change may affect those whose payments and benefits are determined by the income test.
With inflation easing, the announcement confirms that rates will ‘gradually return to pre-pandemic settings’ with staged increases to take effect in the future. Increases will be realigned from 1 July to the same time that payments are indexed (expected to be 20 March and 20 September).
What are the new rates?
The current and new deeming rates from 20 September are included in the table below.
| Deeming rates | Income thresholds | ||
| Current | From 20 September | Singles | Couples (included illness separated) |
| 0.25% | 0.75% | First $64,200 | First $106,200 |
| 2.25% | 2.75% | Above $64,200 | Above $106,200 |
Who may be impacted?
An increase in deeming rates could reduce benefits and entitlements for those who are:
- income-tested pension and allowance recipients
- Commonwealth Seniors Health Card (CSHC) holders who have an account-based income stream that is deemed, and
- Low Income Health Care Card holders who may lose entitlement.
Higher deeming rates could also increase aged care fees that are based on means for some aged care clients.
Example – impact of deeming rate increase for age pensioner from 20 September
Jackson, aged 70, is a single homeowner with $250,000 in an account based pension and $50,000 in a bank account on 20 September 2025. His assessable income and assets are currently under both the income and assets test thresholds.
Prior to the deeming rate increase, he would have been eligible for the full single rate of Age Pension of $30,646.20 per year ($1,178.70 per fortnight).
As the deeming rates are increasing by 0.50%, under the income test, his:
- assessable income will increase from $5,466 to $6,966 per year, and
- Age Pension will reduce to $29,997.20 pa (ie $1,153.74 per fortnight).
The represents a reduction of $649 pa or $24.96 per fortnight.
CSHC holders – impact from 20 September
Single CSHC card holders will be able to hold an account based pension of approximately $3.7 million before their income would exceed the threshold of $101,105 (if they had no adjusted taxable income).
Couples could hold account based pensions of approximately $5.9 million before their income would exceed the threshold of $161,768 (if they had no adjusted taxable income).
The transfer balance cap limits the amount that can be held in retirement-phase pensions. The approximate amounts above would only be available to individuals who have made personal injury contributions.