If you receive a payment from Services Australia, you may be affected by deeming. Understanding how deeming works can be helpful in understanding your payment and deciding how to invest your money.
What is deeming?
Deeming is the set of rules Services Australia uses to work out income from your financial assets. Financial assets include bank accounts, shares, managed investments, loans, some gifts, some income streams and, if you’re over the Age Pension age, this can include your superannuation.
Deeming assumes that you receive a set rate of income from these investments, whether you actually get that income or not. It means you don’t have to keep telling Services Australia when your income from these investments change. Plus, any interest you receive that is higher than the deeming rate won’t affect your payment.
It also means Services Australia doesn’t use the chosen level of pension you receive from your account-based pension to work out your payment rate. Instead, the entire balance of your account-based pension is deemed.
Although all your financial assets are deemed, it may not affect your payments. Deeming is part of the income test. If you’re getting the full rate of payment, or your pension is affected by the assets test, deemed income isn’t impacting your fortnightly rate.
Deeming also doesn’t affect Family Tax Benefit (FTB) or Child Care Subsidy (CCS) because any rate of FTB is calculated using your adjusted taxable income.
What are the benefits of deeming?
Deeming helps keep your payments steady, instead of going up and down based on the performance of your financial assets.
Deeming also provides an incentive to invest, as any interest rate achieved above the deeming rates doesn’t count as income.
Importantly, how you invest will not affect your payment. This allows you the flexibility to choose the best investments for your needs.
1 July changes
On 1 July, the deeming thresholds changed.
If you’re single, the first $60,400 of your financial assets has the deemed rate of 0.25 per cent. Anything over $60,400 is deemed to earn 2.25 per cent.
If you’re a member of a couple and at least one of you receives a pension, the first $100,200 of your combined financial assets is deemed at the rate of 0.25 per cent. Anything over $100,200 is deemed to earn 2.25 per cent.
Funds from the sale of the family home
If you receive an income support payment from Services Australia, special rules apply if you sell your home.
Since 1 January 2023, the money you get from the sale of your home may be treated differently to your other financial assets. The portion of the proceeds from your sale that you plan to use to purchase or build your new home will be deemed at the lower interest rate of 0.25 per cent for up to two years from the date of sale. This can be extended to a total of three years under special circumstances.
To find out more about deeming, go to servicesaustralia.gov.au/deeming.
Hank Jongen is general manager, Services Australia.
Do you understand deeming? Did you know the rates had changed? Is there something you don’t understand about it? We can help if you post your query in the comments section below.
Also read: Tax time checklist from Services Australia
