Deeming rates are increasing again, with the Minister for Social Services announcing another 0.5% rise effective from 20 March 2026. The lower deeming rate will climb to 1.25%, whilst the upper rate reaches 3.25%. For pensioners wondering what the new deeming rates for pensioners in 2026 are, these changes directly impact how Centrelink calculates deemed income from financial assets. Consequently, age pension payments may be affected for thousands of retirees across Australia. Understanding what deeming rates are and how they apply to different asset thresholds is essential for anyone receiving or planning to receive the age pension. This guide explains the 2026 changes to deeming rates, how they’re calculated, and what pensioners can do to navigate these adjustments effectively.
What are the Deeming Rates for Pensioners?
Centrelink uses deeming rates to calculate income from financial assets for age pension eligibility. This method assumes assets earn a set rate of return, regardless of actual performance.
How deeming rules work
Deeming applies two separate rates to financial assets based on threshold amounts. The lower rate applies to assets up to $98,161.17 for singles and $162,378.76 for couples (combined). Assets exceeding these thresholds are subject to the higher rate. Services Australia adds together all financial asset values, applies the appropriate deeming percentages, and then converts the annual deemed income to a fortnightly amount by dividing by 26. This calculated figure is included in the income test assessment.
Why does the government use deeming?
The government introduced bank deeming in 1991 to encourage income support recipients to maximise returns by investing to gain at least the deeming rate. Deeming treats all financial investments identically, ensuring people with equivalent asset levels receive similar assessments regardless of investment choices. The system keeps pension payments steady rather than fluctuating with asset performance. When investment returns exceed deeming rates, the additional income doesn’t count towards the income test. This creates an incentive structure that allows retirees to select investments based on lifestyle requirements rather than pension impact.
Financial assets covered by deeming
Financial assets subject to deeming include:
- Bank accounts, term deposits, and cash management accounts
- Cash exceeding $3,057.98
- Listed and unlisted shares
- Managed investments, bonds, and debentures
- Superannuation funds for those over pension age
- Account-based pensions and annuities
- Loans made to individuals or organisations
- Gold and other bullion
Home loan offset accounts remain financial assets for deeming purposes, even when interest returns apply directly to loan repayments.
The ‘Phantom Income’ Trap: Actual Returns vs. Assumed Returns
Deeming creates situations in which Centrelink assesses pensioners as earning more than their actual income. When bank interest rates fall below deeming rates, the system calculates a higher income than reality. Conversely, when shares or managed funds deliver returns above deeming rates, retirees benefit as excess earnings escape income test calculations.
How Assets Held Under Your Mattress Are Treated
Cash holdings above $3,057.98 are subject to deeming rules. Pensioners cannot avoid assessment by keeping money outside financial institutions. The gross market value determines deemed income, regardless of where cash physically resides.
What Are the New Deeming Rates for Pensioners in 2026
From 20 March 2026, the Australian Government Actuary recommended rate adjustments that the Minister for Social Services subsequently determined. These changes mark the second increase following the end of a five-year freeze period.
Lower deeming rate threshold
The lower deeming rate stands at 1.25% as of 20 March 2026. This rate applies to the first $98,161.17 of financial assets for single pensioners. For couples where at least one partner receives the age pension, the threshold for combined financial assets is $162,378.76. Separated couples due to illness have a threshold of $81,189.38 each.
Upper deeming rate threshold
Financial assets exceeding the lower threshold are subject to the higher deeming rate of 3.25%. This rate applies to all amounts above the applicable threshold based on relationship status.
Recent Centrelink deeming rates increase history
Deeming rates remained frozen at 0.25% (lower) and 2.25% (upper) for over five years, from July 2020 through June 2025. The freeze saved social security recipients approximately $2.75 billion. Rates increased by 0.5% on 20 September 2025, taking them to 0.75% and 2.75% respectively. A further 0.5% increase occurred on 20 March 2026. Pre-pandemic rates were 1% and 3%.
The Operational Impact of Moving from a 0.25% Base
The Department of Social Services estimated nearly 70,000 pensioners would see payment decreases from the September 2025 increase. The median fortnightly reduction was $10.24. However, rate increases coincide with pension indexation, which may offset some impacts.
Relationship Status Variations: Single, Coupled, and Separated Illness Brackets
Single pensioners have a lower threshold of $98,161.17. Pensioner couples (combined assets) receive a threshold of $162,378.76. Members of non-pensioner couples where one partner receives an allowance have individual thresholds of $81,189.38.
How Age Pension Deeming Rates Affect Your Payments
Services Australia assesses both income and assets tests and applies whichever produces the lower pension payment.
