If you hold savings, shares, superannuation, or other investments, the income test used to assess your Age Pension relies heavily on "deeming." Following the end of the government's multi-year deeming rate freeze, rates have adjusted significantly — which could alter your fortnightly pension payments.
This guide explains how deeming works, the current 2025-26 rates and thresholds, what assets are affected, and practical strategies to manage your situation.
Deeming is a set of rules Centrelink uses to estimate the income you earn from your financial assets. Rather than tracking exact dividends or interest payments, Centrelink assumes your financial investments earn a set rate of return — regardless of what they actually yield.
The system encourages productive investment, simplifies administration, and prevents retirees from parking cash in zero-interest accounts to artificially inflate their pension entitlement.
Following the end of the government's deeming rate freeze (which expired 30 June 2025), the current rates are:
Note: These are a significant increase from the frozen rates of 0.25% / 2.25% that were in place during COVID-19 and the high-inflation period. If your assets haven't changed, your assessed income may have risen and your pension could be lower as a result.
| Relationship Status | Lower Rate (1.25%) Applies To | Upper Rate (3.25%) Applies To |
|---|---|---|
| Single | First $66,800 | Any amount over $66,800 |
| Couple (at least one on pension) | First $110,600 combined | Any amount over $110,600 |
| Couple (neither on pension) | First $55,300 each | Any amount over $55,300 each |
If you're a couple, Centrelink combines your financial assets and applies the combined threshold, even if assets are held entirely in one partner's name.
Jennifer is a single Age Pension recipient with $400,000 in financial assets (bank accounts, shares, and a term deposit).
Step 1: First $66,800 × 1.25% = $835/year
Step 2: Remaining $333,200 × 3.25% = $10,829/year
Step 3: Total deemed income = $11,664/year ÷ 26 = $448.62/fortnight
Since this exceeds the single income-free area of $226/fortnight, her pension reduces by 50 cents for every dollar above $226: ($448.62 - $226) × 0.50 = $111.31 reduction per fortnight. Jennifer receives $1,086.00 - $111.31 = $974.69/fortnight (before supplements), plus her actual investment returns on the $400,000.
Peter (single) has $1,000,000 in financial assets. His deemed income would be:
First $66,800 × 1.25% = $835/year
Remaining $933,200 × 3.25% = $30,329/year
Total deemed income = $31,164/year ÷ 26 = $1,198.62/fortnight
This exceeds the single part-pension cut-off of $2,627.80/fortnight? Let's check: $1,198.62 is well below the cut-off, so Peter still receives a part pension. His pension reduces by ($1,198.62 - $226) × 0.50 = $486.31/fortnight. He receives $1,086.00 - $486.31 = $599.69/fortnight.
However, if Peter's financial assets were $1,800,000, his deemed income would be approximately $2,383/fortnight, which still qualifies for a small part pension. The deeming system creates a clear incentive: the more financial assets you have above the thresholds, the faster your pension phases out.
Centrelink adds your deemed income to any other income (wages, rent, foreign pensions) to get your total assessed fortnightly income. Once this exceeds the free area, your pension is reduced:
Remember: Centrelink applies whichever of the Assets Test or Income Test gives the lower pension result.
Deeming rates are set by the Minister for Social Services to reflect returns available to conservative investors. During COVID-19 and the high-inflation years, the government froze rates at historic lows (0.25% lower, 2.25% upper) to protect pensioners. The freeze expired 30 June 2025, with rates adjusting to the current 1.25% / 3.25%.
Impact check: When deeming rates rise, your assessed income rises automatically even if your portfolio is unchanged. If your assets are above the thresholds, this could push you over the income-free area and reduce your fortnightly pension. Check your myGov account to see if your pension has adjusted.
One of the most effective ways to reduce deemed income is to convert financial assets into non-financial assets that aren't subject to deeming. For example, using savings to pay off debt, renovate your principal home, or purchase a vehicle. Your principal home is exempt from both the assets test and deeming, so spending $100,000 on a home renovation reduces your financial assets by $100,000 — lowering your deemed income and potentially increasing your pension.
You can gift up to $10,000 per financial year ($30,000 over 5 years) without the gifted amount counting as a deprived asset. If you're slightly above a pension threshold, gifting the maximum allowable amount can bring your assessable assets below the cut-off. However, the 5-year waiting period for excess gifts means this only works within the limits.
If you're over Age Pension age and have superannuation in an account-based pension (retirement phase), the balance counts as a financial asset for deeming purposes. However, the actual income you withdraw from the account-based pension is NOT assessed under the income test — only the deemed income is. This means you can withdraw more than the deemed amount without affecting your pension. This is a significant advantage of superannuation over non-super investments.
Log into myGov and go to Centrelink - My Profile - Income and Assets. Update your balances whenever they change significantly. If your savings drop (home renos, travel, car purchase), your deemed income falls and your pension may increase. Centrelink won't automatically adjust it - you need to report the change yourself.
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View All CalculatorsMike Backman — Founder of Aussie Property & Crypto Calc. Mike researches Australian property, taxation and personal finance and maintains all calculators using ATO, ASIC, RBA and state government data.
Last updated: 19 July 2026 · About this site · Report an error