When you apply for the Age Pension, Centrelink uses “deeming rules” to work out how much income you earn from your financial assets.
This system might seem confusing at first, but it plays a big role in deciding whether you qualify for the Age Pension — and how much you’ll be paid each fortnight.
This guide explains what deeming is, why it’s used, what counts as a deemed asset, what’s exempt, and how you can manage your investments to make the most of the deeming rules.
Deeming is a way Centrelink estimates the income you earn from your financial investments. Instead of looking at the exact interest or return you receive, they assume your money earns a standard rate of return.
These standard rates are called “deeming rates” and are set by the Australian Government. The idea is to make the Age Pension fairer, simpler, and more predictable — and to stop people moving money around just to qualify for a higher pension.
Without deeming, Centrelink would need to check every bank account, share dividend, managed fund, and other investment each time you report your income. This would be complex and inconsistent.
By using standard rates, the system:
Deeming applies to most financial investments. These include:
For couples, financial investments are combined and the deeming rates applied to the total balance.
Not all income is deemed. Some assets and income streams are assessed differently or are exempt from deeming altogether. Examples include:
It’s important to understand these exceptions — they can make a big difference to how your income is assessed.
As of 1 July 2024, the deeming rates remain frozen until 30 June 2025:
| Situation | Lower Rate | Upper Rate | Threshold |
|---|---|---|---|
| Singles | 0.25% up to $64,200 | 2.25% above $64,200 | $64,200 |
| Couples | 0.25% on first $106,200 | 2.25% above $106,200 | $106,200 |
These thresholds are updated each July and rates are reviewed periodically by the government. For the latest, check Services Australia.
Let’s look at a simple example for a single pensioner with $120,000 in financial assets:
Total deemed income: $160 + $1,255 = $1,450/year. Centrelink adds this to any other income you have to work out your pension payment under the Income Test.
Centrelink applies both the Income Test and the Assets Test when calculating your Age Pension. The test that results in the lower payment determines how much you get.
Because deemed income may be higher than your actual income (for example, if your bank accounts earn only 1%), you might receive less pension than you expect. But the same rules apply if you earn more — you keep the extra earnings, and they don’t affect your pension unless they exceed the deeming assumptions.
For Age Pension and Residential Aged Care means testing, your family home is generally exempt from the Assets Test as long as you (or your partner, or a “protected person”) live in it.
This means you could live in a house worth $400,000 or $4 million — and it wouldn’t directly affect your pension. But if you sell that home and the proceeds become part of your bank balance, they become assessable assets — and deeming rules apply.
When you sell your family home, the money you get is counted as a financial asset — unless you plan to use it to buy another principal home within a certain timeframe.
Here’s how it works:
This can have a big effect on your Age Pension rate because both the Assets Test and the Income Test can reduce how much you receive.
If you intend to buy, build, rebuild, repair or renovate another principal home, you may get an Assets Test exemption for up to 12 months (sometimes extended to 24 months in special circumstances, like building delays outside your control).
Example:
Mary sells her house for $800,000 and plans to buy an apartment for $600,000. For up to 12 months, that $600,000 is exempt from the Assets Test — but it is deemed as income for the Income Test.
Any remaining amount not used to buy the new home (e.g. the extra $200,000) is counted as an asset immediately and deemed.
Your Age Pension is worked out under both an Income Test and an Assets Test — whichever results in the lowest payment is what you get.
So, selling your home can:
For many people, this can mean a sudden drop or cancellation of their pension, even if they plan to buy another home soon. That’s why it’s important to plan ahead and understand how long the exemptions and deeming will last.
Selling your family home can also affect how much you pay for Residential Aged Care. Here’s how:
For example, some people sell the family home to pay a Refundable Accommodation Deposit (RAD). While that can be a good strategy, it also means any leftover money is assessable and deemed.
Instead of selling, some people keep their family home and rent it out to generate extra income to help pay aged care fees or living costs.
If you rent it out:
This can be more complex than selling — and you’ll need to weigh up tax implications, maintenance costs, and whether your family wants to keep the property long-term.
Here are a few practical tips:
You’re legally required to tell Services Australia if you sell your home and get proceeds that affect your means test. Failing to update your details can lead to overpayments, debts, or even penalties.
You usually have 14 days to report changes in your assets or income. This includes deposits into new accounts, paying for new accommodation, or gifting money to family.
Remember:
For couples, the total value of combined financial assets is used. The thresholds are higher for couples because they share living expenses.
If only one partner is eligible for the Age Pension, the same rules still apply to their share of combined financial assets.
Many retirees draw a regular income from superannuation through an account-based pension. If you started your pension on or after 1 January 2015, it’s deemed like any other financial asset.
If your pension began before 1 January 2015 and you have been receiving a means-tested pension continuously since then, special rules may apply — your income may be assessed under old rules, not deeming.
This is one reason why financial advice can be valuable — the right structure may help maximise your Age Pension entitlement.
While you must declare all financial assets honestly, you can legally manage how your investments are structured. Here are a few tips:
It’s essential to get independent financial advice before making significant changes.
It’s your responsibility to report changes in your financial situation. Centrelink uses data-matching with banks and the ATO, so undeclared assets are likely to be discovered eventually.
You should update Centrelink if you:
Your pension may be adjusted if your deemed income changes significantly.
Many retirees get caught out by the deeming rules. Here are a few myths:
The deeming rules can be complicated, especially when investments are involved. Always:
Deeming is a vital part of how your Age Pension is worked out. Understanding the rules can help you make the most of your money, structure your assets wisely, and avoid surprises. It’s not about hiding assets — it’s about knowing how the system works so you can plan for a more secure and stress-free retirement.