This page explains what financial assets are, what deeming is, and how deeming works.
Note: whilst this page uses the term 'Pension' and 'Pensioner' it also applies to veteran payment.
Deeming is the method DVA uses to calculate income from your financial assets. Deeming assumes that any money you have invested in financial assets is earning a particular amount of income regardless of the actual return.
The income testing of the following benefits is affected by deeming:
- service pension;
- veteran payment;
- income support supplement;
- age pension; and
- Commonwealth Seniors Health Card (CSHC).
For pension purposes, financial assets include:
- all accounts with banks or other financial institutions (including savings and cheque accounts and term deposits);
- cash in excess of $500;
- gold and other bullion;
- managed investments such as public unit trusts (including cash, mortgage, property and equity trusts), insurance bonds and friendly society bonds;
- loans you make to other people including family and friends;
- loans you make to organisations, such as businesses, private trusts or private companies;
- bonds and debentures;
- shares in public companies on any stock exchange either in Australia or overseas;
- shares in unlisted public companies;
- money in a superannuation fund where your fund is in the accumulation phase and not paying you a pension (including a retail, industry, corporate, employer or public sector fund, retirement savings account and self-managed superannuation fund) and you have reached pension age (qualifying age for a war widow/widower). For more information refer to the section “What about superannuation?”;
- asset-tested short term income streams;
- certain account-based and lifetime income streams; and
- gifts in excess of:
- $10,000 in a financial year
- $30,000 in a rolling five-year period.
*Note: - Accounts (such as home loan offset accounts) where the interest return is immediately applied to a specific purpose such as a loan, rather than being directly received by the pensioner, are still financial assets for deeming purposes.
Non-financial assets include:
- an entry contribution to a retirement village;
- household contents and personal effects;
- vehicles, boats, and caravans;
- antiques or collections;
- conventional life insurance policies;
- private company shares;
- partially asset-test exempt income streams;
- asset-tested long term income streams; and
- real estate investments, such as:
- vacant land;
- holiday homes; and
*Note: - Income streams include purchased superannuation pensions, annuities, allocated pensions, account-based pensions, transition to retirement pensions, market linked pensions or term allocated pensions. For more information refer to Income Streams.
Deeming is a simpler, fairer way to assess your income. It is used for assessing income from financial assets only, because the income generated by some of these assets is not always simple to calculate. The deeming rates are set with regard to the returns available in the market from a variety of financial investments and are monitored regularly. Any future change in the rates will be timed to coincide with the March and September pension indexation increases and any other time if the financial market fluctuates significantly.
There are two deeming interest rates, a higher deeming rate and a lower deeming rate. The lower deeming rate applies up to what is called a deeming threshold. Everything above this threshold is deemed to earn the higher deeming rate. The deeming thresholds are different for singles and couples. Any changes to the deeming thresholds are made in July each year in line with movements in the Consumer Price Index (CPI).
The deeming thresholds are as follows:
- for singles - $53,000 which is deemed to earn the lower deeming rate of 0.25%
- for couples - $88,000 (combined) which is deemed to earn the lower deeming rate of 0.25%.
Amounts above these thresholds are deemed to earn the higher deeming rate of 2.25%.
Your deemed income is worked out as follows:
- The values of your financial assets are added together.
- The first $53,000 ($88,000 for couples) is deemed to earn the lower deeming rate of 0.25%.
- Amounts over $53,000 ($88,000 for couples) are deemed to earn the higher deeming rate of 2.25%.
Example 1: The following is an example of a deeming calculation for a couple:
Example deeming calculation
||Total financial assets
||Calculate first $88,000 of total at 0.25% interest
||$88,000 x 0.0025 = $220.00
||Remaining balance of total
||$174,188 - $88,000 = $86,188
||Calculate balance of total at 2.25% interest
||$86,188 x 0.0225 = $1,939.23
||Add answers at step 2 and step 4
||$220.00 + $1,939.23 = $2,159.23
||Divide answer from step 5 by 26 to convert annual income to fortnightly income
||$2,159.23 ÷ 26 = $83.05
||Fortnightly deemed income
We do not deem income from:
- failed investments which have been granted an exemption from deeming
- investments associated with certain church and charitable organisations which have been granted a deeming exemption before 1 January 2010 (however, it is important to note that if you earn interest or receive valuable consideration on the investment, the actual interest earned or the value of any valuable consideration received will be included in your pension assessment)
- National Disability Insurance Scheme (NDIS) amounts*; or
- certain funeral bonds.
*Note: - New investments in church and charitable funds and additional amounts added to an already exempted fund on or after 1 January 2010 are subject to deeming. If you need more information on failed investments, or church and charitable funds, contact DVA.
If you need to know which failed or church and charitable investments have been granted exemptions from deeming, contact DVA.
