From tomorrow, the thresholds used to help calculate the 'deemed' annual income earned from your financial assets will be increased.
This increase is due to inflation.
The changes mean many senior Australians will receive a higher pension amount, and some will qualify for the pension for the first time.
Here are the details
Deeming is the method used to estimate the annual income from your financial assets (excluding investment property) each year.
There are two deeming rates set by the Federal Government.
To be clear, those rates are staying as they are until 30 June 2026.
What's changing is the thresholds for the two deeming rates.
The lower deeming rate is 0.25%.
From Tuesday, 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%, which is applied to the balance of your assets' value to determine your total deemed income.
That's added to your other declared income, then Services Australia applies the pension income test to work out how much to pay you.
Deeming simplifies the process for everyone, and historically, the deeming rates have been conservative.
This has benefited pensioners because their investment income has been assessed more favourably under the pension income test.
Here's how.
Deeming's conservative history
Financial assets captured under deeming rules include ASX shares, international shares, bonds, and cash savings.
Some superannuation income streams are also included, but this is only relevant if you're older than the pension age.
As stated, the deeming rates are 0.25% and 2.25%.
Over the past year, the banks have paid 5%-plus on cash savings.
ASX 200 shares have delivered the usual average of 4% in dividends.
So, the deeming rates are conservative compared to actual returns.
How do these changes affect your pension?
Don't worry, the changes to the deeming rate thresholds affect your pension in a good way!
The raised thresholds mean a greater portion of your assets will be assessed at the lower deeming rate of 0.25%.
This is beneficial because you'll receive less deemed income under the pension income test.
This means you may receive a higher pension amount or be entitled to receive the support payment for the first time.
How much is the age pension?
The single age pension, including supplements, is $1,149 per fortnight.
The couple's pension, including supplements, is $866.10 per partner per fortnight.
Australians become eligible for the pension when they reach 'retirement age', which is 67 years for people born on or after 1 January 1957.
