Don’t spend those deeming dollars just yet

Christmas? September? When will deeming rates be cut?

deeming rates

There is consensus – from the Government, from the Opposition, from older Australians – that deeming rates need to change. There has been consensus for several weeks. There is talk but, as yet, no action. And the conjecture is that any approved changes may only take effect in September – the second of the twice-yearly indexations that aim to keep the pension in touch with the cost of living.

The estimated 600,000 pensioners affected by deeming rates are counting the days and wishing they were counting the dollars in their pockets  – perhaps so they could spend the extra money and boost a sagging economy. Consumer confidence has, according to the Westpac-Melbourne Institute, hit a two-year low.

What we know.

Deeming rates, used by Centrelink to determine Age Pension entitlements after taking into account an average return on a variety of investments, have not changed since 2015.

If you’re a member of a couple and one or both receive a pension, the first $86,200 of combined financial assets is subject to the deemed rate of 1.75 per cent. Anything over $86,200 is deemed to earn 3.25 per cent.

The current rate for singles is 1.75 per cent for the first $51,800 of financial investments, and 3.25 per cent above that.

The official interest rate, as determined by the Reserve Bank of Australia, was 2.25 per cent at the start of 2015. It is now one per cent.

Who is saying what
Social Services Minister Anne Ruston is responsible for deeming rates. She says she will present a plan to cut deeming rates to Prime Minister Scott Morrison, Treasurer Josh Frydenberg and Finance Minister Mathias Cormann for final approval.

She told YourLifeChoices on 1 July: “Following the Reserve Bank’s decision to reduce the official cash rate last month, I requested advice from my department on the current deeming rate settings. I am now considering that advice. This is a complex area given the deeming rate applies to a range of assets.”

She has denied suggestions the Government is stalling to save money and said it understood the repercussions for older Australians on fixed incomes.

On Saturday, Mr Frydenberg promised action on deeming rates by Christmas. He admitted pensioners had been hurt by interest rate reductions, but argued that returns from other asset classes including superannuation and managed funds had outperformed the deeming rate.

“Some of those returns have obviously been stronger than what we've seen at a time of low interest rates from bank deposits,” he said.

Opposition social services minister Linda Burney has repeatedly called for urgent action.

“It's hypocritical for the Government to say, ‘Oh well, the Reserve Bank has set the cash rate at one per cent, and the Government is demanding banks hand on that one per cent to mortgage holders, when their deeming rate is well above anything that a pensioner or part-pensioner can earn.”

YourLifeChoices publisher Kaye Fallick is a passionate advocate for older Australians.

She says: "How complex can the determination of a deeming rate really be? Given the last time it was changed was 2015, it seems the minister concerned has had four years to plot the steady decline of Age Pensioner returns on their investments.  

"If tax cuts for workers can be banged through both houses of Parliament in week one, waiting until Christmas for a reduction in the deeming rates reveals how little older voters now matter.

"Perhaps we should rename deeming rates as ‘retiree taxes’ so a sense of urgency can be better understood?"

The cost?

A recent Labor Party analysis says retirees could be better off by between $62 and $3875 a year – but only if the deeming rate is reduced to 1.25 per cent. And there is no suggestion from government sources the deeming rate will go that low.

The same Labor analysis says a cut from 3.25 per cent to 2.25 per cent will likely cost the Commonwealth $1 billion over four years.

And on top of the ‘correction’ to current deeming rates, there is a push for ‘lasting change’ to the system.

But let’s take it one step at a time.

Have you mentally ‘spent the money’ when deeming rates are eventually changed? Do you believe they should be changed more regularly?

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    COMMENTS

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    Old Geezer
    11th Jul 2019
    11:03am
    I've already ready spent mine plus a lot more.

    A deeming rate of 1.25% might just be low enough to get me a health card.
    Karl Marx
    11th Jul 2019
    1:14pm
    The health card is for those that need it, rules you out on all counts
    Old Geezer
    11th Jul 2019
    1:16pm
    Why don't I need it? I could do with discounts of my electricity and many other things too.
    Intellego
    11th Jul 2019
    2:06pm
    You don't deserve discounts.
    Triss
    11th Jul 2019
    2:45pm
    Gasps with shock...OG accepting the dreaded welfare!!! And of course you will scrupulously add all those benefits up so you can pay them back when you pop your clogs.
    Old Geezer
    11th Jul 2019
    4:14pm
    Except I don't get any benefits so nothing to pay.
    Sheilab
    11th Jul 2019
    11:21am
    Deeming should be tied to the Reserve Bank official interest rates.

    Just maybe the politian's pensions should be subject to the same deeming rates as pensioners.
    Colours
    13th Jul 2019
    10:49pm
    Now there's a great idea!

