February 25: Centrelink Deeming Rates Hike to Squeeze Part Pensions
Centrelink deeming rates will rise on 20 March, lifting the lower rate to 1.25% and the upper rate to 3.25%. The change lands the same day as March 20 indexation to pensions and supplements. While many will see higher base payments, income-tested part pensioners could face reduced entitlements. Advisors warn some may lose eligibility. We explain how deeming works, who is most exposed, and what steps to consider now, so you can protect cash flow and plan for Age Pension changes.
March 20 Changes: Rates and Indexation
Centrelink deeming rates assume a return on financial assets like savings, term deposits, and shares. From 20 March, the lower rate moves to 1.25% and the upper rate to 3.25%. These rates apply in tiers to your assessable financial assets. The same day, pension and supplement amounts rise through indexation for more than five million Australians, according to reporting by 9News source.
Indexation boosts base payments, but higher deemed income can offset gains under the income test. If your deemed income rises, your part pension may fall. The effect depends on your assets mix, where you sit against income free areas, and whether you are assessed mainly under the assets or income test. We expect some households to see little net change, while others experience clear reductions.
Who Is Most At Risk of Cuts
The biggest risk sits with income-tested part pensioners close to cut-off points. Higher centrelink deeming rates push up assessed income, which can reduce fortnightly pensions. Advisers caution that some retirees could see part pension cuts or even lose eligibility, a trend highlighted by The West Australian’s coverage of the policy shift source.
A quick example shows the sensitivity. A 1 percentage point increase applied to $200,000 of financial assets adds about $2,000 a year in deemed income, roughly $77 a fortnight. For $400,000, that is about $154 a fortnight. These are illustrative only, not advice. The actual impact depends on your asset tiers, whether you are single or a couple, and which test sets your payment.
Wider Economic and Market Implications
Reduced part pensions tend to trim discretionary spending first. We see a near-term headwind for cafes, clothing, and homewares, while essentials hold up better. If centrelink deeming rates lift assessed incomes for many retirees at once, the effect can cool foot traffic and basket size, especially in suburbs with older populations. That can weigh on retail sentiment into the June quarter.
Communities with larger retiree shares may feel the shift earlier. Discount retailers, pharmacy, and value supermarkets could gain share, even as overall spend softens. Financial firms may field more enquiries on cash products and annuities. Local service businesses that rely on senior customers might notice slower demand, then stabilisation as households rebalance budgets after Age Pension changes settle.
Steps To Prepare Before March 20
Make sure your Centrelink record is accurate before 20 March. Update balances, new term deposits, account-based pensions, and any private income. Confirm partner details if you are part of a couple. Keep recent statements handy, and track declared interest or dividends. If you expect a change, call early to discuss options and timeframes. Small corrections can prevent overpayments or sudden backdated debts.
Map your fortnightly needs for the next six months. Build a cash buffer to avoid forced selling. Consider staggering term deposits so not all mature at once, which can smooth income as centrelink deeming rates rise. Review super drawdowns, fees, and tax settings with a licensed adviser. Tighten discretionary spending now so any part pension cuts land with less stress.
Final Thoughts
The 20 March reset brings two forces at once. Payments rise with indexation, but higher deemed returns will lift assessed income for many retirees. Those on the income test near cut-offs face the most risk of reductions. Our message is simple. Update your details early, run clear cash-flow plans, and speak to a licensed adviser about product settings and drawdowns. If you depend on a part pension, model a few scenarios so you know your buffer. A prepared household can absorb smaller changes, protect savings, and avoid rushed decisions if payments move after the Age Pension changes take effect.
FAQs
What are Centrelink deeming rates?
Centrelink deeming rates are set percentages used to estimate earnings on your financial assets for the income test. They do not reflect your actual returns. From 20 March, the lower rate is 1.25% and the upper rate is 3.25%. The rates apply in tiers, which helps Services Australia assess your Age Pension.
How does March 20 indexation interact with the deeming change?
Indexation lifts base payments and thresholds on 20 March, but higher deemed income can reduce part pensions under the income test. The net effect depends on your asset levels and which test applies to you. Some will see a small rise, others little change, and some may face lower fortnightly payments.
Who is most at risk of part pension cuts?
Income-tested part pensioners close to eligibility cut-offs face the greatest risk. If deemed income rises due to the new rates, their assessed income can exceed free areas, which reduces the payment. Couples with larger financial asset balances and singles holding significant cash or term deposits should review their position early.
What can I do to prepare for the Age Pension changes?
Before 20 March, update your Centrelink details, confirm asset balances, and check partner information. Build a short-term cash buffer, review super drawdowns, and consider staggering term deposit maturities. If unsure, seek guidance from a licensed financial adviser to model different outcomes and plan for any reduction in payments.
Disclaimer:
The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.