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Deeming Rate Calculation - Service Pension Couple
Example of pensioner description/situation
John and Mary are both service pensioners with a combined total of $100,000 in financial investments. $65,000 is in a term deposit and they have $35,000 worth of managed investments.
Example of calculation of deemed income
The following table is an example showing the deemed income calculation.
Note: The threshold amount and the deeming interest rate used in this example were current at 1 May 2020 and may have since changed.
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Step | Action | $ |
In this example the low deeming rate is 0.25% and the high rate is 2.25% and the threshold is $86,200. | ||
1 | Determine the value of the pensioner's total financial assets. Financial investments -Add managed investments -Result: value of total financial assets |
65,000 35,000 100,000 |
2 | Is the value of total financial assets less than the threshold listed in Operation of Deeming? -If yes, multiply the value by 0.25% to obtain the total deemed income. -If no, go to step 3 |
|
3 | Determine income from the below threshold amount. -Threshold amount -Multiply by 0.25% -Result: income from the below threshold amount |
86,200
215.50 |
4 | Determine the above threshold amount. -Value of total financial assets -Less threshold -Result: above threshold amount |
100,000 86,200 13,800 |
5 | Determine income from the above threshold amount. -Above threshold amount -Multiply by 2.25%. -Result: income from the above threshold amount |
13,800
310.50 |
6 | Determine the total deemed income. -Income from below threshold amount -Add income from above threshold amount -Result: total deemed income |
215.50 310.50 526.00 |
How deemed income is used
In the example above, the total deemed income is added to any income John and Mary have from other sources to calculate how much they can be paid under the income test.
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Fact Sheet IS 87 Income and Assets Test – Income Test Overview
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.
According to section 5J of the VEA, a financial investment means:
- available money,
- deposit money,
- a managed investment,
- a listed security,
- a loan that has not been repaid in full,
- an unlisted public security,
- gold, silver or platinum bullion,
- an asset tested income stream (short term) ; or
- an asset tested income stream (long term) that is an account‑based pension within the meaning of the Superannuation Industry (Supervision) Regulations 1994; or
- an asset‑tested income stream (long term) that is an annuity (within the meaning of the Superannuation Industry (Supervision) Act 1993) provided under a contract that meets the requirements determined in an instrument under subsection (1G);
but does not include an investment in an FHSA (within the meaning of the First Home Saver Accounts Act 2008) or a designated NDIS amount.