    11th Jul 2019
    11:44am
    Just to add to Fallick's statement, there has only been one change to the deeming rate since Keating introduced it. The history of the deeming rate is that it was always below or on par with the cash rate until 2010 when the cash rate fell below the deeming rate and no change was made at that time. It's a bit rich for Labor to join in the discussion when they did nothing for 3 years.
    Intellego
    11th Jul 2019
    2:07pm
    Well your beloved Lieberals have done nothing for a lot longer than 3 years...
    GeorgeG
    11th Jul 2019
    12:22pm
    Most pensioners are effected by the assets test before the income one. That's why Scott Morrison's changes to the taper rate in 2017 were so unfair.
    You would have to have assets of $1,000,000 to get even $32500 pa at 3.25%. Those assets would disqualify you from the pension anyway. So the two tests are way out of kilter.
    Tricky
    11th Jul 2019
    12:41pm
    Plots and Prayers by this Government. How can there GOD be so cruel to pensioners and part pensioners on 'Term Deposits'.
    Karl Marx
    11th Jul 2019
    1:12pm
    Morrison believes in a fictional supreme, maybe he can ask the question next time he's on his knees.
    Old Geezer
    11th Jul 2019
    1:20pm
    I don't have any term deposits as there is better returns to be had elsewhere.
    KSS
    11th Jul 2019
    1:21pm
    God is NOT cruel - God is perfect. God does not make earthly law.

    People are not perfect and can do 'bad' things because they have free will. This is the battle raging between the devil and God!
    Tricky
    11th Jul 2019
    12:43pm
    We the people are being robbed!
    PlanB
    11th Jul 2019
    12:52pm
    They said we are getting 1% -- well I am not I am getting 0.3%

    We are and have been robbed for years --
    Old Geezer
    11th Jul 2019
    1:19pm
    Our stock market was up over 11% last financial year so 3.25% seems a bit low for a deeming rate to me.
    Intellego
    11th Jul 2019
    2:09pm
    Not everybody is wealthy like you or can afford to fiddle about on the stockmarket, Geezer.
    Karl Marx
    11th Jul 2019
    2:09pm
    yes OG whatever you make on investments is good but if you have your money in a no risk bank account you get less than 1% so deeming rates on bank accounts is a tax on pensioners & should be abolished
    Karl Marx
    11th Jul 2019
    2:13pm
    Intellego, not everyone wants to fiddle around on the stock market. I for one would rather do other more interesting & more enjoyable things in my retirement but OG seems happy to do the stock market, that's ok each to their own. We all have a choice
    Old Geezer
    11th Jul 2019
    4:13pm
    Bank accounts are high risk as you rarely make a return after inflation and tax.
    Old Geezer
    11th Jul 2019
    4:15pm
    So you prefer to knot and knat then. I certainly don't.
    PlanB
    12th Jul 2019
    12:42pm
    OG, I do not play the stock market -- I worked and saved and did without to have a few bob -- but this ******* government are busy lining their own pockets and robbing the bejesus out of us pensioners --

