Media Release by The Hon Jenny Macklin MP

Deeming rates to be lowered

The Australian Government is lowering the social security income test deeming rates.

This is to reflect the recent reduction in interest rates and the impact the global financial crisis is having on returns on pensioners’ investments.

The deeming rate will change from 4 per cent to 3 per cent for the first $41,000 of a single pensioner’s financial investments ($68,200 for a couple). It will also shift from 6 per cent to 5 per cent for the balance of financial investments over these amounts. The changes will come into effect from November 17, 2008.

Payments affected by the deeming rate include means tested pensions, such as the Age Pension, Disability Support Pension and Carer Payment, income support allowances and supplements, such as Parenting Payment and Newstart, paid by Centrelink and the Department of Veterans’ Affairs.

Recent decreases in the official interest rate to 5.25 per cent means that the social security system needs to be adjusted to take account of decreased returns on deposits or other investments. Deeming rates are set to reflect returns on investment available to pensioners and other income support recipients.

The lowering of the deeming rates mean that part rate pensioners paid under the income test, with financial investments mainly in term deposits, shares, managed investments and other accounts, may receive an increase in their pension payments, to reflect the reduction in their assessable income.

Individual results are heavily dependant on individual circumstances.

Pensioners already paid at the maximum rate will have no change to their pension payments.

The Rudd Government’s decision acknowledges that many pensioners and social security recipients who also rely on own-source income have been adversely affected by the global financial crisis.

The Australian Government has taken a number of recent steps to ease the financial pressure on pensioners, including delivering a $4.8 billion down payment to Australia’s four million pensioners, seniors, carers, people with disability and veterans.

From the 8 December 2008 single pensioners will receive a lump sum payment of $1,400 and couples $2,100.

These lump-sum payments are a down payment on longer term reform to the pension system, which will be delivered in the 2009-10 Budget context.

The Government also instructed Centrelink to update the value of pensioners’ listed securities and managed investments. As a result, around 370,000 customers received an average increase of $4 a fortnight and in some cases the increase was more than $100 per fortnight.

The deeming rules are a central part of the social security income test and are used to fairly assess income from financial products.

The Government will continue to act decisively to maintain the integrity and fairness of the social security system in the face of on-going events in financial markets and the wider economy.

Those with high levels of investment income should contact Centrelink on 13 2300 to clarify their individual circumstances and the impact of the deeming adjustment.