Deeming rates and the veil of secrecy

Article published 28 February 2019

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IT is fairly straightforward to calculate your pension payment on the basis of what other income you have and how much you own in assets, but one thing remains shrouded in secrecy: the deeming rates used to calculate the imaginary money you earn on financial assets.

Financial assets are things like term deposits, shares and money in saving accounts. Centrelink uses percentages to estimate the income you derive from those financial assets. These percentages are determined by the Minister for Social Services if and when she or he feels the need. The last time the Minister changed the deeming rates was on 20 March 2015. There has been no review since.

This means that for almost four years for asset values up to $51,200 (for singles), and up to $85,000 (for couples), a deeming rate of 1.75 per cent has applied. For financial investments above those amounts, a higher deeming rate of 3.25 per cent applies.

There is a belief among pensioners that the deeming rates ought to reflect the going term deposit rate. Historically, the deeming rates (both the lower and the higher rate) have tracked under the going term deposit rate. Currently, the average term deposit rate is 2.2 per cent, according to the Reserve Bank. Obviously, the lower deeming rate still tracks under that average term deposit rate, but the higher rate doesn’t.

When the deeming rates were last changed in March 2015, the average term deposit rate was 2.7 per cent, which then dropped steadily to its current level of 2.2 per cent.

The Reserve Bank has indicated that it may lower the cash rate in the not too distant future. The effect this would have on term deposit rates is obvious.

So, why hasn’t the Minister felt the need to review the deeming rates even though term deposit rates have dropped half a per cent?

First, the Minister has absolute discretion to review or not to review the deeming rates. When the Minister does decide to review, the Minister has absolute discretion as to what methodology she or he uses to set new rates.

CPSA believes that the secrecy with which the Minister operates with regard to the deeming rates is inappropriate. There needs to be transparency about what triggers a review of the deeming rates and what factors other than term deposit rates are taken into account.

Of Australia’s more than 3.5 million pensioners, some 785,000 (more than a quarter) are being paid under the income test and most, if not all of those pensioners, are affected by the deeming rates.

They have a right to know exactly how their social security payment is calculated, and CPSA is using Freedom of Information to find out. THE VOICE will keep readers posted.

For more information please email our media contact at

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