Deeming increase announced: client implications

Article published on: 20-08-2025

From 20 September, deeming rates will increase for the first time since the Covid-era freeze. This change may affect clients whose payments and benefits are determined by the income test.

With inflation easing, the announcement confirms that rates will ‘gradually return to pre-pandemic settings’ with staged increases to take effect in the future. Increases will be realigned from 1 July to the same time that payments are indexed (expected to be 20 March and 20 September).

What are the new rates?

The current and new deeming rates from 20 September are included in the table below.

Deeming rates		Income thresholds
Current	From 20 September	Singles	Couples (included illness separated)
0.25%	0.75%	First $64,200	First $106,200
2.25%	2.75%	Above $64,200	Above $106,200

Who may be impacted?

An increase in deeming rates could reduce benefits and entitlements for clients who are:

income-tested pension and allowance recipients
Commonwealth Seniors Health Card (CSHC) holders who have an account-based income stream that is deemed, and
Low Income Health Care Card holders who may lose entitlement.

Higher deeming rates could also increase aged care fees that are based on means for some aged care clients.

Example – impact of deeming rate increase for age pensioner from 20 September

Jackson, aged 70, is a single homeowner with $250,000 in an account based pension and $50,000 in a bank account on 20 September 2025. His assessable income and assets are currently under both the income and assets test thresholds.

Prior to the deeming rate increase, he would have been eligible for the full single rate of Age Pension of $30,646.20 per year ($1,178.70 per fortnight).

As the deeming rates are increasing by 0.50%, under the income test, his:

assessable income will increase from $5,466 to $6,966 per year, and
Age Pension will reduce to $29,997.20 pa (ie $1,153.74 per fortnight).

The represents a reduction of $649 pa or $24.96 per fortnight.

CSHC holders - impact from 20 September

Single CSHC card holders will be able to hold an account based pension of approximately $3.7 million before their income would exceed the threshold of $101,105 (if they had no adjusted taxable income).

Couples could hold account based pensions of approximately $5.9 million before their income would exceed the threshold of $161,768 (if they had no adjusted taxable income).

The transfer balance cap limits the amount that can be held in retirement-phase pensions. The approximate amounts above would only be available to individuals who have made personal injury contributions.

We’ll keep you posted

We will provide updates if there is any further change in deeming rates. We will also update our Facts and Figures e-book effective 20 September 2025, so save it as a favourite in your browser, or add it to your mobile device home screen for easy access.

© 2025 IOOF Service Co Pty Ltd. All rights reserved.
For financial adviser use only – it is not to be distributed to clients. The information in this communication is factual in nature. It reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue, and may be subject to change. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Examples are illustrative only and are subject to the assumptions and qualifications disclosed. Whilst care has been taken in preparing the content, no liability is accepted for any errors or omissions in this communication, and/or losses or liabilities arising from any reliance on this communication.