Deeming rates (and calculator) for the Age Pension income test

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Age Pension eligibility
How deeming affects means testing for residential aged care
How deemed income is calculated
What are the current deeming rates?
Deeming calculator
Example deeming calculations
Why does the Australian government use deeming?
Why does the deeming rate increase if you have more investment assets?
January 2015 changes

In its May 2024 Budget, the federal government announced another 12-month extension of the freeze on deeming rates until 30 June 2025.

Until then, the lower deeming rate remains at 0.25% and the higher rate at 2.25%.

In recent years, deeming rates shifted from being an arcane concept few people knew or cared about, to a hot button issue for retirees struggling to make ends meet at a time of rising interest rates and cost-of-living pressures.

The reason is this.

Under the deeming rules, you are ‘deemed’ to earn a certain annual rate of return on your financial assets, regardless of the rate of return you actually earn. Your returns could be higher or lower than the deeming rates. In the case of bank deposits, the returns you are earning may be lower than the current deeming rates while returns from superannuation have been higher. Why does this matter? Because it could affect the amount of Age Pension you receive and the amount you pay for residential aged care.

Age Pension eligibility

Deeming is used to determine your eligibility for the Age Pension under the income test. The other requirements are passing the assets test, reaching Age Pension age and qualifying as an Australian resident.

Deeming rules are used by Services Australia (via Centrelink) for income test calculation purposes. Centrelink also applies the same deeming rates and thresholds when assessing eligibility for the Commonwealth Seniors Health Card (CSHC).

Common types of financial assets that deeming rates apply to include:

Account-based super pensions
Savings accounts and term deposits
Shares
Managed investment such as managed funds and insurance bonds
Debentures

Deeming doesn’t apply to the family home and other property assets.

How deeming affects means testing for residential aged care

Deeming rates don’t just affect income-tested Age Pensioners. For anyone entering residential aged care, deeming is used to calculate any means-tested contribution they may be required to pay.

Read more about the cost of residential aged care

Visit the government’s myagedcare for an explanation of how deeming applies to aged care means testing.

How deemed income is calculated

The deemed income from your investments is calculated by multiplying their current value by the relevant deeming rates. Different deeming rates apply depending on:

Your living arrangements (whether you live alone or with a partner)
The value of your investment assets
Whether or not you (or your partner) currently get the Age Pension.

Once your deemed income is calculated, the amount is then added to any other income you’ve earned from all other sources as part of the Age Pension income test. If your income exceeds the income test thresholds, your Age Pension entitlement will progressively reduce until it cuts off completely.

What are the current deeming rates?

The deeming rates and thresholds that apply to 30 June 2025 are listed in the table below.

Situation	Deeming lower rate	Deeming higher rate
Single	0.25% on the first $62,600 of your investment assets, plus	2.25% on your investment assets over the amount of $62,600
Couple	0.25% on the first $103,800 of your combined investment assets, plus	2.25% on your investment assets over the amount of $103,800

Note

The 0.25% and 2.25% deeming percentage rates were frozen from 1 May 2020 (although the thresholds change each financial year).

While deeming rates are meant to rise and fall in line with market interest rates, in practice there has often been a lag.

Under pressure from retirees who faced the double whammy of historically low returns from their bank deposits at the time, and a reduction in their Age Pension entitlements due to deeming rates that were higher than they were actually earning, the federal government cut deeming rates in mid-2019 and again in 2020.

The percentage rates applying from 1 July 2019 to 30 April 2020 were 1% (lower rate) and 3% (upper rate).
Prior to 1 July 2019 the percentage rates were 1.75% (lower rate) and 3.25% (upper rate).

These rates compare with a cash rate of 1% in 2019 and 0.25% a year later.

Fast forward to 2024 and the cash rate is 4.35% at the time of writing, while the top deeming rate is frozen at 2.25%. In other words, today’s retirees are winning the deeming rate game.

Deeming calculator

Enter your details into our deeming calculator to estimate your annual and fortnightly deemed income.

What is included under ‘financial investments’?

Financial investments include:

Bank, building society and credit union accounts
Cash
Term deposits
Cheque accounts
Friendly society bonds
Managed investments
Assets held in superannuation and rollover funds
Listed shares and securities
Shares in unlisted public companies
Gold, silver or platinum bullion
Loans and debentures by you (that is, money owed to you).

The following are not included

Your home
Home contents
Cars, boats and caravans
Investment properties
Antiques, stamp or coin collections

It is worth noting that an investment property is not counted as a financial investment, so it is not assumed that it achieves an income at the deeming rate, but any income from investment properties is applied as income in the income test.

Use our Age Pension calculator to estimate your Age Pension entitlement.

The calculator automatically determines the deemed income from your investment assets using the current deeming rates.

Deeming rates are set by the Minister for Social Services. The Department of Social Services monitors the rate to ensure that it’s appropriate for market conditions. Any future changes to the deeming rate will coincide with changes to Age Pension rates, which are regularly adjusted based on the consumer price index (CPI), or at any other time if the financial markets fluctuate significantly. The CPI is calculated by the Australian Bureau of Statistics. Any changes to the deeming thresholds are generally made in July each year in line with changes in the CPI.

Example deeming calculations

To illustrate how deeming works, below are single and couple deeming tables that show the deeming amount that will apply at a range of different investment asset values at current deeming rates.

Click each deeming table example name to view.

