If you receive a part or full Age Pension you might see changes to how your income is assessed by Centrelink over the coming year. One of the key drivers of this is social security deeming rates, which the Government has already signalled will be rising.

What are deeming rates?

Deeming rates are the assumed rates of income Centrelink uses for financial assets such as:

• Bank accounts and term deposits
• Shares and managed funds
• Account-based pensions

These rates are not what you earn but instead they are a set percentage amount of the value of your financial assets that the Government uses to work out your “deemed income” for means testing the Age Pension and aged care fees.

The purpose of deeming is fairness and simplicity. It avoids looking at actual investment returns, treating financial assets similarly regardless of where the money is invested.

Why are deeming rates likely to increase?

Deeming rates were frozen at historically low levels during the COVID-19 pandemic.

In 2025 the Government announced it would unfreeze and increase deeming rates, reflecting stronger returns available in financial markets and easing inflation. This change took effect on 20 September 2025, with:

• A lower rate increasing to 0.75%
• An upper rate rising to 2.75%

These are the rates that now apply through 30 June 2026.

The recent Mid-Year-Economic-Forecast-Outlook or MYEFO confirms the Government’s intention to lift deeming rates. Referred to as “resetting social security deeming rates” the Government noted this will result in lower social security payments overall compared with keeping the old frozen rates, saving the Government around $1.9 billion over the next four years.

How will higher deeming rates affect you?

1. Age Pension payments

Deemed income is added to any other income you have for the Age Pension income test. If your deemed income increases, it can reduce your fortnightly pension entitlement but only if you are an income tested part age pensioner.

This is because for many retirees, the assets test is the harsher test and will still mainly determine payment levels.

Importantly, the deeming changes were introduced at the same time as regular pension indexation in September 2025, so many people may see an overall increase in their Age Pension even if deemed income goes up.

2. Aged care fees

Deeming rates are used in the means test for aged care, including both home care and residential aged care. Increasing deeming rates can lead to higher assessed income, which in turn could increase your means-tested care fees.

While the family home is excluded from means testing in residential aged care, financial assets such as savings and super accounts are included. This makes understanding deeming an important part of aged care planning.

3. Other Centrelink payments

Deeming affects all those subject to the Centrelink income test, including:

• Disability Support Pension
• Carer Payment
• JobSeeker and other payments that include income testing

However, the impact will vary significantly depending on your individual income and asset mix.

What happens next?

The Government has indicated that the 2025 increase is the first step and that future changes to deeming rates will be guided by advice from the Australian Government Actuary.

If market returns rise further, deeming rates could also rise in future reviews meaning your deemed income might continue to climb unless the rules change again.

Final thoughts

Higher deeming rates don’t automatically mean everyone will lose part of their pension or benefits, especially if the assets test applies. But for many retirees, especially those on part pensions or with significant deemed income, the change could reduce entitlements or affect eligibility for concessions like the Commonwealth Seniors Health Card.

If you’re unsure how these changes affect you, it’s a good idea to speak to us. Understanding how deeming interacts with your income and assets is key to planning confidently for retirement.