centrelink deeming rates

Centrelink Deeming Rate Changes: What Australian Retirees Need to Know

If you’re receiving a Centrelink payment like the Age Pension, JobSeeker, or Parenting Payment, then you’ve likely heard whispers about “deeming rates”—and possibly even seen your fortnightly amount dip slightly over the past year. But what exactly are deeming rates, and why is there so much concern among retirees right now?

From March 2026, millions of Australians will face another adjustment in their Centrelink payments as deeming rates rise for the second time in less than two years. While this might sound like a minor administrative tweak, it could have real financial consequences—especially for those on part-pensions or relying heavily on income-tested benefits.

In this guide, we break down everything you need to know about the latest changes, why they matter, and how to protect yourself if you're affected.

What Are Deeming Rates?

Deeming rules are used by Centrelink to estimate how much income you earn from your financial assets—such as bank savings accounts, term deposits, shares, or managed funds. Rather than looking at actual returns (which can fluctuate), the government applies a fixed “deemed” rate of return based on your age and asset type.

This estimated income is then added to any other income you receive (like part-time work or dividends), and Centrelink uses it to determine whether you qualify for full or partial payments under the income test. The higher the deemed income, the lower your pension entitlement becomes.

For example: - If you have $100,000 in savings and the current lower deeming rate is 0.25%, Centrelink assumes you earn $250 per year from it. - That $250 counts toward your total assessable income, which may reduce your weekly pension by several dollars.

It’s important to note that deeming only applies to financial assets, not property, vehicles, or personal belongings. And while some people benefit from lower rates (e.g., younger recipients with smaller balances), others suffer when rates rise unexpectedly.

Why Are Deeming Rates Rising Again?

Since early 2024, Australia has seen a sharp increase in official interest rates as the Reserve Bank combats inflation. As a result, banks and lenders have raised their deposit and term deposit rates significantly—making cash holdings more attractive.

Traditionally, deeming rates lag behind market conditions. However, in recent months, the federal government has moved to bring them closer to reality. On March 20, 2026, the lower deeming rate will jump from 0.25% to 0.75%, and the upper rate (for larger balances or older recipients) will rise from 2.25% to 2.75%.

What makes this particularly painful for many retirees is that these hikes coincide with annual indexation increases—meaning their base pension amount goes up at the same time their assumed income from savings also rises.

As journalist Nick Bruining put it in The West Australian:

“You’re getting a cost-of-living increase, but your deemed income is also going up. For part-pensioners, that means the net effect could be zero—or even negative.”

This combination has been dubbed the “double whack” by advocacy groups and media outlets alike.

Who Is Most Affected?

Not everyone will lose money. Here’s who should pay special attention:

1. Part-Pension Recipients

People receiving a reduced portion of the Age Pension due to high income or assets are most vulnerable. Even small increases in deemed income can push them below the threshold for full entitlements.

According to Services Australia data, around 1.2 million Australians currently receive a partial pension. Many rely on these payments for essential living costs like rent, healthcare, and food.

2. Seniors Card and Low-Income Health Card Holders

These groups often depend on Centrelink payments as their primary income source. Any reduction—no matter how small—can strain household budgets.

3. Those With Moderate Savings Balances

While retirees with no savings won’t see an impact, anyone holding between $50,000–$100,000 in liquid assets risks losing hundreds of dollars annually once the new rates kick in.

For instance: | Asset Balance | Old Lower Rate (0.25%) | New Lower Rate (0.75%) | |---------------|------------------------|--------------------------| | $50,000 | $125/year | $375/year | | $100,000 | $250/year | $750/year |

Assuming a standard income test applies, that extra $375–$500 in assumed income could reduce a weekly pension by roughly $15–$20.

Timeline of Recent Developments

Here’s a quick recap of key events leading up to the March 2026 changes:

• September 2024: First major hike in deeming rates since 2020, raising both thresholds by 0.5%.
• November 2024: Advocacy bodies warn of growing hardship among low-income seniors; calls grow for reform.
• January 2026: Minister for Social Services Tania Plibersek announces further adjustments aligned with rising bank deposit rates.
• March 2026 (effective date): Both lower and upper deeming rates increase by 0.5 percentage points simultaneously with scheduled indexation.

Critically, these changes apply automatically—no action needed from recipients. But understanding them is essential for managing retirement finances.

Expert Perspectives: Is This Fair?

The debate around deeming rates reflects deeper tensions in Australia’s welfare system. Supporters argue that deeming prevents wealthy retirees from gaming the system—ensuring fairness across generations. Others counter that the rules punish thrifty Australians who saved responsibly during working life.

Dr. Sarah O’Brien, economist at the Grattan Institute, notes:

“Deeming was designed decades ago when returns on cash were negligible. Now, with record-high interest rates, it penalizes ordinary savers who are doing nothing wrong.”

Meanwhile, the Australian Council of Social Service (ACOSS) has called for a complete overhaul of the deeming regime, suggesting variable rates tied to actual investment returns instead of rigid percentages.

Until reforms happen—if ever—the March 2026 changes are expected to worsen financial stress for tens of thousands.

Immediate Steps You Can Take

While you can’t stop the rate change, there are ways to soften its blow:

1. Review Your Assets: Use the Services Australia Deeming Calculator to estimate how much your savings will affect your pension under the new rules.

2. Consider Diversification: Shifting some savings into non-deeming assets (like superannuation with concessional tax treatment) may reduce exposure. Consult a qualified financial advisor before making moves.

3. Track Actual Returns: Keep records of real interest earned on your accounts. If actual returns are significantly higher than deemed amounts, you may be eligible for a review—though this rarely results in backpay due to policy constraints.

4. Stay Informed: Follow updates from trusted sources like Yahoo Finance Australia, 9News, and The Guardian Australia for timely alerts about upcoming changes.

Looking Ahead: Will Reform Happen?

Political pressure is mounting. Opposition parties have flagged potential amendments ahead of the next federal election, though major structural changes seem unlikely in the short term.

One silver lining? The simultaneous rise in pension rates means most full-pensioners won’t see a net loss—but part-pensioners remain at risk.

Longer-term solutions might include: - Indexing deeming rates to actual market performance rather than fixed percentages - Introducing age-based exemptions for those over 75 with modest balances - Creating a “transition period” for recent retirees adjusting to post-pandemic economic shifts

Until then, awareness is your best defense.

Final Thoughts

The March 2026 deeming rate hikes represent yet another challenge for Australia’s aging population. While necessary to reflect current economic realities, they highlight systemic flaws in how retirement income is assessed.

For millions of Australians counting on Centrelink support, understanding these mechanics isn’t just academic—it’s about safeguarding basic living standards in old age.

Stay informed, plan wisely, and don’t hesitate to seek professional advice. After all, retirement shouldn’t come with hidden deductions.

Sources: - [Centrelink change prompts ‘double whack’ warning to Australian retirees: 'Reduced'](https://au.finance.yahoo.com/news/centrelink-change-prompts-double-whack-warning-to-australian-retirees