Deeming rates: the income Centrelink decides you earned

Centrelink has never been much interested in what your savings actually earn. It applies deeming rates instead: set percentages your financial assets are assumed to earn, whatever the bank really paid you. For five years that assumption was close to zero, frozen since May 2020, and the income test was gentle as a result. That era is over. The rates have risen twice in six months, they are now 1.25% and 3.25%, and the Australian Government Actuary reviews them again before 20 September 2026. If you get a part pension, or you're about to claim one, this is the rule quietly moving your payment.

What deeming actually is

Deeming is the income test's shortcut. Rather than audit every pensioner's bank interest, dividend statements and term deposit renewals, Centrelink assumes your financial assets earn a set rate, adds that deemed income to whatever else you have coming in, and runs the lot through the income test. Your actual returns never enter the conversation. Earn less than the deemed rate and you're assessed on income you never received. Earn more and Centrelink looks the other way.

The logic is bluntly practical: one assumed rate means nobody gains by hiding savings in a dead account, and nobody has to mail Centrelink a shoebox of interest statements.

“Financial assets” covers more than the bank. Savings and transaction accounts, term deposits, shares, managed funds, and superannuation, which means account-based pensions plus accumulation super once you're past Age Pension age. The deemed total then meets the income test: the first $218 a fortnight is free for singles, $380 combined for couples, and every dollar above that costs 50 cents of pension.

What are the deeming rates right now?

Two rates have applied to the Age Pension income test since 20 March 2026: a lower rate of 1.25% on the first slice of your financial assets, and 3.25% on everything above it. Where the slice ends depends on your household.

Those thresholds run to 30 June 2026, then rise on 1 July 2026 to $66,800 for singles and $110,600 for couples combined. Current rates, thresholds and the rest of the pension settings live on The Numbers, our data hub.

Why the rates are climbing again

The rates were cut to 0.25% and 2.25% on 1 May 2020 and frozen there. The freeze formally ended on 30 June 2025, although nothing moved that day; the rates held at their frozen levels until the first scheduled step-up. By the government's own impact analysis, five years of freeze had left deemed income well short of the returns actually available to retirees.

The catch-up is running in steps. On 20 September 2025 the rates rose to 0.75% and 2.75%, the first increase since 2020. On 20 March 2026 they rose again, to the current 1.25% and 3.25%, following an Australian Government Actuary recommendation released on 20 February 2026. The stated policy is a gradual reset in increments of up to half a percentage point, reviewed by the Actuary before each 20 March and 20 September indexation day, “until the rates appropriately reflect the investment returns available”.

So pencil in 20 September 2026. A further rise of up to 0.5 points is possible, which would take the rates to a maximum of 1.75% and 3.75%. The Actuary's recommendation is due around August 2026. Nothing is decided yet, and that's exactly why the date matters.

What does deeming do to $300,000?

Judith is 68, single, owns her unit outright, and holds $300,000 in financial assets spread across an account-based pension, a term deposit and a savings account. Her assets are below the $321,500 assets test free area for a single homeowner, so the income test sets her pension. (Centrelink always runs both tests and pays the worse result; if your balance is nearer the line, start with how the assets test works.)

At the current rates, her first $64,200 is deemed to earn 1.25%, which is $802.50 a year. The remaining $235,800 is deemed at 3.25%, another $7,663.50. Total deemed income: $8,466 a year, or $325.62 a fortnight. The income test ignores her first $218 a fortnight and claws back 50 cents per dollar on the $107.62 above it. Her pension drops by $53.81 a fortnight, about $1,399 a year.

Here's the part that stings. Under the frozen rates, the same $300,000 produced deemed income of $5,466 a year, $210 a fortnight, which was entirely under the free area. Zero pension impact. Judith hasn't spent a cent or earned an extra dollar, yet her pension is $1,399 a year lighter, with another step possibly coming in September.

The same $300,000 that cost nothing in pension a year ago now costs $1,399 a year.

The table holds today's thresholds and the $218 free area steady, so the rate change is the only moving part. Couples wear it more lightly: the same $300,000 held jointly is deemed at $7,626 a year, $293 a fortnight, which is still under the $380 combined free area. No reduction at all, provided nothing else is coming in. To see where your own balance lands, run it through the Age Pension estimator, which applies both tests in under a minute.

When deeming works in your favour

Deeming cuts both ways, and the second edge gets far less attention. The deemed rate is a ceiling as well as a floor: if your investments return more than 3.25%, the excess never enters the income test. Pensioners with cash in a transaction account paying nothing get the rough end of the same rule, assessed on income that never arrived. Whether your actual return is above or below the deemed rate decides which side of the deal you're on, and Centrelink doesn't check either way.

Two carve-outs are worth knowing. If you sell your principal home intending to buy or build another, the proceeds are deemed at the lower rate only, currently 1.25%, for sales from 1 January 2023. And wages escape deeming entirely because they're real income with their own concession: the Work Bonus exempts the first $300 a fortnight of employment income, banks whatever you don't use up to a ceiling of $11,800, and hands new claimants from 1 July 2024 a $4,000 starting balance. A pensioner who hasn't worked in a while can take on a decent stretch of paid work before the income test notices.

One trap completes the picture: giving money away doesn't stop it being deemed. Gift more than the allowed $10,000 a year, or $30,000 across five years, and the excess keeps being treated as your financial asset, deemed income and all, for five years from the date of the gift.

Dates worth circling

Three of them. On 1 July 2026 the deeming thresholds rise to $66,800 for singles and $110,600 for couples combined, and the income test free areas climb to $226 and $396 a fortnight, both small moves in pensioners' favour. Around August 2026 the Australian Government Actuary hands the government its next deeming recommendation. And on 20 September 2026 any rate change takes effect, up to a possible 1.75% and 3.75%. If your pension is set by the income test, that September date is the one to watch.