In the 2025 Federal Budget, the Australian government has decided to keep Centrelink’s deeming rates unchanged for another year. This decision benefits pensioners and other Centrelink recipients, allowing them to continue receiving higher payments without worrying about rate increases.
This move is especially significant for retirees, as the cost of living continues to rise. By freezing the deeming rates, the government ensures that pensioners can keep more of their payments, providing financial stability in an uncertain economic environment.
What Are Centrelink Deeming Rates and Who Are They Intended For?
Deeming rates are a method used by the government to calculate how much financial support individuals receive from Centrelink. These rates assume a standard rate of return on assets such as bank accounts, superannuation, and shares, regardless of actual earnings.
This system helps to simplify the calculation process, as it doesn’t require tracking the actual income from these assets. Instead, the government uses a predetermined deemed rate for each asset category.
Over 450,000 age pensioners and other Centrelink recipients benefit from these frozen rates, which include those whose payments depend on deeming calculations. These recipients will continue to rely on Centrelink payments to cover essential costs like groceries, utilities, and healthcare.
Without this freeze, a deeming rate increase could have reduced the amount of financial support these individuals receive, causing further financial strain.
Understanding the Impact of Deeming Rate Thresholds
Deeming rates have been linked to the Reserve Bank of Australia’s cash rate since May 2020.
However, despite the current cash rate sitting at 4.35%, the government has opted to keep the rates unchanged for another year. The deeming rates are currently as follows:
| Financial Assets | Deeming Rate |
|---|---|
| First $62,600 for singles | 0.25% |
| Above $62,600 for singles | 2.25% |
| First $103,800 for couples | 0.25% |
| Above $103,800 for couples | 2.25% |
These rates were initially set by the coalition government in 2022 as a way to help Centrelink recipients cope with rising living costs. The Labour government has since extended this freeze until July 1, 2025.
How Deeming Rates Affect Financial Assets
Deeming rates are applied to a variety of financial assets such as bank accounts, term deposits, superannuation (for those over Age Pension age), and shares. Here’s how the rates apply:
- Singles: 0.25% is deemed on the first $62,600 of their assets, and any amount over that is deemed at 2.25%.
- Couples: The first $103,800 of combined assets is deemed at 0.25%, with amounts above this threshold deemed at 2.25%, provided that at least one partner is a pensioner.
These deemed rates determine how much financial support individuals will receive. Even if someone’s investments earn more than the deemed rate, only the deemed rate will be considered when calculating their Centrelink payments.
The Australian government reviews and adjusts the deeming rate thresholds every year on July 1 to reflect the cost of living. Since March 2020, these rates have remained unchanged to provide consistent support for pensioners and other recipients.
Why Has the Government Decided to Freeze Deeming Rates?
The decision to freeze the deeming rates was first made in March 2020 to assist age pensioners amid rising living costs. The Morrison government initially extended this freeze until 2022, and the Albanese government has now confirmed that the freeze will last until July 1, 2025.
Despite the Reserve Bank of Australia’s cash rate being at 4.35%, the government has chosen not to raise the deeming rates for another year. This decision ensures that pensioners and other Centrelink recipients continue to receive financial support at current levels, which is critical for many individuals relying on these payments to meet their daily needs.
The 2025 Federal Budget has confirmed that Centrelink’s deeming rates will remain frozen for another year, providing much-needed stability for pensioners and other Centrelink recipients.
This decision ensures that individuals relying on government payments to cover essential living costs can do so without fear of reduced support due to rising interest rates.
By maintaining the current deeming rates, the government is offering continued financial relief to those who need it most, helping them manage their finances with greater ease.
FAQs
What are deeming rates, and how do they affect Centrelink payments?
Deeming rates are used by the government to estimate the income from financial assets like bank accounts, shares, and superannuation. These rates help calculate how much Centrelink support a person will receive, regardless of their actual investment returns.
Who will benefit from the freezing of the deeming rates?
Over 450,000 age pensioners and other Centrelink recipients whose payments depend on deeming calculations will benefit from this freeze.
How long will the deeming rates remain frozen?
The freeze on deeming rates will remain in place until July 1, 2025.
How does the deeming rate apply to different financial assets?
The deeming rate applies to financial assets such as term deposits, shares, bank accounts, and superannuation (if you’re over Age Pension age). The first portion of assets is deemed at 0.25%, and any amount above the threshold is deemed at 2.25%.