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Operation of Deeming

Last amended 
6 January 2015

How deeming operates


Deeming refers to how income is assessed from financial investments for income test purposes. When the deeming rules are applied, the actual income from financial investments is not counted. Deemed income is added to a pensioner's assessable income from all other sources, and the total amount is then assessed under the income test.    



Current deeming thresholds and rates

The current deeming thresholds and rates can be viewed in the Fact Sheet: IS 30 Pension Rates, Limits and Allowances Summary.




Deeming thresholds

Under the deeming rules, the first step is to total the value of a pensioner's financial assets. The deemed amount of income is determined by applying the following rates:

  • Below Threshold Rate to the amounts of the total at or below the threshold, and
  • Above Threshold Rate to the amounts of the total above the threshold.

The thresholds are indexed to the Consumer Price Index on 1 July each year, along with assets test thresholds and income test free areas.    



Deeming rates

The Below Threshold and the Above Threshold deeming rates contained within the Social Security Act 1991 are used for VEA purposes with the Minister for Social Services determining these rates. The rates are set so that they are available in safe investments, and their appropriateness is monitored on an on-going basis. Any future change in the rates will be timed to coincide with March and September pension indexation increases and any other time if the financial market fluctuates significantly.

From 1 January 2023, only the lower deeming rate will be applied to home sale proceeds intended for acquiring a new home during the exempt period. 


According to section 5J(1) of the VEA a financial asset means;


Indexation is the action of adjusting pension and allowance rates, limits and thresholds to maintain their value against increases in the cost of living and average earnings.