    OG, why do you bother even showing yourself on here just to rub your rudeness and "wealth" in our faces -- good for you if you are rich -- but EVERYONE isn't as lucky and have worked long and hard AND had some bad luck along the way -- through NO fault of their own to contend with --
    Karl Marx
    11th Jul 2019
    1:09pm
    Any deeming rate imposed by the government is a pension tax, pure & simple
    Old Geezer
    11th Jul 2019
    1:19pm
    If you got 11% plus on your investment last year you would be robbing the government then.
    Karl Marx
    11th Jul 2019
    2:06pm
    Why would I be robbing the government OG. If I make money on investment I will pay the appropriate tax.
    Deeming rates are a tax on pensioners & should be abolished pure & simple
    Old Geezer
    11th Jul 2019
    5:12pm
    Because you are only being assessed as getting 3.25% not 11%.
    Tricky
    11th Jul 2019
    1:09pm
    SCOMO's Hillsong philosophy is to screw the pensioners, part pensioners and self funded retiree's. #PLOTS & PRAYERS#
    PlanB
    12th Jul 2019
    12:46pm
    Yes, Tricky, Scomo is a so-called Christian like Abbott and the mob, they did nothing but tell lies -- if that is what Christians do I want NO part of their way.
    Arvo
    11th Jul 2019
    1:50pm
    The push for lowering deeming rates will work against many part time pensioners and against some full pension age pensioners sitting in a residential home worth more than , say, $1.25 million, when such high value homes are classified as part of the Asset Test. What government giveth with one hand, government takes away with the other hand.
    Karl Marx
    11th Jul 2019
    2:14pm
    you're being speculative. But then again this government is run by thugs
    Poppa
    11th Jul 2019
    2:41pm
    Will the deeming rates go down by 1% who knows but that is about all so at least its something I suppose and am grateful if so and when?.
    Poppa
    11th Jul 2019
    2:41pm
    Will the deeming rates go down by 1% who knows but that is about all so at least its something I suppose and am grateful if so and when?.
    Poppa
    11th Jul 2019
    2:44pm
    Why do I get double comments in the comments field on this site for YLC ? Anyone any ideas ?
    Arvo
    11th Jul 2019
    6:18pm
    don't repeat the Enter when nothing happens, just press F2 or F1
    Poppa
    11th Jul 2019
    2:44pm
    Why do I get double comments in the comments field on this site for YLC ? Anyone any ideas ?
    Greg
    11th Jul 2019
    3:20pm
    If you click "post reply" sometimes the screen doesn't refresh and show you the updated screen so you click again - the first click has actually worked but you don't think it has. In future click once and then refresh/reload your page and check to see if your comment is there.
    Old Geezer
    11th Jul 2019
    4:10pm
    Mine puts 2 comments from the one click so I have to delete one. This happens every time I post a comment.
    Not a Bludger
    11th Jul 2019
    4:08pm
    Most of this commentary omits to say that many part pensioners are earning 5-7% on their shares/super but are deemed at the much lower deeming rate - are are you commentariat proposing to address this?
    Old Geezer
    11th Jul 2019
    4:11pm
    I agree and have no doubt they are all ready looking at people's actual returns.
    Sundays
    11th Jul 2019
    4:34pm
    There is no reason why there can’t be a seperate deeming rate purely for cash at bank. This should be tied to the cash rate set by the RBA.
    Old Geezer
    11th Jul 2019
    5:11pm
    No all assets should be deemed the same. Your car is deemed but it makes a negative return every year.
    Not a Bludger
    11th Jul 2019
    6:33pm
    Again, dead right OG - maybe scrap deeming altogether and work on each pensioner recipients annual situation - just like an annual tax return.
    Sundays
    11th Jul 2019
    6:56pm
    Your car is not deemed! It is counted in the Asset Test. Only financial assets are deemed. OG, you know this but live to stir. It shows a callous disregard for Pensioners with money in the bank who are being deemed on earnings they don’t receive.
    BERRYUPSET
    11th Jul 2019
    6:36pm
    `i`ve already spent mine ...just to make ends meet!!!
    bobm
    11th Jul 2019
    6:51pm
    I don't get any of this bonus as I am under the tax limit. Why would you spend this bonus? how long will it be before the next bill arrives for payment. This little bonus for those who get it will reduce the pain when the account turns up. May be it will spread payments of bills to a soft curve and not the up and down sharp curves.
    jimbo
    11th Jul 2019
    7:05pm
    there should be a royal commission regarding centrelink and deeming rates they are up to the same tricks as the banks. The only fair way to treat money gained from your investments is for everyone to have it calculated separately. people getting more than the deeming rate are being subsidised by those getting less.
    Karl Marx
    11th Jul 2019
    11:56pm
    That's why deeming rates should be scrapped and all income taxed appropriately so if you're earning less than 1% or even zero in a bank account then that's your choice & if you want to play the stock market & you make 30% then that's also your choice & both incomes should be taxed.
    LiveItUp
    16th Jul 2019
    3:14pm
    Definitely not!

    They tried to do just that and then bought in deeming as it was too complicated and too time consuming to do it for everyone.

    Easier to just invest better and get more than the deeming rate.
    Molo
    12th Jul 2019
    11:55am
    Re: Deeming rates
    I refer to the comment by Mr Frydenberg that " returns from other asset classes including superannuation and managed funds had outperformed the deeming rate". He conveniently forgets that pensioners with superannuation, would be very concerned in having shares as the biggest percentage in their super funds and for obvious reasons, would have invested the biggest percentage in cash and fixed deposits. Given the very low prevailing interest rates, the returns on these super funds would be expected to be well below the the 3.25 % deeming rate.

    He needs to get real and reduce the deeming rates immediately, pensioners are hurting.
    LiveItUp
    12th Jul 2019
    4:30pm
    If retired people have all their money in the bank then they only have themselves to blame for their own bad advice.
    Anonymous
    15th Jul 2019
    6:55pm
    give those who have money only in bank accounts a lower deeming rate and those who have there money earning much more (i.e. the stock market) then give them less
    LiveItUp
    16th Jul 2019
    3:10pm
    Definitely not! That just encourages laziness.

    14th Jul 2019
    9:09am
    great news that the government has announced a bonus for pensioners and retirees...but I expect some will still complain
    LiveItUp
    16th Jul 2019
    3:11pm
    They sure are and still haven't stopped.
    Chrissy L
    14th Jul 2019
    10:47am
    I awoke to the news announced overnight of the change to deeming rates, whilst it is a step in the right direction and I am pleased the government has finally done something about this situation. I have to advise however, that I think the government could have gone further and been more realistic, regarding the cost of living pressures Pensioners and Part Pensioners are facing. I personally, will benefit about $7.50 per week, not sure I can stimulate the economy much with that, if at all. I think the time has arrived to look at an independent body to manage changes to deeming rates for more fairer outcomes for pensioners and part pensioners, instead of this kind of knee jerk reaction, after much pressure from seniors group and individuals who have to live on these miniscule increases in their pensions

    15th Jul 2019
    6:54pm
    i would suggest the best thing to do is look at every individual and see exactly where their money is invested and pay them accordingly
    LiveItUp
    16th Jul 2019
    3:12pm
    It's not practical to do and that's why they bought in deeming. You don't know what you have earnt until 2 or 3 months after the end of the financial year.


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