Australian politicians are being urged to come clean on a “sneaky attack” on pension payments. Deeming rates impact the payments of 900,000 Centrelink recipients. This including 450,000 pensioners, and it is still unclear whether they will increase when the current freeze expires.
Deeming rates have been frozen for the past three years. The current extension is set to end on June 30, 2025. A Department of Social Services representative and pre-budget leaks initially indicated they would remain frozen for another year. The government has now refused to rule out ceasing the current freeze.
Increasing the rate could leave a single age pensioner up to $3,300 a year worse off, according to advocates. That’s based on deeming rates returning to track in-line with the Reserve Bank of Australia (RBA) cash rate.
What are deeming rates with Centrelink?
Deeming rates are the rates of return the government assumes people earn on their financial assets. This regardless of what they actually earn.
If earn more than the deemed rate, it isn’t counted by the government. This happens when working out your payments including for the age pension, JobSeeker and parenting payments. It applies to financial assets like shares, superannuation and bank accounts.
The lower deeming rate is currently frozen at 0.25 per cent. The upper rate at 2.25 per cent until June 30, 2025.
The expiry of the deeming rates freeze does not mean the deeming rates will automatically increase. Deeming rates are usually adjusted by the government on July 1 each year.
The former Coalition government froze rates in 2022 for two years as a cost-of-living measure after the RBA started increasing interest rates. The Labor government then extended this freeze in last year’s federal budget.
‘Already struggling’: Pensioners won’t cope with $3,000 drop
Advocates for older Australians have called for deeming rates to remain set while pensioners and other Australians battle the cost-of-living crisis.
COTA Australia chief executive Patrician Sparrow said cost-of-living pressures were hitting many Australians, particularly those on fixed incomes, hard.
“To expect people to deal with a drop of more than $3,000 on top of what they’re currently trying to cope with is unreasonable at best,” she said.
“The latest indexation adjustment to the Age Pension in March wouldn’t even allow a pensioner to buy a coffee per week.
“Pensioners are already struggling; our politicians need to recognise that and confirm they won’t pile more pain on top of what people are already feeling.”
National Seniors Australia chief executive officer Chris Grice said any changes to deeming rates needed to be “measured, incremental, and transparent” in their calculation so already under-pressure Aussies weren’t hit even harder.
“This can’t be a matter of wait and see. For our political parties to attempt to sneak through changes to deeming rates after the election would be outrageous,” he said.
What have the major parties said about Centrelink?
Both parties have been unclear about what will happen once the deadline passes.
Prime Minister Anthony Albanese left the door open to ending the three-year freeze on the rates on Saturday.
He did not rule out an increase but indicated Labor had historically set deeming rates “lower than the cash rate”.
The Coalition has also declined to explain what will happen after the deadline passes.
The Coalition campaign headquarters told The Australian Financial Review it was “not proposing any change to the scheduled assessment of deeming rates”.
