Q: Could you please explain what the change in deeming rates for Pensioners means and why Age Pension payments will rise as a result.
A: Deeming is the method that Centrelink and DVA use to calculate the income from your financial assets when determining your entitlements for Age Pension (as well as other benefits such as Disability Support Pension and Newstart Allowance) under a means test.
There are two components of means-testing; an Asset Test and an Income Test. Centrelink calculates your Age Pension on the test that generates the lowest eligible pension amount.
Effective from 1 July 2019, the deeming rate will decrease from 1.75 per cent to 1.0 per cent for financial investments up to $51,800 for single pensioners and $86,200 for pensioner couples. The upper deeming rate will be cut from 3.25 per cent to 3.0 per cent for amounts of financial investments over these lower thresholds.
Non-financial investments such as Defined Benefit Pensions, distributions from Trusts and Private Companies, rental income and wages earned from work are not assessed subject to these deeming rules but continue to be assessed for Income test purposes in the usual way.
Individuals may earn up to $174 per fortnight, couples up to $308 before their pension entitlements are impacted by the income test. Income in excess of these amounts reduces pension entitlements by $0.50 for every dollar assessed for Income test purposes.
The changes mean that couples whose income is assessed using deeming may receive up to $1053 extra year, while singles could receive up to $804 extra a year.
Whilst the payments will be backdated to 1 July 2019, the payment adjustments will be processed from the end of September 2019.