Deeming Rates 2026 Australia: How They Work and Affect Your Pension
Current deeming rates explained simply. How Centrelink calculates income from your financial assets, the impact on Age Pension, and strategies to minimise deeming.
What Are Deeming Rates?
Deeming rates are fixed percentages that Centrelink uses to calculate the income your financial assets are assumed to earn — regardless of what they actually earn. Instead of looking at your actual interest, dividends, or investment returns, Centrelink applies these standard rates to the value of your financial assets to determine your 'deemed income' for the pension income test. This simplifies the income assessment process but can work for or against you. If your investments earn more than the deeming rates, you benefit (the excess isn't counted as income). If your investments earn less than the deeming rates (for example, a savings account paying 0.10%), you're disadvantaged because Centrelink assumes you're earning more than you actually are. Deeming rates are set by the Minister for Social Services and can be changed at any time, though in practice they change infrequently.
Current Deeming Rates — March 2026
As of March 2026, the deeming rates are: Lower rate: 0.25% per year on the first $60,400 of financial assets for singles ($100,200 for couples combined). Upper rate: 2.25% per year on financial assets above that threshold. These rates have been in effect since 1 May 2020, when they were reduced from 1.00% and 3.00% respectively, following Reserve Bank cash rate cuts during the COVID-19 pandemic. The lower deeming rate threshold ($60,400 for singles, $100,200 for couples) is indexed periodically and may change at indexation dates. These deeming rates apply to all pension-type payments: Age Pension, Disability Support Pension, Carer Payment, and Department of Veterans' Affairs pensions. They also apply to allowance-type payments (JobSeeker, Youth Allowance) when assessing income from financial assets, though the income test structure differs.
Which Assets Are Deemed?
Financial assets subject to deeming include: bank accounts (all types — savings, term deposits, transaction accounts, offset accounts), shares and managed funds (Australian and international), superannuation in account-based pension phase (if you're over Age Pension age), bonds and debentures, gold and silver bullion, managed investment trusts, money in online investment platforms, cryptocurrency (assessed at market value), loans you've made to others, and income streams purchased from financial institutions after 1 January 2015. Assets NOT subject to deeming include: your family home, real estate (investment properties are assessed under the assets test but rental income is assessed separately), personal effects (car, furniture, jewellery), some pre-2015 income streams, and defined benefit superannuation pensions (which have their own assessment rules).
How to Calculate Your Deemed Income
The calculation is straightforward once you know your total financial assets. For a single person with $250,000 in financial assets: Step 1 — Apply the lower deeming rate to the first $60,400: $60,400 x 0.25% = $151.00 per year. Step 2 — Apply the upper deeming rate to the remainder: $189,600 x 2.25% = $4,266.00 per year. Step 3 — Add them together: $151.00 + $4,266.00 = $4,417.00 per year, or $170.27 per fortnight. This $170.27 is the deemed income that Centrelink counts in the pension income test. For a couple with $400,000 combined: $100,200 x 0.25% = $250.50/year, plus $299,800 x 2.25% = $6,745.50/year = $6,996.00/year or $269.08 per fortnight. Use our Age Pension calculator to see how your deemed income affects your actual pension amount.
Impact on Your Age Pension — Worked Examples
Let's see how deeming affects the pension for a single homeowner with no employment income. Example 1 — $100,000 in financial assets: Deemed income = $60,400 x 0.25% + $39,600 x 2.25% = $151 + $891 = $1,042/year = $40.08/fortnight. This is below the $204 income free area, so no reduction — full pension of $1,116.30 per fortnight. Example 2 — $300,000 in financial assets: Deemed income = $151 + $5,391 = $5,542/year = $213.15/fortnight. This is $9.15 over the income free area. Pension reduction: $9.15 x 0.50 = $4.58 per fortnight. You'd receive $1,116.30 - $4.58 = $1,111.72 per fortnight. Example 3 — $600,000 in financial assets: Deemed income = $151 + $12,141 = $12,292/year = $472.77/fortnight. Over threshold by $268.77. Reduction: $268.77 x 0.50 = $134.39. You'd receive $1,116.30 - $134.39 = $981.91 per fortnight.
Are Deeming Rates Fair? The Ongoing Debate
The upper deeming rate of 2.25% has been criticised as too high given that many savings accounts and term deposits are paying rates below 2.25% in the current environment. Conversely, when term deposit rates were higher (4-5% during 2023-24), the deeming rates were arguably too low, benefiting savers. The core issue is that deeming rates are a blunt instrument — they assume all financial assets earn the same return, regardless of whether your money is in a 0.10% savings account or a diversified share portfolio. Advocacy groups like National Seniors Australia and COTA have called for more frequent deeming rate adjustments to better track actual market conditions. The government has the power to change deeming rates at any time without legislation, but political considerations often delay adjustments. Any future changes would be announced by the Minister for Social Services.
Strategies to Reduce Your Deemed Income
While you should never make financial decisions solely to maximise your pension (always consider your overall financial wellbeing), there are legitimate strategies that can reduce deemed income. Pay off debts — reducing your financial assets by paying off a mortgage or other debts reduces deemed income while eliminating interest costs. Home improvements — spending financial assets on renovating your exempt family home reduces your deemed assets. Prepay expenses — paying council rates, insurance, or utility bills annually in advance reduces your bank balance on the date Centrelink assesses your assets. Funeral bonds — up to $15,000 per person in an approved funeral bond is exempt from deeming. Gifting rules apply — you can give away up to $10,000 per financial year (maximum $30,000 over 5 years) before the gifted amount is still counted. Seek advice from a financial adviser who understands the Centrelink system before making major changes.
How to Report Financial Assets to Centrelink
Centrelink requires you to report the total value of your financial assets and update them whenever they change significantly. You can update your financial assets through myGov (Centrelink online account), by calling the Older Australians line on 132 300, or at a service centre. When reporting, provide the current balance of all bank accounts (check your latest statements), the market value of shares and managed funds (use your latest portfolio statement or check market prices), your super account balance (check your fund's website or latest statement), and the value of any other financial assets. Centrelink may also verify your financial assets directly with financial institutions through data matching. If your assets change by a large amount (inheritance, property sale, large withdrawal), report the change within 14 days to avoid overpayments and potential debts. Regular small fluctuations in share values don't need to be reported — Centrelink reassesses periodically.
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General information and estimates only — not financial, tax, or legal advice. Always verify with Services Australia.
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