Centrelink uses deeming rates to work out if you're eligible for the Age Pension. It's important to understand deeming rules and how it could impact on your retirement income.

What are deeming rates?

Deeming rates are used to calculate how much money you’ve made from your financial assets if you’re retired.

Once you get the amount you've earned from your financial assets, it's then included as income in the Age Pension income test.

The income test is one of the tests used to work out how much money you can earn each fortnight and still get the Age Pension. It's also used to see if you can get other income support payments from the government.

You could get a part or full Age Pension, if you also meet the assets test and other eligibility rules.

The assets test looks at the value of savings plus any assets you own, both in Australia and overseas, except for your family home if you live in it.

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What are the deeming rates for the Age Pension?

Source: Services Australia, accessed April 2024.

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How the Age Pension works with your super

Superannuation is counted in both the assets test and the income test under the deeming rules for the Age Pension.

Centrelink uses deeming rates to work out how much you're getting from returns on your super investments:

• once you reach the qualifying age for the Age Pension
• no matter how much you may be getting from your super account as income.

The deeming rate is important as it helps decide your eligibility for the Age Pension. By knowing how Centrelink calculates your future income, you can plan and manage your finances better.

You can then work out the best way to use your super and other income along with the Age Pension (if you're eligible) to improve your life in retirement.

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What other income support payments is deeming used for?

Deeming also applies to other Australian government payments and benefits, such as:

But if you've had an account-based income stream before 1 January 2015,

• and have continued to get pension payments since then, your eligibility for the Age Pension will be worked out using the deductible amount instead of deeming.
• and have held a CSHC since then, your account-based pension won't be included in the income test as long as you continue to hold a CSHC card and keep the same account-based pension.

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What are the benefits of deeming?

Deeming rates set a fixed rate of income for all financial assets, even if the actual income is higher or lower. There are some benefits in using deeming to work out income from your financial assets.

• It doesn’t matter where your money is invested, they’ll be treated the same way.
• You’ll be more secure knowing your Age Pension or other support payments will stay the same.
• If your investment return is higher than the deemed rates, the extra amount doesn't count as your income.
• You can choose investments based on your lifestyle needs, not on the expected returns.