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This topic provides brief information on the following:
The deeming rules are a simple and fair way of assessing income from 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 or allowance payment. Deeming also encourages people to consider earning better returns on their investments. Prior to the introduction of deeming many income support recipients elected to receive little or no income from their savings.
These deeming rules were introduced in 1996 after an independent review of the income and assets tests. Consultations with pensioners and pensioner organisations had indicated major concerns about the complexity of the previous income test rules for financial investments, and about the frequent changes the previous rules caused to pension payments.
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. The deeming rates are set so that they realistically reflect the returns available in the market from a range of financial investments.
Deeming refers to how income is assessed from financial investments for income test purposes. Under the deeming rules, the first step is to calculate the total value of an income support recipient's financial assets. The 'deemed' amount of income is arrived at after applying the following rates:
The following table shows the 3 deeming threshold amounts from 1 July 2010.
|
If a recipient is a... |
Then the deeming threshold is... |
|
member of a non-pensioner couple, |
$36,000 |
|
single pension or allowee recipient, |
$43,200 |
|
pensioner couple (section 9(1)-'pensioner couple'), |
$72,000 |
Where the deeming rules are applied, the actual income from financial investments is not counted. From
Deemed income is added to a recipient's assessable income from all other sources, and the total amount is then assessed under the income test.
Act reference: SSAct section 1076 Deemed income from financial assets-persons other than members of couples, section 1077 Deemed income from financial assets-members of pensioner couples, section 1078 Deemed income from financial assets-members of non-pensioner couples, section 1081 Deeming threshold, section 1083 Actual return on financial assets not treated as ordinary income, section 1084 Certain money and financial investments not taken into account, section 1084A Valuation and revaluation of certain financial investments
The BTR and the ATR are determined by the Minister for FaHCSIA, under section 1082 of the Social Security Act 1991. Their appropriateness is monitored on an on-going basis, taking into account market returns on retail financial investments available to recipients. Another factor taken into account is the need to avoid disruption to pensioners, through frequent or small changes to the deeming rates. Any changes to the deeming rates are usually made in March or September, at the same time as pension indexation increases. This is simpler for pensioners, because it reduces the number of changes to pension payments, therefore reducing the complexity of age pension payments. However, the deeming rates can be changed at other times, should this be considered necessary.
The following table shows the historical deeming rates and applicable thresholds operating since 1 July 1996.
|
Date |
BTR |
ATR |
Threshold Amounts | ||
|
Single pensioner or allowee |
Pensioner couple |
Member of non-pensioner couple | |||
|
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 |
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
_______________________________________________________
Last reviewed: 1 July 2010