*Note: - NDIS amounts held by, or on behalf of, an NDIS participant to pay for future disability expenses under their NDIS plan are exempt from the deeming provisions of the income test. Any actual returns that are earned, derived or received on NDIS amounts are exempt income and also exempt from deeming.
Funeral bonds are managed investments taken out by a policy holder to either offset, or assist towards, the payment of funeral costs of that person or the person's partner.
To be exempt from deeming, the funeral bond must be considered asset-test exempt. Up to two funeral bonds per funeral may be assets test exempt if the bonds:
- mature on the death of the person or their partner; and
- do not relate to a funeral for which a prepaid funeral arrangement applies; and
- are not be able to be redeemed before maturity; and
- are used on maturity to pay the expenses of the funeral; and
- the sum of the amount invested does not exceed the $13,500 funeral bond threshold.
For more information refer to Funeral Bonds and Prepaid Funeral Plans.
Financial assets, such as managed investments, that are purchased using borrowed money, are assessed holding the gross investment value for deeming purposes under the income test. This applies even when an undertaking is losing money, or where the repayments on the loan are greater than the return from the investment.
This can result in an asset having a different value under the assets test, as opposed to the income test through deeming. This is because for the purpose of calculating the value of a person’s assets for the assets test, the asset value is reduced by the value of any encumbrance.
Superannuation fund investments include money invested in a superannuation fund (including a retail, industry, corporate, employer or public sector superannuation fund, retirement savings accounts and self managed superannuation fund) where your fund is in the accumulation phase and not paying you a pension or income stream.
Superannuation fund investments resemble managed investments but usually cannot be accessed until the owner reaches preservation age (which is 55 years for people born before 1 July 1960, increasing to 60 years for people born on or after 1 July 1964). Preservation age is not the same as your pension age. If you want to access your superannuation before you reach your preservation age, it is recommended that you contact your fund with respect to its rules. The Australian Prudential Regulation Authority has also developed special rules, which apply, and the circumstances include severe financial hardship and compassionate grounds.
Income is not deemed on money in a superannuation fund that is in the accumulation phase until you reach pension age (qualifying age for a war widow/widower) (see below). Early withdrawals from a superannuation fund by a person under 55 years of age are not assessed under the income test, but the withdrawn funds may be assessable under the income and assets test if invested.
After you reach pension age (qualifying age for a war widow/widower), if you:
- are not receiving a pension or income stream from your superannuation fund, the money you have invested in your superannuation fund will be assessed as a financial asset and deemed;
- are receiving a pension or income stream from your superannuation fund, the income stream will be assessed under the income stream rules.
If you are a veteran who has qualifying service and received service pension, or a war widow or widower who received income support supplement, your superannuation is assessable when you reach 60 years.
If you receive partner service pension, an age pension or veteran payment from DVA, your superannuation funds are assessable when you reach pension age as per the table below:
Male and female non-veterans
|Date of Birth
|Before 1 July 1952
|1 July 1952 to 31 December 1953
||65 years and 6 months
|1 January 1954 to 30 June 1955
|1 July 1955 to 31 December 1956
||66 years and 6 months
|On or after 1 January 1957
For assessment of money invested in a superannuation fund in the accumulation phase, qualifying age applies to war widows and widowers receiving income support supplement (ISS). Qualifying age is the same age as pension age for a veteran with qualifying service, i.e. 60 years.
When you are granted an income support pension, and periodically after that, you will be notified of your obligations. You will be required to tell us within 14 days (28 days if you live overseas or receive remote area allowance) of changes to your circumstances that might affect the rate of income support pension you receive or your eligibility to receive that pension. These obligations apply equally to trustees.
Usually an overpayment of pension will not occur when you have met your obligations. However, sometimes even if you have met your obligations, an overpayment can occur because we have not been able to process the change before the next payday. We do our best to avoid this occurring, but it is not always possible. To provide you with your exact entitlement we are obliged to recover overpayments of pension where they do occur.
You do not need to tell us of changes to the interest rates on your financial investments.
The Australian Securities and Investments Commission (ASIC) MoneySmart website provides financial information to help you make the most of your money. The MoneySmart website also has a register of suitably qualified financial advisers who hold an Australian Financial Services licence. You can contact ASIC by telephone on 1300 300 630 or visit www.moneysmart.gov.au/
The Financial Planning Association of Australia (FPAA) also provides contact details for financial planners that are members of the FPAA and information about how to choose a financial planner. FPAA’s website is at www.fpa.asn.au
Further information about superannuation, including early release of superannuation, can be obtained from your fund, or from the Australian Prudential Regulation Authority (APRA). APRA’s superannuation hotline is 131 060, and their website is at http://www.apra.gov.au
Centrelink runs a free Financial Information Service (FIS) which provides education and information on financial and lifestyle issues to all Australians. Any personal information given to FIS officers is treated as confidential. FIS can be contacted by telephone on 132 300.