How deeming works

If you receive a payment from the Department of Human Services, it could be helpful to understand how to ‘deeming’ rates might affect you.

Deeming rules are used to work out income from your financial assets. Learn more about financial assets here. If you receive a payment from the Department of Human Services, such as the Age Pension, you should understand how current deeming rates might affect you.

The Australian Government reduced the deeming rates in 2020 as part of a package to address the impacts of the coronavirus pandemic and market volatility.

The rate of 0.25% currently applies to financial investments up to $53,600 for singles and $89,000 for couples.

Q: What is deeming?

A: For Australians receiving a regular payment from Centrelink (such as Newstart, Disability Support pension, or Age pension) or Department of Veteran’s Affairs (such as a Service pension) the government assesses your financial ability to support yourself, so that it can work out how much payment you are entitled to receive. There are two tests that are used to assess the financial ability, the assets test and the income test.

1. The assets test looks at the value of the assets that you have that you could sell or use to support yourself.
2. The income test considers the income that you receive from all sources that you can use to live on, including financial assets. This may include interest from term deposits, dividends from shares and payments from a superannuation income stream.

To simplify the calculation of the income test and treat different types of financial assets in the same way, the government sets a tiered rate of return for all financial investments. These are known as the deeming rates. They assume that you are earning income at this fixed rate, regardless of the amount of income you are actually receiving.

Q: What are deeming rates from 1 May 2020?

A: The Australian Government reduced the deeming rate effective 1 May 2020. As of that date, the upper deeming rate was 2.25% and the lower deeming rate was 0.25%. At the time, the government said the reductions reflected the low interest rate environment and its impact on income from savings, and would benefit around 900,000 income support recipients.¹

Current deeming rates are:

For singles:

For couples and at least one of you get a pension:

Deeming and your QSuper account

Your QSuper Retirement Income account is considered to be a financial asset.² As such, the balance of your Retirement Income account will be ‘deemed’ to earn a certain amount of income based on the balance at 1 July each year.³ This is irrespective of the actual level of payments that you are drawing from your account as income.

Your QSuper Accumulation account is not counted as a financial investment until you reach your qualifying Age Pension age (or age 60 if you qualify for a Service Pension).

Find out more about deeming

The Department of Human Services has an explanation of deeming, exemptions and further information on its website.

1. Joint media release, The Hon. Scott Morrison MP (Prime Minister), The Hon. Josh Frydenberg MP (Treasurer) 22 March 2020.
2. There are some exemptions if you commenced your income stream on or after 1 January 2015. See https://www.humanservices.gov.au/individuals/topics/income-streams/27671 for more details.
3. The balance at the commencement of the Retirement Income account will be reported if the account was opened part way through the financial year.