Deeming Rates Explained: What They Are, How They Work, and Why They Matter

What Is Deeming?

Deeming is a method Centrelink uses to estimate the income you earn from your financial investments — regardless of what those investments actually earn.

Instead of asking you to report the actual interest, dividends, or returns from every account and investment, Centrelink applies a standard "deemed" rate of return to the total value of your financial assets.

Why Does Deeming Exist?

Deeming was introduced to simplify the income test and to prevent people from deliberately putting money into low-return accounts to reduce their assessed income.

However, it has become controversial because the deemed rates have not always reflected actual market returns — particularly during periods of very low interest rates (2020–2022), when many seniors were earning far less than the deemed rate on their savings.

How Deeming Is Calculated

Centrelink applies two deeming rates:

Current deeming rates (as at March 2025)

• **Lower rate**: 0.25% on the first $62,600 of financial assets (single) or $103,800 (couple)
• **Upper rate**: 2.25% on financial assets above those thresholds

Example calculation

Suppose you are a single pensioner with $150,000 in savings and term deposits.

• First $62,600 × 0.25% = $156.50/year
• Remaining $87,400 × 2.25% = $1,966.50/year
• **Total deemed income = $2,123/year = $81.65/fortnight**

This $81.65/fortnight is added to your other income when Centrelink calculates your pension entitlement.

What Counts as a Financial Asset?

Financial assets subject to deeming include:

• Bank accounts (savings, transaction, term deposits)
• Shares and managed funds
• Superannuation (if you are over Age Pension age)
• Loans you have made to others
• Gifts made in the past 5 years (above the gifting limits)

Financial assets **not** subject to deeming include:

• Your home
• Your car and household contents
• Life insurance policies
• Funeral bonds (up to $15,000)
• Accommodation bonds paid to aged care facilities

The Controversy Over Deeming Rates

During 2020–2022, the Reserve Bank of Australia cut the cash rate to near zero, and many savings accounts were earning 0.01%–0.5% interest. Yet Centrelink's deeming rates remained at 0.25% and 2.25% — meaning many pensioners were deemed to earn far more than they actually received.

Advocacy groups including the National Seniors Australia and COTA Australia called for deeming rates to be reduced to reflect actual market conditions.

Can You Challenge Your Deemed Income?

In most cases, no — deeming is applied uniformly and you cannot substitute actual earnings for deemed earnings. However, you can:

• Ask Centrelink to review whether all your assets are correctly classified
• Check that exempt assets (like your home) are not being included
• Request a hardship review if the deemed income is causing genuine financial difficulty

Deeming Rates Are Updated Twice a Year

Deeming rates are reviewed and may change every **March and September**. Always check the current rates at servicesaustralia.gov.au.