Deeming Rates March 2026: How the Increase Affects Your Pension

Deeming rates are the rates Centrelink uses to estimate the income your financial assets are earning, regardless of what they're actually earning. Instead of asking you to track and report every dollar of interest, dividends, and investment returns, Centrelink applies a simple formula: it assumes (or "deems") that your financial assets are earning income at a set rate. This deemed income is then counted under the income test, which determines how much Age Pension, DSP, or Carer Payment you receive. The higher the deemed income, the more your pension may be reduced. The key thing to understand: it doesn't matter whether your savings account is paying 0.5% interest or your shares returned 10% last year. Centrelink uses the deeming rate, not your actual returns. This can work for or against you. If your investments are earning more than the deeming rate, you benefit because Centrelink counts less income than you actually receive. If your investments are earning less than the deeming rate (for example, money sitting in a low-interest savings account), you're disadvantaged because Centrelink counts more income than you're actually receiving.

One thing people miss: As of March 2026, the deeming rates are: **Lower deeming rate: 0.25%** This applies to the first: - $64,200 of financial assets for a single person - $106,200 of combined financial assets for a couple (combined) **Upper deeming rate: 2.25%** This applies to every dollar of financial assets above the thresholds listed above. Note: These rates should be verified against the current Services Australia website, as they're subject to change. Deeming rates are set by the Minister for Social Services and can be adjusted at any time, though changes are typically announced in advance. These rates have been at historically low levels since the COVID-19 emergency reductions in 2020.

Before COVID, the lower rate was 1.75% and the upper rate was 3.25%. The current rates are significantly more favourable for pensioners with financial assets.

Let's work through a specific example to show exactly how deeming affects your pension. Margaret is a single Age Pensioner. She has $150,000 in financial assets: $80,000 in a savings account and $70,000 in a managed fund. **Step 1: Calculate deemed income** First $64,200 is deemed at the lower rate of 0.25%: $64,200 x 0.25% = $160.50 per year Remaining $85,800 ($150,000 - $64,200) is deemed at the upper rate of 2.25%: $85,800 x 2.25% = $1,930.50 per year Total deemed income: $160.50 + $1,930.50 = $2,091 per year, or $80.42 per fortnight. **Step 2: Apply the income test** The Age Pension income free area for a single person is $204 per fortnight.

Margaret's deemed income of $80.42 is below this threshold, so her pension is not reduced by the income test at all. If Margaret had $300,000 in financial assets instead, her deemed income would be: - First $64,200 at 0.25% = $160.50 per year - Remaining $235,800 at 2.25% = $5,305.50 per year - Total: $5,466 per year, or $210.23 per fortnight - That's $6.23 above the income free area - Pension reduction: $6.23 x 50 cents = $3.12 per fortnight As you can see, with the current low deeming rates, you need quite substantial financial assets before your pension starts to be affected.

David and Sandra are a couple, both receiving the Age Pension. They have $250,000 in combined financial assets: $100,000 in term deposits, $100,000 in shares, and $50,000 in a savings account. **Step 1: Calculate deemed income** First $106,200 (couple threshold) is deemed at the lower rate of 0.25%: $106,200 x 0.25% = $265.50 per year Remaining $143,800 ($250,000 - $106,200) is deemed at the upper rate of 2.25%: $143,800 x 2.25% = $3,235.50 per year Total deemed income: $265.50 + $3,235.50 = $3,501 per year, or $134.65 per fortnight. **Step 2: Apply the income test** The income free area for a couple is $360 per fortnight (combined).

Heads up — David and Sandra's deemed income of $134.65 is well below this threshold, so their pension is not reduced at all. Even if they had $400,000 in financial assets, their deemed income would be approximately $253.73 per fortnight — still below the couple income free area of $360. They would need financial assets of approximately $530,000 before deeming started to reduce their pension under the income test. Remember, though, that the assets test applies separately. With $400,000 in financial assets, the assets test may be the one that reduces their pension, not the income test.

While you can't change the deeming rates, there are legitimate strategies to reduce the impact on your pension: **1. Reduce countable financial assets** Paying down your mortgage (if you still have one) converts a financial asset (cash) into a non-financial asset (home equity).

Your home is exempt from both the assets test and deeming. **2. Prepay expenses** Prepaying bills like council rates, insurance, or even funeral expenses reduces your financial assets and therefore your deemed income. Some pensioners prepay 12 months of expenses at a time. **3.

Home improvements** Spending money on home renovations or repairs reduces your financial assets. The value of the improvement is captured in your home, which is exempt. **4. Gift within the allowed limits** You can gift up to $10,000 per financial year and $30,000 over five years without it being counted as a deprived asset.

Amounts above these limits are still counted as financial assets for five years. **5. Consider superannuation timing** If you're between preservation age and Age Pension age, your super is not counted at all.

This bit matters. Once you reach Age Pension age and your super is in pension phase, it becomes a deemed financial asset. Understanding this transition is important for planning. **6. Seek financial advice** A financial adviser who specialises in retirement and Centrelink can help you structure your assets to minimise the impact of both the income test (including deeming) and the assets test.

The cost of advice often pays for itself through increased pension payments. IMPORTANT: Never make financial decisions solely to increase your Centrelink payment. The pension is a safety net, not an investment strategy. Consider your overall financial wellbeing, not just the Centrelink outcome.