Deeming Explained: How Centrelink Turns Your $200k Savings Into 'Income'
Deeming is the rule Centrelink uses to assume your financial assets earn a set rate of income — whether they actually do or not. From 20 March 2026, the first $64,200 of a single person's financial assets is deemed to earn 1.25% a year, and anything above that is deemed to earn 3.25%. That assumed income is what counts in the Age Pension income test, even if your bank pays you next to nothing.
It catches a lot of people off guard: "I've got $200,000 in the bank earning almost nothing — how can Centrelink say I'm earning income from it?" The answer is deeming. This guide walks through exactly how it works, with a step-by-step worked example, the current rates and thresholds, and how the deemed figure then flows into the income test that decides your fortnightly pension.
What deeming actually is
Rather than ask you to report the real interest, dividends and distributions from every investment, Centrelink applies one assumed (or "deemed") rate of return across all of your financial assets combined. Two simple rates are set by the government and reviewed periodically. The income that comes out the other side is "deemed income" — a number Centrelink treats as if it landed in your pocket, regardless of what your accounts genuinely earned.
The logic, according to Services Australia, is twofold: it keeps the income test simple (one rule instead of dozens of statements), and it removes the incentive to park money in low-return accounts purely to look "poorer" for pension purposes. The trade-off is that the rule applies uniformly — so a cautious saver earning 0% gets deemed exactly the same as a savvy investor earning 6%.
The deeming rates and thresholds from 20 March 2026
There are two rates. A lower rate applies up to a threshold, and a higher rate applies to everything above it. The threshold depends on whether you're single or a member of a couple.
| Situation | Lower rate (1.25%) applies to | Upper rate (3.25%) applies to |
|---|---|---|
| Single | First $64,200 | Amount over $64,200 |
| Couple — at least one gets a pension | First $106,200 (combined) | Combined amount over $106,200 |
| Couple — neither gets a pension | First $53,100 each | Each person's amount over $53,100 |
These rates and thresholds took effect on 20 March 2026 and are confirmed on the official Services Australia deeming page. Because Centrelink indexes Age Pension figures twice a year (in March and September), always check the current figures before relying on a calculation.
Meet Dorothy. She is single, 68, and recently retired. She has $200,000 sitting in a savings account and a term deposit. The accounts are paying her very little — let's say close to 0% on the savings portion — but Centrelink doesn't care what they actually pay. It deems them.
Step 1 — Apply the lower rate to the first $64,200:
$64,200 × 1.25% = $802.50 per year
Step 2 — Apply the upper rate to the rest:
$200,000 − $64,200 = $135,800 deemed at the upper rate
$135,800 × 3.25% = $4,413.50 per year
Step 3 — Add the two together:
$802.50 + $4,413.50 = $5,216.00 of deemed income per year
Step 4 — Convert to a fortnight (Centrelink assesses income per fortnight; multiply the annual figure by 14 ÷ 365):
$5,216.00 × 14 ÷ 365 = $200.06 per fortnight (about $200.05–$200.10 depending on rounding)
So Centrelink treats Dorothy as earning roughly $200 a fortnight from that $200,000 — even though her actual bank interest may be a tiny fraction of that. That deemed figure is what enters the income test below.
Why deeming applies even if your account earns 0%
This is the part that frustrates people most. If your savings account literally pays nothing, you might assume the income test sees $0. It doesn't. Deeming is a fixed assumption, not a measurement. The rate is applied to the balance of your financial assets, full stop.
There's a flip side worth knowing: deeming can also work in your favour. If you invest well and your assets actually return more than the deemed rate — say a share portfolio returning 6% — Centrelink still only counts the deemed 1.25%/3.25%. The "extra" real return is invisible to the income test. So deeming penalises the very cautious and quietly rewards the higher-earning investor. The practical lesson: holding money in a 0% account to look poorer for Centrelink achieves nothing, because deeming ignores your real rate either way.
Which assets are deemed
Deeming applies to your financial assets. Per Services Australia, that includes:
| Deemed (financial assets) | Not deemed this way |
|---|---|
| Savings accounts and term deposits | Your principal home |
| Shares, managed funds and bonds | Investment property (assessed on net rent + asset value) |
| Superannuation in the pension/retirement phase | Super held by a person under Age Pension age (generally exempt until they draw it) |
| Account-based pensions (income streams) | Personal contents, cars, lifestyle assets (assets test, not deemed income) |
| Money in loans, debentures and friendly society bonds | — |
A key point on super: once you're of Age Pension age, your superannuation counts as a financial asset and is deemed — whether or not you've started drawing it. Most account-based pensions are also deemed under the rules that have applied since 1 January 2015. (A small number of older income streams started before that date may be assessed differently; check your specific product with Centrelink.)
