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.
Fact Sheet IS 87 Income and Assets Test – Income Test Overview
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.