Kim
Australian pensioners are on high alert as Centrelink prepares to revise its deeming rates in June 2025, a change that could result in annual pension reductions of up to $3,300 for some retirees.
While this adjustment aligns with rising interest rates and economic recovery efforts, it comes at a time when cost-of-living pressures remain high.
For those relying on the Age Pension to cover essentials like food, rent, and utilities, this shift may feel like a silent financial cut—one that occurs without warning but carries serious consequences.
Here’s what you need to know about how deeming works, who’s affected, and how you can minimize the impact.
What Are Centrelink Deeming Rates and Why Do They Matter?
Deeming rates are Centrelink’s method of estimating income from financial assets such as savings accounts, term deposits, managed funds, and shares. These rates do not reflect your actual returns but instead use an assumed rate of income to simplify pension assessments.
The deemed income is then applied to the Age Pension income test, which determines the amount of pension a retiree receives. If deemed income increases, pension entitlements often decrease, regardless of whether the pensioner’s actual income has changed.
Why June 2025 Is a Critical Turning Point
The deeming rate freeze, introduced in 2020 during the pandemic to protect retirees from volatile markets, is officially ending in June 2025. As a result, Centrelink will increase the deeming thresholds to reflect current market conditions, particularly the Reserve Bank’s rising cash rate.
For many pensioners, this means:
- Higher assessed income under the income test
- Reduced pension payments
- In some cases, complete ineligibility for part-pensioners near the income threshold
Current vs Expected Deeming Rates & Impact
Here’s a look at how the deeming rate changes will affect different groups of retirees:
| Type of Asset Holder | Threshold Amount | Current Rate | Expected Rate | Estimated Annual Loss |
|---|---|---|---|---|
| Single (≤ $60,400) | Up to $60,400 | 0.25% | 0.75% | $302 |
| Single (> $60,400) | Over $60,400 | 2.25% | 2.75% | $820 |
| Couple (≤ $100,200) | Up to $100,200 | 0.25% | 0.75% | $420 |
| Couple (> $100,200) | Over $100,200 | 2.25% | 2.75% | $1,050 |
| Couple (Illness Separated) | Over $100,200 | 2.25% | 2.75% | $1,050 |
| Average Reduction | — | — | — | Up to $3,300 |
Who Will Be Most Affected?
The hardest-hit pensioners will likely include:
- Singles and couples with financial assets above the deeming threshold
- Retirees with conservative investments like low-yield savings or term deposits
- Part-pensioners close to the income cut-off
- Seniors who aren’t managing their finances proactively
Even retirees earning lower-than-deemed returns may be penalized, as Centrelink calculates income based on assumed, not actual, returns.
How Does Deeming Work? A Simple Example
Let’s say a single pensioner has $100,000 in financial assets:
- Current deeming calculation:
- $60,400 at 0.25% = $151
- $39,600 at 2.25% = $891
- Total deemed income = $1,042
- New deeming calculation (June 2025):
- $60,400 at 0.75% = $453
- $39,600 at 2.75% = $1,089
- Total deemed income = $1,542
That’s a $500 increase in deemed income annually, which can reduce Age Pension payments significantly.
How to Minimise the Impact of Deeming Rate Hikes
There are proactive strategies pensioners can use to reduce assessable income:
| Strategy | Description |
|---|---|
| Reinvest in Super | Move eligible savings into superannuation (if under age 75) |
| Purchase Exempt Assets | Spend cash on non-assessable items like home upgrades or vehicles |
| Gifting | Legally gift up to $10,000/year or $30,000 over 5 years to reduce assets |
| Pay Off Debts | Use funds to reduce debt instead of holding interest-bearing accounts |
| Defer Investment Income | Postpone receiving dividends or interest until after rate hike |
| Consult FIS Officers | Get free personalized advice from Centrelink’s Financial Information Service |
| Use Income Streams | Explore annuities and income streams with lower deeming impact |
What the Government Says
The Department of Social Services claims this adjustment is necessary to keep the Age Pension system sustainable and reflective of real-world interest rates. Officials argue that the deeming model provides a fair and consistent way of assessing income.
However, pension advocacy groups warn that the timing of this change—when inflation and utility prices are still high—could cause undue financial stress for seniors.
The June 2025 deeming rate increase may seem like a technical adjustment, but for many retirees, it represents a real loss of income—up to $3,300 annually in some cases.
With the cost of living continuing to rise, this change could be financially painful for those who depend on every dollar from their Age Pension.
To protect your income, it’s crucial to review your financial situation, seek help from Centrelink’s Financial Information Service, and consider asset restructuring ahead of the change. Early action can help you minimize the damage and continue receiving the maximum support available.
FAQs
Is the deeming rate change guaranteed to affect all pensioners?
No. Only those with significant financial assets are likely to be affected. Pensioners with minimal or no financial investments may see no change.
Can I reduce the impact by changing my investments?
Yes. You can shift assets, pay off debts, or invest in exempt items to reduce assessable income.
When will the new deeming rates take effect?
The revised deeming rates are expected to be implemented by June 2025, ending the pandemic-era freeze.