The Federal Government has announced changes to the deeming thresholds, which may affect your eligibility for the age pension.
Let's investigate further.
Higher deeming thresholds from 1 July
From 1 July, the thresholds used to calculate deemed income from your financial assets will be increased to keep pace with inflation.
This matters to older Australians because deeming plays a key role in determining their age pension entitlements under the income test.
Deeming is the method that the government uses to estimate the income you earn from your financial assets each year.
Instead of calculating your actual returns, the government assumes you earn a set rate — known as the deeming rate — and applies that to the total value of your assets to work out your 'deemed' investment income.
The investment income is then added to your other income, and the pension income test is applied to work out your payment amount.
Financial assets captured under deeming rules include ASX shares, international shares, bonds, cash at the bank, and some superannuation income streams (only relevant if you're older than the pension age).
(Some financial assets, like investment properties, are not subject to deeming rules. Instead, you simply report the net rental income.)
There are two deeming thresholds, which are subject to different deeming rates of investment return.
The lower deeming rate is 0.25%.
From 1 July, the lower deeming rate will be applied to the first $64,200 worth of assets, up from $62,600, owned by singles.
For couples, the lower deeming rate will be applied to the first $106,200 worth of combined assets, up from $103,800.
The higher deeming rate is 2.25%.
That is applied to the balance of your assets' value to determine your total deemed income.
How do these changes affect your pension?
The raised thresholds mean a greater portion of your assets will be assessed at the lower deeming rate.
This means you'll receive less deemed income under the pension income test.
That may make you eligible for a higher payment, or qualify you for the pension if you were previously just outside the eligibility limits.
For the moment, all that is changing is the deeming thresholds.
The deeming rates themselves will remain as they are until 30 June 2026.
The deeming rates were cut to 0.25% and 2.25% in 2020 to protect pensioners and others during the COVID-19 emergency. The government initially froze the rate for two years, but it's been extended several times since then.
The changes to the deeming thresholds are part of many indexation changes for a variety of government financial supports.
As we've reported, other changes include higher thresholds for the pension asset and income tests.
This means Australians will be able to own and earn more in retirement while still qualifying for a pension.
How much is the age pension?
The single pension, including supplements, is $1,149 per fortnight.
The couples' pension, including supplements, is $866.10 per partner per fortnight.
Australians become eligible for the pension when they reach 'retirement age'.
For those born on or after 1 January 1957, the retirement age is 67 years.
There is a special Centrelink hotline dedicated to helping older Australians with their pension enquiries and other matters: 132 300.
