As part of the 2025 Federal Budget, the government has announced that Centrelink’s deeming rates will remain still for another year.
It means pensioners and other Centrelink recipients will continue to benefit from higher payments without worrying about rate increases as part of the 2025 Federal Budget.
For many retirees, the freeze on deeming rates is crucial. With the cost of living continuing to rise, the unchanged rates ensure that pensioners and other recipients retain more of their payments.
What Are Centrelink’s Deeming Rates in the Federal Budget and Who Do They Affect?
Deeming rates determine how much financial support pensioners and other Centrelink recipients receive. The government assumes the rate of return on financial assets like bank accounts, superannuation, and shares, regardless of actual earnings.
The system ensures that if someone earns more from these investments, then only the deemed rate is counted when calculating their Centrelink Payments.
Over 450,000 age pensioners will see the freeze in deeming rates, along with the other Centrelink recipients whose payments are affected by deeming.
The unchanged rates will help retirees rely on these payments to cover essentials like groceries, utilities, and medical expenses.
Without the freeze, an increase in deeming rates could have reduced their support, adding financial pressure.
Deeming Rate Thresholds and Their Impact
Since May 2020, the rates have moved in line with the Reserve Bank of Australia’s cash rate.
The rates stayed at –
0.25% for lower balances
2.25% for higher amounts
The rates are currently in line with 4.35%.
However, the Federal Budget papers didn’t mention freezing of deeming rates, but the Department of Social Services confirmed they will stay frozen for another year.
Earlier, the coalition government initiated the freeze in 2022 for Centrelink recipients for two years to help ease the financial pressures.
Later, the Labour government extended the freeze until July 1, 2025.
How Deeming Rates Are Applied to Financial Assets?
Singles will earn 0.25% on the first $62,600 of their financial assets, while any amount above that will earn 2.25%.
For couples, the first $103,800 of combined assets will be deemed to earn 0.25%, and with anything over that, earnings will be deemed at 2.25%, given that at least one partner receives a pension.
These financial rates apply to a range of financial assets, namely terms deposits, shares, bank accounts, and superannuation (if you’re over Age Pension age).
If someone earns more from these investments, only the deemed rate will be counted when calculating their Centrelink payments.
The Australian government tracks and adjusts deeming rate thresholds every July 1 to reflect changes in the cost of living.
To help ease the financial pressures, the deeming rates have remained unchanged since March 2020.
Why Has the Government Extended the Deeming Rates Freeze in the Federal Budget?
The freeze was first introduced in March 2020 to help age pensioners from the rising cost of living pressures. The Morrison government then extended the freeze till 2022, and the Albanese government has now confirmed that the freeze will remain until July 1, 2025.
As of now, despite the Reserve Bank of Australia’s cash rate currently sitting at 4.35%, the government has decided to keep deeming rates at their current level for one more year, although it’s not mentioned in the Federal Budget papers.
FAQs on Deeming Rates in the Federal Budget
1. What are the deeming rates for Centrelink recipients in the Federal Budget?
The deeming rates are used by the Australian government to determine the income earned from financial assets. These earnings are basically evaluated when calculating Centrelink Payments.
2. How will Deeming rates affect in 2025?
In the new Federal Budget, the government has announced that the rate freeze will stay until next year.
3. How do deeming rates affect Centrelink pensioners and retirees?
The freeze in deeming rates will ensure that pensioners and retirees can hold on to their payments without any deduction.
4. What are the ongoing deeming rates in 2025?
Since May 2020, deeming rates have remained unchanged :
- 0.25% on the first $62,600 (singles) or $103,800 (couples).
- 2.25% on amounts above these thresholds.
5. Why did the government extend the deeming rate freeze?
The freeze helps protect pensioners from ongoing financial pressures, ensuring they retain more of their Centrelink payments.
To know more about deeming rates and the latest changes, find the information here.
