Centrelink Deeming Rates 2025-26: How They Affect Your Age Pension

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.

1. What is Deeming and Why Does Centrelink Use It?

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.

• If your actual returns are higher than the deeming rate, the extra income is free from Centrelink's income test - you keep the surplus
• If your investments earn less than the deeming rate, Centrelink still assesses you at the official deemed rate

The system encourages productive investment, simplifies administration, and prevents retirees from parking cash in zero-interest accounts to artificially inflate their pension entitlement.

2. Current Deeming Rates for 2025-26

Following the end of the government's deeming rate freeze (which expired 30 June 2025), the current rates are:

• Lower deeming rate: 1.25% - applied to financial assets up to the threshold
• Upper deeming rate: 3.25% - applied to financial assets above the threshold

3. Deeming Thresholds for Singles vs Couples

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.

4. What Financial Assets Are Deemed?

• Bank accounts, savings, term deposits, and cash
• Shares listed on the ASX or international exchanges
• Managed funds and unit trusts
• Superannuation (once you reach Age Pension age of 67)
• Account-based pensions and certain annuities
• Gold, bullion, and other investment commodities
• Money lent to others, including family members

5. What is NOT Deemed?

• Your principal home (also exempt from the assets test)
• Investment properties - actual rental income is assessed instead
• Cars, boats, caravans, and personal effects
• Business assets used in active operations
• A younger partner's super in accumulation phase (if they're under Age Pension age)

6. Worked Examples

7. How Deeming Interacts with the Income Test

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:

• Singles: 50 cents reduction per dollar over $218/fortnight
• Couples: 50 cents combined (25 cents each) per dollar over $380/fortnight combined

Remember: Centrelink applies whichever of the Assets Test or Income Test gives the lower pension result.

8. History of Deeming Rate Changes

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%.

9. Strategies to Manage Deeming Rates

• Invest to match or beat the deeming rate: If you're being deemed at 3.25%, holding cash at 0.5% is inefficient - consider term deposits or income funds paying at least the deeming rate
• Younger spouse's super: Shift assets into an under-67 partner's accumulation super - fully exempt from both deeming and the assets test
• Gift within limits: Up to $10,000/year or $30,000 over 5 years - any excess is still deemed for 5 years
• Funeral bonds: Exempt from both deeming and the assets test up to government thresholds
• Spend on your exempt home: Use savings for home renovations or improvements - reduces assessable cash while improving your non-assessable asset

10. How to Check Your Situation via myGov

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.