Investment value	Deemed at 0.25%	Deemed at 2.25%	Deemed income total (per year)
$50,000	$125.00	$0	$125
$100,000	$156.50	$842	$998
$150,000	$156.50	$1,967	$2,123
$200,000	$156.50	$3,092	$3,248
$250,000	$156.50	$4,217	$4,373
$300,000	$156.50	$5,342	$5,498
$350,000	$156.50	$6,467	$6,623
$400,000	$156.50	$7,592	$7,748
$450,000	$156.50	$8,717	$8,873
$500,000	$156.50	$9,842	$9,998
$550,000	$156.50	$10,967	$11,123
$600,000	$156.50	$12,092	$12,248
$650,000	$156.50	$13,217	$13,373
$700,000	$156.50	$14,342	$14,498
$750,000	$156.50	$15,467	$15,623
$800,000	$156.50	$16,592	$16,748

Investment value	Deemed income at 0.25%	Deemed income at 2.25%	Deemed income total (per year)
$50,000	$125.00	$0	$125
$100,000	$259.50	$0	$260
$150,000	$259.50	$1,039.50	$1,299
$200,000	$259.50	$2,164.50	$2,424
$250,000	$259.50	$3,289.50	$3,549
$300,000	$259.50	$4,414.50	$4,674
$350,000	$259.50	$5,539.50	$5,799
$400,000	$259.50	$6,664.50	$6,924
$450,000	$259.50	$7,789.50	$8,049
$500,000	$259.50	$8,914.50	$9,174
$550,000	$259.50	$10,039.50	$10,299
$600,000	$259.50	$11,164.50	$11,424
$650,000	$259.50	$12,289.50	$12,549
$700,000	$259.50	$13,414.50	$13,674
$750,000	$259.50	$14,539.50	$14,799
$800,000	$259.50	$15,664.50	$15,924
$850,000	$259.50	$16,789.50	$17,049
$900,000	$259.50	$17,914.50	$18,174
$950,000	$259.50	$19,039.50	$19,299
$1,000,000	$259.50	$20,164.50	$20,424
$1,050,000	$259.50	$21,289.50	$21,549
$1,100,000	$259.50	$22,414.50	$22,674

Below we have also included some example calculations to help illustrate how deeming is calculated:

Example 1

Jane is single and has investment assets valued at $75,000. Her deemed income would be calculated as follows:

0.25% x $62,600 = $156.50

2.25% x $14,600 ($75,000 – $60,400) = $279.00

= $435.50 (per year)

= $16.75 (per fortnight)

Example 2

Ray and Sue are a married couple. Ray is currently receiving the Age Pension and Sue is not. They have combined investment assets of $150,000. Their combined deemed income for the purposes of Ray’s Age Pension income test would be calculated as follows:

0.25% x $100,200 = $259.50

2.25% x $49,800 ($150,000 – $100,200) = $1,039.50

= $1,299.00 (per year)

= $49.96 (per fortnight)

Why does the Australian government use deeming?

According to the Department of Social Services, some of the benefits of deeming are:

Deeming is a simple and fair way to assess income from financial investments because:

People with the same amount of money held in different financial investments receive a similar assessment
It reduces the extent to which income support payments vary
The deeming rate reflects returns that pensioners can get for their savings.

By treating all financial investments in the same way, the deeming rules:

Encourage you to choose investments on their merit rather the effect the investment income may have on your pension entitlement
Help to simplify investment choices.

Deeming encourages you to consider earning better returns on your investments. It increases incentives to earn higher returns on investments because returns above the deeming rate are not counted as income.

It’s this last point that has many retirees hot under the collar. While returns from assets such as shares and property have indeed been higher than deeming rates in recent years, there is no guarantee this will continue. By their very nature, higher investment returns also come with a higher risk of price fluctuations and years of negative returns. That’s why many risk-averse retirees prefer the safety of capital guaranteed bank deposits to cover their income needs in the short to medium term.

Why does the deeming rate increase if you have more investment assets?

The lower deeming rate is applied to the value of your investment assets up to a threshold amount to reflect the fact that you’ll need a range of low-risk, accessible investments (like savings accounts) to meet your day-to-day living expenses. These types of investments provide lower levels of return.

The higher deeming rate is applied to investment asset values above the threshold amounts to reflect the fact that you can diversify your investment portfolio by chasing higher returns on higher-risk assets (like shares).

January 2015 changes

A major deeming rule change was introduced on 1 January 2015 when the investment balance of all new account-based super pensions were first included in the Age Pension income test. As a result, the deeming rate now applies to these super pensions that retirees can receive tax free, provided they are over 60 years of age and meet a superannuation condition of release.

However, the old rules were ‘grandfathered’ for people who were already receiving account-based super pensions and the Age Pension prior to 1 January 2015, which means their super balances will be forever excluded from the Age Pension income test.

Below is an example of how the rule worked before 1 January 2015:

Bob is 65 years old and has $190,000 in superannuation, which he has used to purchase an account-based income stream with the underlying assets in term deposits and shares. Bob elects to receive an annual income of 5% from his income stream ($9,500).

Under the income test rules before 1 January 2015, an amount is deducted from this income to reflect the ‘return of capital’. This is calculated using the following formula:

Assessable income = Annual payment – (Purchase price/Life expectancy)

Assessable income = $9,500 – ($190,000/18.54)

= $9,500 – $10,248

= $0 (assessable income cannot be negative)

Under the income stream rules before 1 January 2015, none of the income from Bob’s account-based income stream is assessed.

Source: DSS