Deeming Rate Changes March 2026: How They Affect Your Pension
The deeming rates increased on March 20, 2026. Lower rate up to 1.25%, upper rate up to 3.25%. Worked examples showing how the changes affect pensioners with $100K, $200K and $300K in financial assets.
Deeming rates increased on March 20, 2026
The deeming rates used by Centrelink to assess income from your financial assets increased today, March 20, 2026. The lower deeming rate moved from 0.25% to 1.25%, and the upper deeming rate moved from 2.25% to 3.25%. Both rates increased by a full 1 percentage point. This is the largest single increase to deeming rates since they were slashed during the COVID-19 pandemic in 2020, when the government dropped them to emergency lows to protect pensioners from being assessed on investment returns that had collapsed. The new rates better reflect the current interest rate environment, where term deposits are paying 4–5% and savings accounts are paying 3–4%. The old deeming rates were well below actual returns for most people, which was generous — the new rates are still below market rates, but less so.
What are deeming rates and why do they matter?
Deeming is the method Centrelink uses to estimate how much income your financial assets generate. Instead of tracking your actual investment returns — dividends, interest, capital gains — Centrelink applies a fixed percentage (the deeming rate) to the total value of your financial assets and treats the result as your income for the purposes of the income test. This matters because the income test determines whether you receive a full pension, a part pension, or no pension at all. Higher deemed income means a higher assessed income, which can reduce your pension. The beauty of deeming — from the pensioner's perspective — is that it does not matter what your assets actually earn. If your shares return 8% but the deeming rate is 3.25%, Centrelink only counts the 3.25%. Conversely, if your savings account pays 0.5% but the deeming rate is 1.25%, you are deemed to earn more than you actually do. Financial assets that are deemed include: bank accounts, term deposits, shares, managed funds, superannuation (if you are Age Pension age), bonds, debentures, and any financial investments. Your home, car, personal effects, and real property (like an investment property) are not deemed — they are assessed differently under the assets test.
New deeming rates and thresholds from March 20, 2026
Here are the exact deeming rate settings that apply from today: **Lower deeming rate:** 1.25% per annum (was 0.25%) **Upper deeming rate:** 3.25% per annum (was 2.25%) **Deeming threshold — single:** $64,200 Financial assets up to $64,200 are deemed at the lower rate of 1.25%. Everything above $64,200 is deemed at the upper rate of 3.25%. **Deeming threshold — couple (combined):** $106,600 The first $106,600 of combined financial assets is deemed at 1.25%, and the rest at 3.25%. The thresholds themselves have not changed significantly — the big story is the rate increase. The 1 percentage point jump on both rates means every pensioner with financial assets will have a higher assessed income than they did yesterday, even if nothing about their actual finances changed.
Worked example: $100,000 in financial assets (single)
Let's say you are a single Age Pensioner with $100,000 in total financial assets — a mix of bank savings and a small share portfolio. **Under the OLD deeming rates (before March 20):** First $64,200 × 0.25% = $160.50 per year Remaining $35,800 × 2.25% = $805.50 per year Total deemed income = $966.00 per year ($37.15 per fortnight) **Under the NEW deeming rates (from March 20):** First $64,200 × 1.25% = $802.50 per year Remaining $35,800 × 3.25% = $1,163.50 per year Total deemed income = $1,966.00 per year ($75.62 per fortnight) **Impact:** Your deemed income has increased by $1,000 per year or $38.46 per fortnight. Under the pension income test, this additional deemed income reduces your pension by $19.23 per fortnight (50 cents for every dollar above the income free area). However, the Age Pension rate itself increased by approximately $22.00 per fortnight today. So the net effect is actually a small gain of roughly $2.77 per fortnight. With $100,000 in financial assets, the payment rate increase more than covers the deeming rate hit.
Worked example: $200,000 in financial assets (single)
Now consider a single pensioner with $200,000 in financial assets — perhaps a mix of superannuation drawdowns sitting in a bank account and some managed funds. **Under the OLD deeming rates:** First $64,200 × 0.25% = $160.50 per year Remaining $135,800 × 2.25% = $3,055.50 per year Total deemed income = $3,216.00 per year ($123.69 per fortnight) **Under the NEW deeming rates:** First $64,200 × 1.25% = $802.50 per year Remaining $135,800 × 3.25% = $4,413.50 per year Total deemed income = $5,216.00 per year ($200.62 per fortnight) **Impact:** Your deemed income increased by $2,000 per year or $76.92 per fortnight. The pension reduction from this extra deemed income is approximately $38.46 per fortnight. The Age Pension rate increase of $22.00 per fortnight does not fully offset this. You end up approximately $16.46 per fortnight worse off — about $428 per year. This is a real reduction, though it is worth noting that your actual investment returns at current market rates are likely well above what Centrelink deems, so your overall financial position may still be comfortable.
