Deeming rates are about to go up after half a decade of being frozen, and it could affect how much Centrelink you receive. (Source: Getty)
Deeming rates are set to go up for the first time this decade in just a few days. They have been frozen since 2020 due to the pandemic, rising inflation, and to combat the cost of living.
However, the government has decided that the economy is recovering well enough to finally let the rates come out to thaw. Social Services Minister Tanya Plibersek said deeming rates will return to pre-pandemic settings on September 20.
“That is, to reflect rates of return that pensioners and other payment recipients can reasonably access on their investments,” she said.
Deeming rates are the rates of return the government assumes people earn on financial assets, including shares, superannuation and bank accounts.
They impact means testing for Centrelink payments, including the Age Pension, JobSeeker and parenting payments.
They have been frozen at 0.25 per cent and 2.25 per cent, respectively, since 2020.
For singles, the first $64,200 of your financial assets has a deemed rate of 0.25 per cent.
Anything over $64,200 is deemed to earn 2.25 per cent.
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For couples where at least one person gets a pension, the first $106,200 of your combined assets has a deemed rate of 0.25 per cent. Anything over $106,200 is deemed to earn 2.25 per cent.
Centrelink uses this method to work out your eligibility for certain payments that takes into account your future income as well as other streams of money like superannuation.
There are more than 771,000 people who receive government welfare and who have income from other sources that are affected by deeming rates.
That includes about 460,000 aged pensioners, 96,000 on JobSeeker payments, and 62,000 disability support pension recipients.
The lower deeming rate will rise to 0.75 per cent from September 20.
The upper rate will rise in a similar 0.5 per cent increment to 2.75 per cent for assets above both thresholds.
The Social Services Minister indicated this will be the first of a series of phased increases in the deeming rate.
September 20 will also be the date that certain Centrelink payments go up due to indexation.
After that, the decision to raise, lower, or hold deeming rates will be governed by the Australian Government Actuary.
Plibersek said the body will be able to advise the government on the “most appropriate rate” that reflects current economic conditions, but there will still be some oversight.
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“The government will retain the power to make adjustments, including during exceptional circumstances or events,” she added.
The government froze deeming rates at the start of the decade while the country was in the grips of the pandemic.
The rate is typically tied to the Reserve Bank of Australia’s (RBA) official cash rate.
In mid-2022, the central bank began an interest rate-hiking cycle, which saw the cash rate jump from the record low of 0.10 per cent to a 13-year high of 4.35 per cent.
As a result, the government kept deeming rates frozen to prevent people from suffering a double hit to their finances.
But headline inflation has gradually been coming down from its December 2022 peak of 7.8 per cent to 2.1 per cent at the June 2025 quarter.
Interest rates have also fallen three times this year and could drop again in November, which would see the cash rate fall 1 per cent in 2025.
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