HAVE YOU HEARD? DEEMING RATES HAVE BEEN LOWERED!
13th September 2019
WHAT IS “DEEMING RATE”?
Deeming is a set of rules used by Centrelink to work out income from your financial assets. It assumes an amount of income received from a financial asset regardless of the actual return. Deeming applies to Centrelink benefits such as the aged pension.
WHY DOES THIS MATTER?
The amount of deemed income you earn is added to your other income and assessed under the income test by Centrelink. This could impact the amount you receive in your fortnightly pension.
The lower deeming rate will decrease from 1.75% to 1% for financial assets up to $51,800 (for singles) and $86,200 (for couples). The upper deeming rate will decrease from 3.25% to 3% on balances over these amounts. Changes were made in July and backdated to 01 July 2019.
Deeming rates have not changed for four years and lobby groups have long been pushing for reductions to the rates to make the system fairer. The change is expected to cost the government $600 million over the next four years.
WHAT DOES THE RBA HAVE TO DO WITH THIS?
The Reserve Bank of Australia has recently cut interest rates from 1.5% to a record low of 1%. The RBA hopes that by lowering the interest rates banks will in turn pass these onto consumers and give them more money to spend, thereby supporting businesses and stimulating the economy.
The flip side of saving borrowers money is savers earn far less on money in bank accounts or term deposits. This has put a lot of pressure on deeming rates.
Take for example the situation where you have $50,000 sitting in the bank. Under the old rules, the government would be deeming you to be earning 1.75% on that money even though interest rates at the bank are much lower. Under the new rules, your $50,000 would be deemed to be earning 1%, which is more realistic.
HOW THIS MY IMPACT YOU…
If you are currently receiving Centrelink Age Pension and are being assessed under the income test then you may be eligible for more pension. Centrelink will automatically apply these new rates. Note that this change unfortunately doesn’t benefit people being paid under assets test.
If you have any questions or would like to discuss your personal situation with us please feel free to touch base.