Worked example: $300,000 in financial assets (single)
For a single pensioner with $300,000 in financial assets — common among self-funded retirees who also qualify for a part Age Pension: **Under the OLD deeming rates:** First $64,200 × 0.25% = $160.50 per year Remaining $235,800 × 2.25% = $5,305.50 per year Total deemed income = $5,466.00 per year ($210.23 per fortnight) **Under the NEW deeming rates:** First $64,200 × 1.25% = $802.50 per year Remaining $235,800 × 3.25% = $7,663.50 per year Total deemed income = $8,466.00 per year ($325.62 per fortnight) **Impact:** Your deemed income increased by $3,000 per year or $115.38 per fortnight. The pension reduction from this extra deemed income is $57.69 per fortnight. With the pension rate increase of $22.00, you are approximately $35.69 per fortnight worse off — about $928 per year. At this asset level, the deeming rate increase clearly outweighs the payment rate increase. If you are in this situation, it may be worth reviewing your financial structure. Assets held in non-financial forms (such as home renovations, prepaying expenses, or certain exempt assets) are not subject to deeming.
Impact on couples
Couples have a higher deeming threshold of $106,600 combined, which provides some buffer. Here is a quick comparison for a couple with $200,000 in combined financial assets: **Under the OLD deeming rates:** First $106,600 × 0.25% = $266.50 per year Remaining $93,400 × 2.25% = $2,101.50 per year Total deemed income = $2,368.00 per year ($91.08 per fortnight) **Under the NEW deeming rates:** First $106,600 × 1.25% = $1,332.50 per year Remaining $93,400 × 3.25% = $3,035.50 per year Total deemed income = $4,368.00 per year ($168.00 per fortnight) **Impact:** Deemed income up by $2,000 per year ($76.92 per fortnight). Pension reduction of ~$38.46 per fortnight. Couple pension rate increase of ~$33.20 per fortnight combined. Net impact: approximately $5.26 per fortnight worse off — roughly a wash. Couples with lower financial assets will generally come out ahead or break even. Couples with assets above $250,000 will start to feel the deeming rate increase more noticeably.
Why did the government increase deeming rates now?
The deeming rates were dropped to emergency lows (0.25% lower, 2.25% upper) in 2020 when the Reserve Bank of Australia cut the cash rate to 0.10% during the COVID-19 pandemic. At the time, savings accounts and term deposits were paying close to zero, so the low deeming rates roughly matched reality. Since then, the RBA has raised the cash rate to 4.35% (as of early 2025) and subsequently started easing. Even with recent rate cuts, the cash rate sits well above pandemic lows. Term deposits are paying 4–5%, and savings accounts with bonus interest are paying 3–4.5%. The argument for increasing deeming rates is straightforward: the old rates bore no relation to actual returns. A pensioner with $200,000 in a term deposit earning 4.5% was receiving $9,000 per year in interest but only being assessed on $3,216 in deemed income. The gap was a windfall — and one that was costing the budget billions. The government flagged this change in the Mid-Year Economic and Fiscal Outlook (MYEFO), so it was not unexpected. The timing — aligning it with the March indexation and payment rate increase — was deliberate, ensuring that the most vulnerable pensioners (those with the least assets) actually receive a net increase.
Strategies to manage the deeming rate increase
If the new deeming rates are reducing your pension, there are several legitimate strategies worth considering. None of these involve hiding assets — they involve restructuring how your assets are held. **1. Pay down debt or prepay expenses.** Money spent on reducing a mortgage, prepaying council rates, insurance premiums, or home maintenance is no longer a financial asset and is no longer deemed. This is one of the simplest and most effective strategies. **2. Home renovations.** Money spent improving your principal home converts a deemed financial asset (cash) into a non-deemed asset (your home, which is exempt from both deeming and the assets test). **3. Funeral bonds.** Each member of a couple can hold up to $15,000 in a funeral bond (indexed) that is exempt from deeming. This is a straightforward way to shelter up to $30,000 for a couple. **4. Gifting (within limits).** You can gift up to $10,000 in a financial year and $30,000 over five years without it being assessed. Amounts above these limits are still counted as an asset for five years. **5. Annuities and lifetime income streams.** Certain complying income streams receive concessional treatment under the income and assets tests. This is a complex area — get financial advice before committing. Always consult a financial adviser who specialises in Centrelink-related planning before making significant changes to your asset structure. The rules are intricate and mistakes can be costly.
Use the calculator to check your specific situation
Everyone's situation is different, and the worked examples above are simplified illustrations. Your actual impact depends on your total financial assets, your non-financial assets, your other income sources, whether you are single or partnered, and whether you are a homeowner. Use our free Deeming Rates Calculator to plug in your exact figures and see how the new rates affect your assessed income. Then use the Age Pension Calculator to see how that flows through to your pension amount. If you discover that the new deeming rates push you below the income test threshold for a part pension, or if you were previously receiving a full pension and are now receiving a part pension, it is worth booking a financial information session with Services Australia (free) or seeing a Centrelink-specialist financial adviser.
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General information and estimates only — not financial, tax, or legal advice. Always verify with Services Australia.
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