After a five-year freeze, deeming rates are set to increase on 20 September 2025. For some older Australians, this may not be a welcome change.
An increase in deeming rates increases assessable income for Centrelink and Veterans’ Affairs, which may reduce entitlements and/or increase aged care fees. But for many people, the impact may not be significant.
Why the change?
Deeming is used to determine a level of assessable income from your financial investments – bank accounts, shares, managed funds, some superannuation and income streams, loans you have made and excess gifting.
Deeming rates are usually reviewed twice a year, in March and September, to reflect changes in market rates, but have been frozen for the last five years, originally to support pensioners through the uncertainty of COVID.
From 20 September 2025, the deeming rates will increase to:
- 0.75% on financial assets up to the lower threshold (currently 0.25%)
- 2.75% on financial assets above the upper threshold (currently 2.25%)
Today, the cash rate sits around 3.6%. Against that backdrop, a 0.5% rise in deeming is relatively modest.
Who will it impact?
For most retirees, the assets test has a greater effect on Centrelink entitlements than the income test, so the deeming rate increase may have little impact. However, you will feel the change if:
- Your Centrelink/DVA payments are determined by the income test.
- You are an aged care resident, as higher deemed income might result in higher ongoing care fees.
- You are a part-pensioner, or a self-funded retiree with a Commonwealth Seniors Health Card, and you pay an income-tested fee for your current Home Care Package or will start to receive Support at Home packages from 1 November 2025.
In these circumstances, higher assessable income may have a detrimental effect on your entitlements or fees. Individual calculations are needed to determine what impact this might have on you.
A potential silver lining
Interestingly, there is a benefit for aged care residents who leave residential care.
When you leave, aged care providers must refund the balance of your Refundable Accommodation Deposit (RAD) and also pay interest (from date of departure until date of payment). This interest is based on the lower deeming rate applicable the day after care ends. The higher deeming rate will provide a financial boost to the estates of those exiting care after 20 September 2025.
What should you do?
If you’re currently receiving Centrelink or DVA benefits, or contributing to aged care costs, it’s worth reviewing your situation ahead of the September change. In many cases, the effect will be minimal, but for some, even small shifts in assessable income can influence entitlements or fees and put pressure on your cashflow.
If you need help to ensure you’re making the most of your retirement income and benefits call our office today on 02 6813 0977 to discuss your situation.
