How Centrelink Deeming Works for Age Pension

Centrelink doesn't look at your actual investment returns when calculating Age Pension. Instead, they apply "deeming rules" that assume your financial assets earn a set rate, regardless of what they actually earn. Deemed income feeds into the income test (alongside the asset test and taper) to determine how much pension you receive.

From 20 March 2026, the deeming rates are 1.25% on the first $64,200 of financial assets (singles) or $106,200 combined (couples), and 3.25% on amounts above that threshold.

The Deeming Rates (2025-26)

Situation	Lower Threshold	Rate Below Threshold	Rate Above Threshold
Single	$64,200	1.25%	3.25%
Couple (combined)	$106,200	1.25%	3.25%

These rates are set by the government and reviewed periodically. They're meant to reflect average returns on conservative investments (cash, term deposits), though in practice actual returns vary significantly.

How Deeming Works

Centrelink applies a two-tier system:

• Below the threshold: Your assets are deemed to earn 1.25% per year
• Above the threshold: The excess is deemed to earn 3.25% per year

This deemed income is then used in the Age Pension income test. If your deemed income (plus any other assessable income) exceeds the income free threshold, your Age Pension is reduced by 50 cents for every dollar over the threshold.

Example: Single with $400,000 in Financial Assets

Deemed income calculation:

• First $64,200 × 1.25% = $802.50
• Remaining $335,800 × 3.25% = $10,913.50
• Total deemed income: $11,716 per year

This $11,716 is added to any other assessable income (wages, rent, foreign pensions, etc.) and tested against the income test threshold to determine Age Pension entitlement.

What Assets Are Subject to Deeming?

Deeming applies to all "financial assets," which includes:

• Superannuation (account-based pensions)
• Bank accounts (savings, cheque, term deposits)
• Shares and managed funds
• Bonds and debentures
• Listed securities

Deeming does NOT apply to:

• Your family home (exempt from both asset and income tests)
• Income from employment
• Rental income from investment properties (assessed separately)
• Foreign pensions (assessed at actual amount)
• Some annuities and allocated pensions (special rules apply)

When Deeming Helps You

Deeming can work in your favor if your actual returns exceed the deemed rates:

This is why deeming can be advantageous during bull markets or for investors with growth-focused portfolios.

When Deeming Hurts You

Conversely, deeming can disadvantage you if your actual returns are lower than the deemed rates:

This is a particular concern during low-interest-rate environments or for retirees in very conservative investments.

Deeming and Super Withdrawals

Super withdrawals are NOT counted as income for Age Pension purposes. Only the balance generates deemed income. This is an important distinction:

• Super balance: Subject to deeming (generates assessed income)
• Super withdrawals: NOT assessed as income (after age 60, they're tax-free and not counted)

This means if you withdraw $30,000 from your super, that $30,000 is NOT added to your assessable income for Age Pension purposes. However, your super balance is now $30,000 lower, which reduces the deemed income generated by that balance.

Example: Withdrawal Impact

Before withdrawal: $400,000 super ? Deemed income $14,496/year
Withdraw $50,000: Balance now $350,000 ? Deemed income $12,281/year

The $50,000 withdrawal is NOT counted as income. But the lower balance reduces deemed income by $2,215/year, which may INCREASE your Age Pension (less deemed income = more pension).

Strategic Considerations

Timing Withdrawals

Because super withdrawals don't count as income but do reduce your balance (and thus deemed income), strategic timing of withdrawals can optimize Age Pension entitlements. Drawing down super earlier in retirement reduces deemed income sooner, potentially increasing Age Pension.

Asset Allocation

Since deeming applies uniformly regardless of asset type, you might as well allocate to higher-returning assets if you're comfortable with the risk. A growth portfolio earning 7% is deemed at 1.25%/3.25%, just like cash earning 2%. You keep the difference.

Couples

For couples, the combined threshold is $106,200. The balance split between partners does not matter; only the combined total is relevant for deeming. The balance split between partners doesn't matter; only the combined total is relevant for deeming.

Further Reading

• Age Pension Asset Test 2025: Complete Guide
• Homeowner vs Non-Homeowner Asset Test
• The 7.8% Taper Trap Explained