What are Deeming Rates & what are the current rates?

Deeming rates are a means-testing tool used by the government to determine how much pension someone will receive and with our official cash rate at a low of 1.50% (and term deposit rates not all that much higher), there is a question as to whether deeming rates should be lower than they currently are.

Our official cash rate has been on a downward trend for quite some time now – but the deeming rates have not been lowered since February 2015. Following on from the Reserve Bank of Australia’s decision to lower the official cash rate in February 2015 to a (at the time) historic low of just 2.25%, the government made the decision at that time to lower the deeming rate as well.

Announcing the decision, the then-Federal Minister for Social Services, Scott Morrison, announced that: “This additional investment will mean more in the pockets of pensioners. Under the new deeming rates part-pensioners will receive an average increase in their payments of $3.20 a fortnight, $83.20 a year. Payments affected by the deeming rates include income tested payments such as the Age Pension, Disability Support Pension and Carer Payment, income support allowances and supplements such as the Parenting Payment and Newstart.”

Compare term deposit interest rates

The cash rate has been lowered a further three times since the February 2015 reduction (in May 2015, May 2016 and August 2016) but the deeming rate has not been reduced again. This is an issue that was raised in parliament by the Member for Lindsay, Emma Husar:


What is the deeming rate?

Deeming rates work by applying the prescribed deeming rate against the value of investments owned by a pensioner, to calculate their “income”. This calculated income is then applied against the pension income test to help determine the level of pension they will receive.

That sounds a bit confusing: here’s an example.

If Joan has a term deposit of $45,000 earning 3.00% per annum, her income from that would be around $1,350. Rather than having to tell the Department of Human Resources exactly what her earnings were though, the Department assumes (deems) that on that $45,000 she earned a rate of 1.75% – and therefore an amount of $787.

Making an assumption about the amount of money earned on an investment rather than having pensioners supply large amounts of paperwork detailing specific earnings reduces the lengthy administration that would otherwise be needed to assess pension eligibility.

On the one hand a lower deeming rate is good news for part-rate pensioners as it may enable them to receive a slightly higher amount of age pension each fortnight. On the other hand, retirees risk losing real investment earnings if their chosen bank account mimics the deeming rate.

What are the current deeming rates?

The current deeming rates as prescribed by the government (as at November 2016) are as follows:

Current deeming rates – singles

If you’re single and receive an income support payment:

Investment value Current deeming rate
Up to $49,200 1.75% pa
Over $49,200 3.25% pa

Current deeming rates – couples

If you’re a member of a couple and at least one of you receive a pension:

Investment value Current deeming rate
Up to $81,600 1.75% pa
Over $81,600 3.25% pa


If you’re a member of a couple and neither of you receive a pension:

Investment value Current deeming rate
Up to $40,800 1.75% pa
Over $40,800 3.25% pa


Prior to the March 2015 deeming rate change, the previous deeming rate reductions were in November 2013 and before that in March 2013.

The message? Shop around for a great value deposit account and don’t just accept the deeming rate on your savings. Consumers can compare term deposits here and compare at call savings accounts here.

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