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If you’re receiving the Age Pension or planning your retirement income strategy, a key change is coming this September that could affect your entitlements.
For the first time since 2020, the Australian Government is increasing social security deeming rates. These rates are used to estimate income from financial assets like bank accounts, shares, and superannuation, and they play a crucial role in determining Age Pension payments and aged care fees.
What’s changing?
From 20 September 2025, deeming rates will rise by 0.5%, bringing them to:
- Lower deeming rate: 0.75% p.a. (up from 0.25%)
- Upper deeming rate: 2.75% p.a. (up from 2.25%)
These changes will apply to financial assets assessed under the income test for Centrelink payments, including the Age Pension and Commonwealth Seniors Health Card (CSHC).
Why are deeming rates increasing?
Deeming rates were frozen during the COVID-19 pandemic to protect retirees from falling investment returns. Now, with inflation easing and interest rates rising, the Government is gradually returning deeming rates to more “normal” levels that reflect what retirees can reasonably earn on their investments[1].
Future increases are expected to align with the March and September indexation dates, and the Australian Government Actuary will now advise on appropriate deeming levels[1].
How will this affect age pension payments?
While the Age Pension base rate will increase on 20 September 2025 (up to $1,178.70 per fortnight for singles), some retirees may see a reduction in their payments due to higher deemed income.
Example:
Kevin is a single retiree with $308,000 in financial assets.
- Before 20 September: His deemed income is $5,646, and he receives the maximum Age Pension of $1,149 per fortnight.
- After 20 September: His deemed income increases to $7,186, reducing his Age Pension by $29.19 per fortnight[2].
What about aged care and CSHC?
- Aged Care Fees: Higher deemed income may lead to increased means-tested fees for both Home Care and residential aged care.
- Commonwealth Seniors Health Card (CSHC): Most CSHC holders are unlikely to be affected unless they have high levels of deemed income. For example, a single retiree with no other taxable income could still hold up to $3.7 million in an account-based pension and remain eligible[2].
What should retirees do?
If you’re receiving a part Age Pension or are close to the income or asset thresholds, now is a good time to:
- Review your financial assets and how they’re structured.
- Speak with a financial adviser to assess how these changes may affect your entitlements.
- Plan ahead for future deeming rate increases, especially if you’re considering downsizing or entering aged care.
Need help navigating these changes?
At P3 Financial Planning, we specialise in helping retirees make the most of their entitlements while protecting their lifestyle and legacy. Whether you’re already receiving the Age Pension or planning ahead, we can help you understand your options and make informed decisions.
Book a free consultation today to review your retirement income strategy.
Disclaimer: This is general information only and does not constitute financial advice. The information in this blog is general in nature and does not consider your personal circumstances. Always consult with a qualified financial adviser and tax advisor to ensure these strategies are suitable for you.
References
[1] Changes to social security payments from September 20 | Department of …
[2] Age Pension and deeming changes on 20 September 2025