How deemed income feeds the income test taper
Deemed income doesn't sit on its own — it's added to your other assessable income (wages, real rental income, certain foreign pensions) to form your total fortnightly income for the income test.
From 20 March 2026, the income test works like this for the full single pension (figures from Services Australia and SuperGuide):
| Income test element (from 20 Mar 2026) | Single | Couple (combined) |
|---|---|---|
| Income free area (per fortnight) | $218 | $380 |
| Taper rate above the free area | 50¢ per $1 | 50¢ per $1 combined (25¢ each) |
You keep the full pension up to the free area. Above it, your pension reduces by 50 cents for every dollar of income (for a couple, that's 25 cents each, 50 cents combined).
Back to Dorothy. Her deemed income is about $200 per fortnight. Assume she has no wages or other assessable income, so her total assessable income is $200/fortnight.
Step 1 — Compare to the single free area ($218/fortnight):
$200 is below $218, so she is under the free area.
Step 2 — Apply the taper:
Income over the free area = $0, so the income test reduces her pension by nothing. On the income test alone, Dorothy keeps the full pension.
But watch the other test. Centrelink applies both an income test and an assets test, and the one that produces the lower pension wins. Dorothy's $200,000 also counts in the assets test, so her final pension is whichever test is harsher. This is why deeming sits inside a bigger picture — see our eligibility hub for how the two tests interact.
Now imagine Dorothy had $400,000 deemed. Her deemed income would be roughly $401/fortnight. Income over the free area = $401 − $218 = $183. At 50¢ in the dollar, her pension would be reduced by about $91.50 per fortnight under the income test — before the assets test is even considered.
- Deeming assumes a return. From 20 March 2026: 1.25% up to $64,200 (single) / $106,200 (couple), and 3.25% above — regardless of what you actually earn.
- $200,000 (single) is deemed at about $200/fortnight ($5,216/year), even at a 0% real interest rate.
- A 0% account doesn't help. Deeming ignores your real rate, so parking cash to look poorer achieves nothing — and good investors quietly benefit because real returns above the deemed rate aren't counted.
- Deemed assets include savings, term deposits, shares, managed funds, super at Age Pension age, and account-based pensions. Your home is not deemed.
- Deemed income feeds the income test: full pension up to $218/fortnight (single), then 50¢ lost per $1 above. The assets test runs in parallel — the harsher result decides your pension.
- Figures are indexed twice a year — reconfirm before relying on a calculation.
Frequently asked questions
What are the deeming rates right now?
From 20 March 2026, the lower deeming rate is 1.25% and the upper rate is 3.25%. For a single person, 1.25% applies to the first $64,200 of financial assets and 3.25% to the balance. For a couple where at least one person gets a pension, the lower rate applies to the first $106,200 combined. Source: Services Australia.
Does deeming apply if my bank account pays 0% interest?
Yes. Deeming is a fixed assumption applied to your balance, not a measurement of real interest. Even an account paying nothing is deemed to earn the deeming rate. Conversely, if your investments earn more than the deemed rate, Centrelink still only counts the deemed amount.
Is my superannuation deemed?
Once you reach Age Pension age, your super counts as a financial asset and is deemed, whether or not you've started drawing it. Super held by someone below Age Pension age is generally not assessed until they access it. Account-based pensions started since 1 January 2015 are also deemed.
How is $200,000 turned into income?
For a single person: $64,200 × 1.25% = $802.50, plus $135,800 × 3.25% = $4,413.50, totalling $5,216 per year — about $200 per fortnight. That fortnightly figure is what enters the income test.
Is my family home deemed?
No. Your principal home is exempt from both the assets test and deeming. Deeming applies only to financial assets such as cash, shares, managed funds, super (at Age Pension age) and account-based pensions.
How does deemed income reduce my pension?
Deemed income is added to your other assessable income. From 20 March 2026, a single can earn up to $218 a fortnight before the pension reduces; above that, the pension drops by 50 cents per dollar. The assets test runs separately, and Centrelink pays whichever test gives the lower pension.
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