From 20 March 2026, the Australian Government will increase the deeming rates used to calculate income from financial investments. Understanding how this system works can help retirees see how the change may affect their Centrelink entitlements.
This article explains how deeming works, what the new rates are, and what they may mean for retirees.
What Is Deeming?
Deeming is a method used by Centrelink to estimate the income you earn from your financial assets, regardless of the actual income those assets produce.
Rather than assessing the real interest or investment income from bank accounts, shares, managed funds or superannuation in pension phase, Centrelink assumes these assets earn a set rate of return. That assumed return is called the deeming rate.
This system simplifies income testing and means retirees are not penalised for choosing lower-risk investments that may produce less income.
Financial assets commonly subject to deeming include:
✅ Bank accounts and term deposits
✅ Shares and listed investments
✅ Managed funds
✅ Account-based pensions and allocated pensions
✅ Some loans and debentures
The deemed income from these assets is then used in the income test for payments such as the Age Pension.
The Current Deeming Rates
Deeming rates are set by the Australian Government and apply in two tiers.
Lower deeming rates apply to the first portion of financial assets, and a higher rate applies to assets above that threshold.
Current deeming rates are:
| Asset Level | Singles | Couples (combined) | Deeming Rate |
| Lower threshold | Up to $62,600 | Up to $103,800 | 0.25% |
| Above threshold | Above these amounts | Above these amounts | 2.25% |
This means the first portion of your financial assets is assumed to earn 0.25% per year, while the balance is deemed to earn 2.25%.
New Deeming Rates From 20 March 2026
From 20 March 2026, both deeming rates will increase by 0.5 percentage points.
| Asset Level | Singles | Couples (combined) | New Deeming Rate |
| Lower threshold | Up to $64,200 | Up to $106,200 | 1.25% |
| Above threshold | Above these amounts | Above these amounts | 3.25% |
This means Centrelink will assume a higher level of income is being earned from financial assets when applying the income test.
Example: How the New Rates May Affect Pension Assessments
Consider a retired couple with $400,000 in financial assets.
Before 20 March 2026
💰 First $106,200 deemed at 0.75% = $796.50
💰 Remaining $293,800 deemed at 2.75% = $8,079.50
Total deemed income = $8,876 per year
From 20 March 2026
💰 First $106,200 deemed at 1.25% = $1,327.50
💰 Remaining $293,800 deemed at 3.25% = $9,548.50
Total deemed income = $10,876 per year
In this example, Centrelink would assess approximately $2,000 more income per year under the income test.
Depending on the retiree’s situation, this may slightly reduce Age Pension entitlements if they are assessed under the income test.
Why Deeming Rates Matter
Deeming rates directly influence how much income Centrelink believes retirees earn from their investments. If deeming rates rise, the assessed income increases, which may reduce pension entitlements for some retirees.
Conversely, when deeming rates are low relative to actual investment returns, retirees may benefit because Centrelink assumes less income than their investments may actually generate.
For example:
💰 If investments earn 5% but deeming is 3.25%, Centrelink counts less income than actually earned.
💰 If investments earn 1% but deeming is 3.25%, Centrelink counts more income than actually earned.
Why the Government Adjusts Deeming Rates
Deeming rates are designed to broadly reflect average returns available from common investments such as cash deposits and conservative portfolios.
The Government periodically reviews these rates to ensure they remain aligned with prevailing economic conditions, particularly interest rates and investment returns.
During the extended low-interest-rate environment earlier in the decade, deeming rates were frozen for several years. As interest rates have increased, adjustments are now being introduced.
Governments adjust deeming rates periodically to reflect:
✅ changes in interest rates
✅ broader investment returns
✅ economic conditions
However, adjustments are often delayed during periods of rapidly changing interest rates to avoid sudden impacts on pensioners.
During the extended low-interest-rate environment earlier in the decade, deeming rates were frozen for several years. As interest rates have increased, adjustments are now being introduced.
Will This Affect Every Pensioner?
Not necessarily.
Age Pension payments are assessed under both the income test and the assets test, with the test that results in the lower payment applying.
This means:
✅ Retirees assessed under the assets test may see no change.
✅ Retirees assessed under the income test may experience a modest reduction in payment depending on their level of financial assets.
For many retirees, the impact may be relatively small, but it is still useful to understand how the calculation works.
What Retirees Should Keep in Mind
Investment Choices
Deeming applies regardless of whether assets are invested in cash, shares or managed funds. Therefore, investment decisions should be based on long-term financial objectives rather than solely on Centrelink assessments.
Portfolio Income
If investment returns are higher than deeming rates, retirees may still benefit because Centrelink counts less income than is actually earned.
Regular Reviews
Changes to deeming rates are a reminder that government policy settings can change. Periodic financial reviews can help ensure retirement strategies remain appropriate.
The Key Takeaway
From 20 March 2026, Centrelink will increase the deeming rates used to assess income from financial assets to 1.25% for the lower tier and 3.25% for the upper tier.
While the change means Centrelink will assume slightly higher income from investments, the overall impact on Age Pension payments will vary depending on whether a retiree is assessed under the income test or the assets test.
Understanding how deeming works allows retirees to better interpret Centrelink assessments and maintain confidence in their long-term retirement planning.
Deeming rates are simply a way for Centrelink to estimate income from financial investments. While changes to these rates can affect Age Pension assessments, they do not necessarily reflect the income retirees actually earn from their portfolios.
For retirees, the most important step is understanding how deeming fits into the broader pension assessment rules and ensuring their financial strategy aligns with their long-term retirement objectives.
If retirees are unsure how deeming affects their situation, seeking guidance from a qualified financial adviser at TRAC or contacting Services Australia can help clarify their individual circumstances.
