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Deeming Rates Change

22/07/2019

The Federal Government has announced that the deeming rates used for the income means test will be reduced given the current very low official interest rate.  This reduction in the deeming rates will generally result in an increase in the age pension for individuals currently receiving a part pension and may allow others who were ineligible for a part pension to now be eligible for a part pension.  The reduction may even permit individuals who are, by reason only of the means tests, excluded from receiving the age pension and who are not currently entitled to the Commonwealth Seniors Health Card, to now be entitled to the Seniors Health Card.

Currently the deeming rates are 1.75% and 3.25%.  The change will reduce the deeming rates to 1% and 3% respectively. 

The lower deeming rate (now 1%) applies to the first $51,800 of the value of financial assets for single pensioners or the first $86,200 of the value of financial assets for a pensioner couple.  The higher deeming rate (now 3%) applies to the value of financial assets above $51,800 (single pensioner) or above $86,200 (pensioner couple).

While the change will be effective on and from 1 July 2019 and will be automatically applied by Centrelink (and Veterans’ Affairs), to individuals currently receiving a partial pension, any increase in age pension payments may take some time to materialise as systems and administrative procedures must be updated.

The reduction in the deeming rates will not benefit individuals currently receiving a full pension.  This is because deeming only reduces the amount of the age pension.  If an individual already has an entitlement to a full age pension, they are currently not affected by the deeming rates.

Where an individual or couple are not entitled to an age pension (only by reason of the means test) then they may be entitled to the Commonwealth Seniors Health Care Card.  Entitlement to this card is subject to an incomes test (but not an asset test).   Consequently, the reduction in the deeming rates may now entitle individuals or couples who were previously excluded from both the age pension and the Seniors Health Care Card by reason of the incomes test to now be entitled to the Card.

As the change in the deeming rates can be effected by a legislative instrument (which needs only to be drafted and signed by the relevant Minister), the change can be effected without legislation and therefore relatively quickly.

In summary, the impact of the reduction in the deeming rates will have the following impact:

  • For individuals and pensioner couples already entitled to the full pension – no impact and no action is required
  • For individuals and pensioner couples entitled to a partial pension – likely to be an increase in the part pension and any increase will be automatically implemented by Centrelink (or Veterans’ Affairs)
  • For individuals and couples not previously entitled to a partial pension by reason only of the application of the income means test – they may now be entitled to a part age pension – they must make a fresh application for the age pension
  • For individuals and couples who were not previously entitled to the Commonwealth Seniors Health Card due only to the relevant income means test – they may now be entitled to Seniors Health Care Card or entitled to a part pension  -  they must make a fresh application for the age pension or card.
Note: if an individual or a member of a couple is entitled to an age pension (whether full or partial) they will be automatically entitled to a pensioner concession card.