I thought it would be useful to explain how deeming works, so you can be better informed about how your payment rate is calculated. Understanding deeming can also help you decide how to invest your money.
What is deeming?
Deeming is the set of rules we use to work out income from your financial assets. Financial assets include bank accounts, shares, managed investments, loans, some gifts, some income streams, and, if you’re over the Age Pension age, this can include your superannuation.
Deeming assumes that you receive a set rate of income from these investments. This means you don’t have to tell us every time your income from these investments change. Plus, as a bonus, any investment income you receive that is higher than the deeming rate won’t affect your payment.
It also means we don’t use the chosen level of pension you receive from your account-based pension to work out your payment rate. Instead, the entire balance of your account-based pension is deemed.
Deeming may not impact your payment. If you’re getting the full rate of payment, or your pension is affected by the assets test, deemed income isn’t impacting your fortnightly rate.
What are the benefits of deeming?
Deeming helps keep your payments from Services Australia steady, instead of going up and down based on the performance of your financial assets.
It saves you time, because you don’t need to tell Services Australia every time your income from these investments change.
Deeming also provides an incentive to invest. That’s because any interest or drawdowns you get that are higher than your deeming rate won’t affect your payment from us. So, you can focus on choosing the best investments for your needs and preferences, rather than worry about whether they are better or worse for your rate of payment.
20 March changes
On 20 March, the deeming rates changed.
If you’re single, the first $64,200 of your financial assets has the deemed rate of 1.25%. Anything over $64,200 is deemed to earn 3.25%.
If you’re a member of a couple and at least one of you get a pension, the first $106,200 of your combined financial assets is deemed at the rate of 1.25%. Anything over $106,200 is deemed to earn 3.25%.
Funds from the sale of the family home
If you receive an income support payment from us, special rules apply if you sell your home.
The money you get from the sale of your home may be treated differently to your other financial assets. The portion of the proceeds from your sale that you plan to use to purchase, build, repair or renovate your new home will be deemed at the lower interest rate of 1.25% for up to two years from the date of sale. This can be extended to a total of 3 years under special circumstances.
To find out more about deeming, go to servicesaustralia.gov.au/deeming.
Until next time
Hank Jongen
General Manager
Services Australia