Buried in a ministerial press release about a routine lift in pensions late last week was the news that more than 460,000 Centrelink clients have been dreading.<\/p>\n
Centrelink\u2019s deeming rates are about to increase, meaning thousands of part-pensioners and some full pension recipients are about to see their fortnightly payment clipped.<\/p>\n
The deeming rates are a notional rate of interest Centrelink applies to all financial assets to determine eligibility under the income means test system.<\/p>\n
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By continuing you agree to our Terms<\/a> and Privacy Policy<\/a>.<\/p>\n Thanks to COVID-19 \u2014 and subsequent Federal election promises \u2014 the rates had been held artificially low since they were dropped to emergency levels at the start of the pandemic in May 2020.<\/p>\n From September 20, the lower deeming rate will increase from 0.25 per cent a year to 0.75 per cent. For singles, the lower 0.75 per cent applies to the first $64,200 of financial assets. For couples, it\u2019s the first $106,200. Above these levels, the higher deeming rate of 2.25 per cent a year will also increase by 50 basis-points to 2.75 per cent.<\/p>\n A single home-owning pensioner with $300,000 in financial assets and not more than $21,500 in other assets would currently receive the full pension of $1149 a fortnight. With the new deeming rates, deemed assessable Centrelink income rises from $210.23 a fortnight to $267.92.<\/p>\n That\u2019s nearly $50 a fortnight over a single\u2019s income-free area of $218 a fortnight. The bottom line is, our pensioner will see their pension reduced by about $25 a fortnight.<\/p>\n Under the new income test calculations, a single pensioner with more than $252,000 in financial assets will see a reduction in their pension. The current \u201cmagic number\u201d for a full pension is about $308,000 in financial assets before the income test starts to bite.<\/p>\n A couple in an identical financial position would see no change to their pension, but a couple with $450,000 in financial assets will have deemed income of $394.27 a fortnight. That\u2019s $14.27 over the $380-a-fortnight threshold for couples resulting in a $7.13 reduction.<\/p>\n A couple\u2019s sweet spot before the deemed income from financial assets starts to bite will be about $436,000.<\/p>\n Financial assets for age pensioners include all bank accounts, the value of shares, managed funds, superannuation, account-based pension funds, cash, bullion and gifts over certain limits.<\/p>\n Added to the deemed fortnightly income figure are pre-tax wages, foreign pensions and the net income from rental properties.<\/p>\n Another factor could be a lift in the value of your financial assets like shares, managed funds or superannuation balances since the last increase in March. A rise in pensions also triggers a revaluation of these assets and the increased values will be used in the new deeming calculations.<\/p>\n Importantly, the pension outcomes here don\u2019t factor in the effects of the asset means test which can have a greater effect.<\/p>\n Centrelink latch onto the means test that pays you the lowest pension. Each $1000 over the asset test limits results in a $3-a-fortnight reduction in your pension. For a home-owning single, that limit is $321,500. For couples it\u2019s a combined $481,500. The family home, no matter its value, is usually fully exempt.<\/p>\n Non-homeowners have an additional allowance of $258,000 under the asset test, meaning a non-homeowner retiree with significant financial assets will be more affected by the changed deeming rates.<\/p>\n Your Money Editor Daniel Newell has been crunching the numbers to identify how many seniors are likely to be affected.<\/p>\n \u201cOf the 2.65 million Australians on an age pension at the end of March, about 467,000 are already on an income-tested pension \u2014 but that doesn\u2019t include those who will now be captured by the increased deeming rates,\u201d Newell said.<\/p>\n The other bad news is that the increase in deeming rates doesn\u2019t look like stopping there.<\/p>\n In the announcement made by the Minister for Social Services Tanya Plibersek last week, further increases were flagged.<\/p>\n \u201cIn line with stakeholder feedback, changes to deeming rates will happen at the same time as the indexation of payments, and increases will be staged,\u201d Ms Plibersek said.<\/p>\n The next legislated pension increase is set to occur on March 20 next year. Watch this space.<\/p>\n","protected":false},"excerpt":{"rendered":"Buried in a ministerial press release about a routine lift in pensions late last week was the news…\n","protected":false},"author":2,"featured_media":95872,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185,193],"class_list":{"0":"post-95871","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance","14":"tag-wealth"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/95871","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=95871"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/95871\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/95872"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=95871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=95871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=95871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}