Deeming Rates to Rise in September 2025: What It Means for Retirees and Pensioners
After a five-year freeze, the Australian Government has announced a 0.5% increase in deeming rates, effective 20 September 2025. This marks the first adjustment since the rates were locked in during the COVID-19 pandemic and reflects broader economic changes, including rising interest rates.
What Are Deeming Rates?
Deeming rates are used by Centrelink and the Department of Veterans’ Affairs (DVA) to estimate income from financial assets such as:
- Savings accounts and term deposits
- Listed shares and securities
- Managed investments and bonds
- Superannuation and account-based pensions
Rather than assessing actual earnings, the government assumes a standard rate of return—called the deeming rate—on these assets. This deemed income is then used in the income test to determine eligibility for payments like the Age Pension, Commonwealth Seniors Health Card (CSHC), and aged care subsidies.
New Deeming Rates from 20 September 2025
| Threshold |
|
New Rate | |
|---|---|---|---|
| Lower threshold |
|
0.75% | |
| Upper threshold |
|
2.75% |
These rates apply to financial assets above and below certain thresholds, which vary depending on your household situation:
| Household Type | Lower Threshold | Upper Threshold | |
|---|---|---|---|
| Single | Up to $64,200 |
|
|
| Couple (at least one on pension) | Up to $106,200 (combined) |
|
|
| Couple (neither on pension) | Up to $53,100 (each) | Above $53,100 (each) |
Why Are Rates Increasing Now?
Deeming rates are typically reviewed in March and September, in line with changes to the Reserve Bank of Australia’s cash rate, which has risen from 0.25% in 2020 to over 4% in 2025. The original freeze, introduced to support pensioners during the pandemic, expired on 1 July 2025, paving the way for this adjustment.
While the increase may seem significant, it remains moderate compared to actual interest rates in the economy.
Who Will Be Affected?
Minimal Impact
- Most Centrelink/DVA recipients: Many are assessed under the assets test, which often has a greater impact than the income test.
Potential Negative Impact
- Income-tested Centrelink/DVA recipients: Higher deemed income may reduce payments.
- CSHC holders: Increased assessable income could affect eligibility or benefits.
- Aged care residents: Higher deemed income may lead to increased fees for residential care and Support at Home contributions.
Positive Impact
- Departing aged care residents: When a resident leaves care, aged care providers pay interest on the Refundable Accommodation Deposit (RAD) based on the lower deeming rate. From 20 September, this rate rises to 0.75%, meaning higher interest payments for those exiting care.
Planning Ahead: Super and the Age Pension
Superannuation is included in both the assets test and the income test once you reach Age Pension age. Importantly, Centrelink uses deeming rates—not actual returns—to assess income from super, which means:
- Even if your super earns more or less than the deeming rate, Centrelink uses the standard rate.
- This can affect your eligibility for a full or part Age Pension, depending on your total assets and income.
Understanding how deeming works is essential for retirement planning. By knowing how Centrelink calculates your income, you can better manage your super and other investments to optimise your entitlements.