Calculating your deemed income
Apply 1.25% to assets under the threshold, then 3.25% to amounts exceeding it. For instance, a single pensioner with $183,478.83 in financial assets earns deemed income of $1,227.01 on the first $98,161.17, plus $2,772.82 on the remaining $85,317.65, totalling $3,999.84 annually or $153.85 per fortnight.
Income test vs assets test
The income test reduces pensions by 50 cents per dollar above $333.32 fortnightly for singles, and by 25 cents per dollar above $581.02 combined for couples. The assets test evaluates total asset values separately. Whichever test yields the lower payment determines the final rate.
Age Pension crossover points explained.
A couple with combined financial investments below $667,419.53 receives a full pension. Between $667,419.53 and $751,498.70, the income test reduces payments. For amounts above $751,498.70, the assets test applies. Pensions cease entirely at $1,642,135.51 in assets.
The ‘Taper Rate’ Friction: How the 50-Cent Pension Cut Compounds
Each $152,899.02 in financial assets generates an additional $29.39 deemed income fortnightly under 2026 rates, reducing pensions by $14.69 fortnightly for singles. The 50% taper rate means every $1.53 of deemed income costs 76 cents in pension payments.
Benefits of the deeming system
Deeming stabilises payments regardless of fluctuations in asset performance. Returns exceeding deeming rates escape income assessment entirely. This structure allows investment selection based on retirement needs rather than pension calculations.
Special Deeming Situations and Exemptions
Specific situations qualify for exemptions from standard deeming rules, though Services Australia maintains strict criteria.
Principal home sale proceeds
Sale proceeds from homes sold after 1 January 2023 are subject to a lower deeming rate during the assets test exemption periods. The exemption extends up to 36 months for proceeds intended for purchasing, building, or renovating a new principal home. Only the 1.25% lower rate applies throughout this period.
Failed investment exemptions
The Minister for Social Services grants exemptions solely for fundamentally failed investments. Eligible investments must provide no returns whilst investors have no access to their original capital.
Poor Performance vs. Structural Collapse: What Services Australia Demands
Services Australia refuses exemptions for poorly performing investments, including shares with negative returns or companies experiencing short-term difficulties. Exemptions require complete investment failure, not temporary underperformance. Legal obstacles from third parties or unforeseeable conditions beyond the scope of product disclosure statements may support exemption applications.
Superannuation fund exemptions
Fully preserved or inaccessible superannuation funds may be eligible for deeming exemptions. Account-based pensions purchased after 1 January 2015 remain subject to deeming.
The Younger Partner Superannuation Loophole
Accumulation superannuation accounts held by partners under age 67 are entirely exempt from Centrelink means testing. This exemption vanishes when the younger partner reaches 67, making their super balance assessable.
How to apply for a deeming exemption
Contact Financial Information Service Officers to complete applications. The Minister determines start dates, typically from the date of application submission or the insolvency practitioner’s commencement.
Conclusion – Deeming Rates
Deeming rates certainly impact thousands of Australian pensioners as they climb to 1.25% and 3.25% in 2026. While it may be true that payments may decrease for some retirees, understanding how deeming calculations work helps pensioners plan effectively. The system remains straightforward once retirees understand which assets are subject to deeming and how the thresholds apply to their situation. Pensioners should regularly review their financial assets and consider consulting Financial Information Service Officers to optimise their age pension entitlements under the new rates.
What are the current deeming rates for pensioners in 2026?
As of 20 March 2026, the lower deeming rate is 1.25%, and the upper deeming rate is 3.25%. These rates apply to financial assets when calculating age pension entitlements under Centrelink’s income test.
How do deeming rates affect my age pension payments?
Deeming rates determine how much income Centrelink assumes your financial assets generate. The lower rate of 1.25% applies to assets up to $98,161.17 for singles or $162,378.76 for couples. Assets above these thresholds are deemed to earn 3.25%. This deemed income is then used in the income test, which may reduce your pension by 50 cents for every dollar over the income threshold.
Which assets are subject to deeming rules?
Deeming applies to financial assets, including bank accounts, term deposits, shares, managed investments, bonds, superannuation funds for those over pension age, account-based pensions, and cash holdings exceeding $3,057.98. Your principal home and personal possessions are not subject to deeming.
Can I get an exemption from deeming rates?
Exemptions are available in limited circumstances, such as proceeds from selling your principal home (for up to 36 months if you’re purchasing or building a new home), fundamentally failed investments where you have no access to capital, or fully preserved superannuation that you cannot access. Applications must be made through Services Australia.
What happens if my investments earn less than the deeming rate?
If your actual investment returns fall below the deeming rate, Centrelink still calculates your income based on the deemed amount, which may be higher than your actual earnings. However, if your investments earn more than the deeming rate, the excess income is not counted in the income test assessment.