How Centrelink Deeming Rates Adjustments May Impact Part Pensions

Centrelink plays a vital role in helping millions of Australians maintain financial security in retirement. One of its key payments is the Age Pension, which for many people starts as a part pension, a partial income support payment if your income or assets are above the full‑pension limits but still low enough to qualify. A major part of how Centrelink calculates pension payments is something called deeming rates.

What Are Centrelink Deeming Rates?

• Assets Covered: Bank accounts, term deposits, shares, superannuation in payout phase.
• How It Works: Centrelink treats these assets as producing a fixed income based on the deeming rate.
• Impact on Pension: This “deemed income” is added to your income test for pension calculations.
• Even If Returns Differ, Deeming applies whether your real returns are higher or lower.
• Rate Tiers: Two rates lower rate for assets up to the threshold, and a higher rate above it.
• Current Rates (Mar 2026): Lower 1.25%, higher 3.25%.

How Deeming Rates Affect Part Pensions

• Income Test Impact: A higher deemed income means Centrelink treats you as earning more.
• Pension Reduction: More deemed income can lower part of pension payments.
• Savings Matter: Larger financial assets lead to a bigger impact.
• Example: Assets above thresholds are partially assessed at a higher rate, reducing pension faster.
• Separate From Assets Test: Deeming mainly affects those with significant savings.

Recent Changes to Deeming Rates

• Adjustment Year: 20, 26, first major increase since pandemic freeze.
• Key Updates (Mar 20, 2026):
  • Lower ate 1.25%
  • Higher rate, 3.25%
  • Thresholds: ~$64,200 for singles, ~$106,200 for couples.
• Reason for Change: Reflects actual returns retirees get, e.g., bank deposits, term deposits.
• Trend: Gradual rise after low pandemic-era rates.

Potential Impact on Part Pensioners

• Higher Deemed Income:
  • Raises assessed income, reduces part pension.
  • May delay tapering off completely.
  • Could affect other income-linked benefits.
  • Thousands may see a slight reduction in fortnightly payments.
• Offset With Indexation:
  • Centrelink increases base payment via indexation.
  • Helps offset reduced pension from higher deeming.
• Who Is Most Affected:
  • Part pensioners with significant savings are more likely to lose some payment.
  • Full pensioners with low assets, little impact, may gain from the base rate.
  • Very low assets, negligible change.
  • ~771,000 people affected across payments.

Strategies to Manage the Impact

• Review Assets: Keep Centrelink updated with all financial holdings.
• Seek Advice: Consult a financial adviser for term deposits or large cash holdings.
• Use Tools: Pension calculators and Centrelink online tools to estimate changes.
• Caution: Don’t act on guesswork; confirm with official sources before decisions.

 Conclusion

Centrelink’s adjustments to deeming rates aim to keep assumed investment income in line with real market conditions. For part pensioners, this can mean higher deemed income and smaller pension payments, especially if you hold significant financial assets. But joint increases to payment rates through indexation can soften the blow for many retirees. Staying informed and planning helps you better understand your pension outcome and protect your retirement budget as policies evolve.

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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.