Pension Work Bonus & Deeming Rate Changes March 2026: The Double Hit Explained
Deeming rates are rising from March 20 while the Work Bonus stays unchanged. Here's how the double hit affects Age Pensioners who work part-time AND have savings — with worked examples.
Two changes hitting pensioners at once
From March 20, 2026, Age Pensioners face two simultaneous changes to how their pension is calculated: **1. Deeming rates are going UP** — for the first time since June 2020, the rates used to estimate income from your financial assets are increasing. The lower rate rises from 0.75% to 1.25%, and the upper rate from 2.75% to 3.25%. **2. The Work Bonus stays the SAME** — $300 per fortnight. This is good news (it's not being cut), but it means the Work Bonus won't offset the extra deemed income. For pensioners who have savings AND work part-time, both changes feed into the same income test. The deeming increase pushes your assessed income UP, while the Work Bonus shelters your employment income. Understanding how they interact is crucial to knowing your actual pension payment.
How deeming works (and what's changing)
Deeming is how Centrelink estimates the income from your financial assets — regardless of what those assets ACTUALLY earn. It applies to bank accounts, term deposits, shares, managed funds, superannuation (if you're over Age Pension age), and any other financial investments. **Old rates (before March 20):** - First $64,200 (single) / $106,200 (couple): deemed at 0.75% - Balance above that: deemed at 2.75% **New rates (from March 20):** - First $64,200 (single) / $106,200 (couple): deemed at 1.25% - Balance above that: deemed at 3.25% The thresholds haven't changed — just the rates. This means everyone with financial assets will have higher deemed income, whether their actual returns have changed or not. **Why the increase?** Deeming rates are supposed to reflect realistic returns on a balanced portfolio. With the RBA cash rate at 3.85% (and potentially rising), the government argues that 0.75% and 2.75% no longer reflect reality. Savings accounts are paying 4-5%, so deemed rates are still below actual returns for most people.
How the Work Bonus protects your employment income
The Work Bonus lets pensioners earn up to $300 per fortnight from employment before it counts in the income test. Key features: **How it works:** - First $300 of employment income per fortnight is excluded from the income test - Unused Work Bonus accumulates in your 'income bank' — up to a maximum of $11,800 - When you earn more than $300 in a fortnight, the excess is first offset against your income bank balance - Only after your income bank is exhausted does employment income count in the income test **What counts as employment income:** - Wages and salary - Commission - Bonuses - Director's fees - Some self-employment income (from personal exertion) **What does NOT qualify:** - Investment income (dividends, interest) - Rental income - Superannuation income streams - Deemed income from financial assets This is the key point — the Work Bonus does NOT shelter deemed income. They operate on separate tracks within the income test.
Worked example: Pensioner with $200K savings working part-time
Let's look at Margaret, a single Age Pensioner who has $200,000 in financial assets and earns $500 per fortnight from a part-time job. **Step 1 — Calculate deemed income (new rates from March 20):** - First $64,200 × 1.25% = $802.50/year ÷ 26 = $30.87/fn - Remaining $135,800 × 3.25% = $4,413.50/year ÷ 26 = $169.75/fn - Total deemed income: $200.62 per fortnight **Step 2 — Apply Work Bonus to employment income:** - Employment income: $500/fn - Work Bonus: -$300/fn - Assessable employment income: $200/fn **Step 3 — Total assessable income:** - Deemed income: $200.62/fn - Employment income (after Work Bonus): $200.00/fn - Total: $400.62 per fortnight **Step 4 — Apply income test:** - Income free area: $218/fn - Income above free area: $400.62 - $218 = $182.62 - Pension reduction: $182.62 × 50 cents = $91.31/fn **Margaret's pension:** $1,200.90 - $91.31 = **$1,109.59 per fortnight** **Compare with OLD deeming rates:** - Old deemed income: $162.15/fn - Old total assessable: $362.15/fn - Old pension reduction: ($362.15 - $218) × 0.50 = $72.08/fn - Old pension: $1,178.70 - $72.08 = **$1,106.62/fn** **Net result:** Margaret is slightly better off ($1,109.59 vs $1,106.62) because the pension increase ($22.20) more than offsets the deeming impact. She gains $2.97 per fortnight.
Worked example: Pensioner with $400K savings (the crossover point)
Now let's look at Brian, a single Age Pensioner with $400,000 in financial assets and no employment income. **New deemed income:** - First $64,200 × 1.25% = $802.50/year ÷ 26 = $30.87/fn - Remaining $335,800 × 3.25% = $10,913.50/year ÷ 26 = $419.75/fn - Total deemed income: $450.62 per fortnight **Income test:** - Above free area: $450.62 - $218 = $232.62 - Pension reduction: $232.62 × 0.50 = $116.31/fn - New pension: $1,200.90 - $116.31 = **$1,084.59/fn** **Compare with old rates:** - Old deemed income: $64,200 × 0.75% + $335,800 × 2.75% = $481.50 + $9,234.50 = $9,716/year = $373.69/fn - Old pension reduction: ($373.69 - $218) × 0.50 = $77.85/fn - Old pension: $1,178.70 - $77.85 = **$1,100.85/fn** **Net result:** Brian loses $16.26 per fortnight. The pension increase ($22.20) does NOT fully offset the deeming hit ($38.46) for someone with $400K in financial assets. The crossover point — where the deeming increase fully eats the pension rise — is around $280,000-$300,000 in financial assets for a single pensioner.
Strategies to reduce the deeming impact
If the deeming rate increase significantly affects your pension, consider these strategies: **1. Reduce deemed assets (carefully)** - Prepay bills, insurance premiums, or council rates — money spent is no longer a financial asset - Make home improvements — your principal home is exempt from both deeming and the asset test - Pay down debt (if any) - Funeral bonds up to $15,000 per person are exempt from deeming **2. Maximise the Work Bonus** - If you're not working, consider taking on some part-time work — the first $300/fn is completely free from the income test - Let your income bank build up ($11,800 max) for when you need to earn more **3. Review your asset structure** - Some assets aren't subject to deeming: your home, contents, car, prepaid funeral - Gifting rules apply: you can gift up to $10,000 per financial year (max $30,000 over 5 years) without it being assessed. But gifted assets ARE still deemed for 5 years if above the limit **4. Check you're getting all your entitlements** - Commonwealth Rent Assistance (if you rent) - Pension Supplement and Energy Supplement (automatic) - State-based concessions: energy rebates, council rate reductions, transport concessions **Important:** Don't make major financial decisions just to game the pension test. Talk to a financial adviser or call the Financial Information Service (FIS) at Services Australia — it's a free service for anyone thinking about retirement finances.
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General information and estimates only — not financial, tax, or legal advice. Always verify with Services Australia.
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