How Deeming Rates Work
What deeming is, how Centrelink uses it to calculate your income from financial assets, current deeming rates, and worked examples to show exactly how it affects your payment.
General information and estimates only — not financial, tax, or legal advice. Always verify with Services Australia.
Step 1.What Deeming Means
Deeming is how Centrelink calculates the income from your financial assets for the income test. Instead of looking at how much your investments actually earn (interest, dividends, capital gains), Centrelink assumes your financial assets earn a set rate of return — this assumed return is called the 'deemed income'. It does not matter if your savings account earns 0.5% or your shares returned 15% last year — Centrelink applies the same deeming rates to everyone. This system simplifies things enormously because you do not need to report every dividend and interest payment. But it can also work against you if your actual returns are lower than the deemed rates, or in your favour if your investments are performing well.
Step 2.Current Deeming Rates (2026)
As of March 2026, the deeming rates are: the first $60,400 of financial assets for a single person (or $100,200 combined for a couple) is deemed to earn 0.25% per year. Everything above that threshold is deemed to earn 2.25% per year. These rates are set by the government and can change — they were frozen at these levels for several years and have been adjusted only modestly. The lower rate of 0.25% reflects that many people keep a portion of their savings in low-interest transaction or savings accounts. The higher rate of 2.25% is well below what many investments actually return, which means the deeming system is relatively generous for people with well-invested portfolios.
Step 3.What Financial Assets Are Deemed
Deeming applies to your financial investments, which include: bank accounts (savings, everyday, term deposits), shares and securities (listed on any stock exchange), managed funds and unit trusts, bonds and debentures, superannuation account-based income streams (in most cases), gold, silver, and other financial instruments, money lent to others, and any other financial investments. Deeming does NOT apply to: your home, real estate (rental income is assessed differently), personal effects, cars, and non-financial assets. It also does not apply to certain 'asset-tested income streams' that were purchased before specific dates (these are grandfathered). If you are unsure whether a specific asset is deemed, check with Centrelink or use our Deeming Rates Calculator.
Step 4.Worked Example — Single Person
Let us say you are a single Age Pensioner with $200,000 in financial assets (bank accounts, shares, and managed funds combined). Here is how deeming works: The first $60,400 is deemed at 0.25% = $151.00 per year. The remaining $139,600 ($200,000 minus $60,400) is deemed at 2.25% = $3,141.00 per year. Total deemed income = $3,292.00 per year, or $126.62 per fortnight. Under the pension income test, the income-free area for a single person is $204 per fortnight. Since your deemed income of $126.62 is below this threshold, your pension is NOT reduced by the income test at all. You would receive the full pension rate (subject to the assets test). This is why deeming at current rates is quite favourable for many retirees.
Step 5.Worked Example — Couple with Higher Assets
Now let us say you are a couple with $500,000 combined in financial assets. The first $100,200 is deemed at 0.25% = $250.50 per year. The remaining $399,800 is deemed at 2.25% = $8,995.50 per year. Total deemed income = $9,246.00 per year, or $355.62 per fortnight. The couple income-free area is $360 per fortnight. Your deemed income of $355.62 is just under this threshold, so again, the income test does not reduce your pension. If your financial assets were $600,000 instead, the deemed income would be $478.08 per fortnight, which exceeds the $360 threshold by $118.08. Your combined pension would reduce by $59.04 per fortnight (50 cents for each dollar over the threshold). Use our calculator to model your specific situation.
Step 6.Why Deeming Matters for Your Financial Planning
Understanding deeming helps you make better decisions about how to structure your finances in retirement. Since Centrelink deems all financial assets at the same rate regardless of where they are invested, there is no pension advantage to keeping money in a low-interest savings account versus investing it in shares or a balanced fund. In fact, investing wisely means your actual returns could be significantly higher than the deemed rate, giving you more real income without any additional pension reduction. However, moving money into non-deemed assets (like paying off your home or buying a more expensive car) will reduce your deemed income and potentially increase your pension. This is a legitimate planning strategy. Talk to a financial adviser who understands Centrelink rules if you are making significant financial decisions in or near retirement.
Useful Tools
- Deeming Rates Calculator
- Age Pension Calculator
- Income Test Calculator
- Assets Test Calculator
Resources
- Services Australia — Deeming (servicesaustralia.gov.au)
- Services Australia — Financial Investments (servicesaustralia.gov.au)
- Moneysmart — Retirement Income and Deeming (moneysmart.gov.au)