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This topic provides brief information on the following:
The deeming rules are a central part of the social security income test. They are used to assess income from financial investments for social security and Veterans' Affairs pension/allowance purposes. Deeming assumes that financial investments are earning a certain rate of income, regardless of the amount of income they are actually earning. If income support recipients earn more than these rates, the extra income is not assessed.
The deeming rates reflect the returns available in the market to pensioners for a range of financial investments. By treating all financial investments in the same way the deeming rules encourage people to choose investments on their merit rather than on the effect the investment income may have on the person's pension entitlement.
To calculate the income assessed, deeming rates are applied to the total market value of an income support recipient's financial investments. The actual returns from the income support recipient's investments, whether in the form of capital growth, dividends or interest, are not used for income assessment, even if the investment returns are above the deeming rates.
Bank deeming was introduced in 1991 to encourage income support recipients to maximise their total disposable income by investing to gain returns of at least the deeming rate. While successful, bank deeming did not address the problem of capital growth investments.
To counter the preferential treatment of capital growth investments the rate of return (ROR) rules were introduced in 1992. These rules assessed unrealised capital growth as income on an on-going basis, based on the performance of the investment over the preceding 12 months. The ROR rules, however:
On 1 July 1996 the deeming legislation was extended to include the following financial investments:
Before deeming, 2 areas of concern were:
Deeming is a simple and fair way to assess income from financial assets, as:
The following table shows the historical deeming rates and applicable thresholds operating since 1 July 1996.
|
Date |
Threshold Amounts | ||||
|
Single pensioner or allowee |
Pensioner couple (one or both members of the couple are receiving a pension) |
Member of non-pensioner couple (allowee whose partner is also an allowee or is not receiving income support) | |||
|
01/07/1996 |
5% |
7% |
$30,000 |
$50,000 |
$25,000 |
|
23/01/1997 |
4% |
6% |
$30,000 |
$50,000 |
$25,000 |
|
01/07/1997 |
4% |
6% |
$30,400 |
$50,600 |
$25,300 |
|
20/09/1997 |
3% |
5% |
$30,400 |
$50,600 |
$25,300 |
|
01/07/1998 |
3% |
5% |
$30,400 |
$50,600 |
$25,300 |
|
20/03/1999 |
3% |
4.5% |
$30,400 |
$50,600 |
$25,300 |
|
01/07/1999 |
3% |
4.5% |
$30,800 |
$51,200 |
$25,600 |
|
20/03/2000 |
3.5% |
5.5% |
$30,800 |
$51,200 |
$25,600 |
|
01/07/2000 |
3.5% |
5.5% |
$31,600 |
$52,600 |
$26,300 |
|
01/07/2001 |
3% |
4.5% |
$33,400 |
$55,800 |
$27,900 |
|
20/03/2002 |
2.5% |
4% |
$33,400 |
$55,800 |
$27,900 |
|
01/07/2002 |
2.5% |
4% |
$34,400 |
$57,400 |
$28,700 |
|
01/07/2003 |
2.5% |
4% |
$35,600 |
$59,400 |
$29,700 |
|
20/03/2004 |
3% |
5% |
$35,600 |
$59,400 |
$29,700 |
|
01/07/2004 |
3% |
5% |
$36,400 |
$60,600 |
$30,300 |
|
01/07/2005 |
3% |
5% |
$37,200 |
$62,000 |
$31,000 |
|
01/07/2006 |
3% |
5% |
$38,400 |
$63,800 |
$31,900 |
|
20/03/2007 |
3.5% |
5.5% |
$38,400 |
$63,800 |
$31,900 |
|
01/07/2007 |
3.5% |
5.5% |
$39,400 |
$65,400 |
$32,700 |
|
20/03/2008 |
4% |
6% |
$39,400 |
$65,400 |
$32,700 |
|
01/07/2008 |
4% |
6% |
$41,000 |
$68,200 |
$34,100 |
|
17/11/2008 |
3% |
5% |
$41,000 |
$68,200 |
$34,100 |
|
26/01/2009 |
3% |
4% |
$41,000 |
$68,200 |
$34,100 |
|
20/03/2009 |
2% |
3% |
$41,000 |
$68,200 |
$34,100 |
|
01/07/2009 |
2% |
3% |
$42,000 |
$70,000 |
$35,000 |
|
20/03/2010 |
3% |
4.5% |
$42,000 |
$70,000 |
$35,000 |
|
01/07/2010 |
3% |
4.5% |
$43,200 |
$72,000 |
$36,000 |
|
01/07/2011 |
3% |
4.5% |
$44,600 |
$74,400 |
$37,200 |
|
01/07/2012 |
3% |
4.5% |
$45,400 |
$75,600 |
$37,800 |
|
20/03/2013 |
2.5% |
4% |
$45,400 |
$75,600 |
$37,800 |
For examples on how to calculate income using the deeming rules, see 4.4.1.60 Deeming Rate Calculation - Age Couple.
Act reference: SSAct section 1082 Below threshold rate, above threshold rate
Policy reference: 4.4.1.50 Deeming Rate Calculation - Single DSP Recipient, 4.4.1.60 Deeming Rate Calculation - Age Couple, 4.4.1.70 Deeming Rate Calculation - Single WidB Recipent, 4.4.1.80 Deeming Rate Calculation - NSA Recipient, Partner Receiving PP, 4.4.1.90 Deeming Rate Calculation - Pensioner & Non-Pensioner Couple
Under SSAct section 1084, the Minister for FaHCSIA and the Minister for DEEWR have the power to exempt specified financial investments or a specified class of financial investment from the deeming rules. Each minister provides an exemption for the income support payments within their portfolio responsibilities.
Exemptions from deeming are granted only in special circumstances. Examples include where a financial investment has failed fundamentally or, for some superannuation investments, where the funds are fully preserved and/or inaccessible.
Exemptions are not granted because of poor investment performance, such as shares producing negative returns, or companies or funds in short-term difficulties.
Deeming exemptions do not alter the assessable asset value of an investment.
Act reference: SSAct section 1084 Certain money and financial investments not taken into account
Policy reference: SS Guide 4.4.1.40 Exemption of Financial Investments from Deeming
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Last reviewed: 20 March 2013
