This section contains general information on the deeming provisions.
How deeming operates
VEA → [3]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.
More [4]
The current deeming thresholds and rates can be viewed in the Fact Sheet: IS 30 Pension Rates, Limits and Allowances Summary.
More [5]
Under the deeming rules, the first step is to total the value of a pensioner's financial assets [6]. The deemed amount of income is determined by applying the following rates:
The thresholds are indexed to the Consumer Price Index on 1 July each year, along with assets test thresholds and income test free areas.
More [7]
The Below Threshold and the Above Threshold deeming rates contained within the Social Security Act 1991 [8] 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 [6] 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) [16] 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.
The following payments are affected by deeming:
Deeming applies to financial assets [6], which consist of:
Financial investments to which deeming applies include:
asset-tested lifetime income streams purchased on or after 1 July 2019 with
non‑superannuation money, prior to assessment day [20].
Note that the ex-gratia compensation payment to prisoners of war of the Japanese and Koreans is deemed if invested as above. This applies to both Australian payments and Commonwealth and Allied countries payments.
Deeming provisions [6] do not apply to the following assets: More → [22]
Sometimes an asset may be considered exempt for a specified period and income may or may not be generated by this asset, such as when a pensioner sells their home, intending to buy or build another. More → [27]
Sale of the Principal Home and Deemed Income from Sale of Principal Home
Section 9.2.7 [28]
9.5.4/Deemed Income from Savings Investments [29]
For income test purposes the proceeds, whether deposited into an account or kept as cash in hand, are included in the total value of cash on hand and accounts, and assessed under the deeming provisions.
VEA → [31]
If a financial investment is exempted from deeming by the Minister, any return generated by that investment is assessable, even if the return is greater than the current applicable deeming rates. A return can be in the form of valuable consideration by way of indirect benefits, or actual income received. If the investment is not declared as exempt from deeming, the return generated by the investment is disregarded and deeming rules are applicable. More → [34]
Deeming applies to the gross current value of a financial investment and excludes any amount that is charged in order to make the investment.
If a pensioner advised that they have purchased an investment for $10,500, of which $300.00 was an entry fee payment, the value of the investment is $10,200 ($10,500 minus $300) and this is the amount to which the deeming rules apply.
For income test purposes, the deemed rates of interest will be applied to the current gross market value of financial assets (i.e. the value of a financial asset should not be reduced by exit fees, charges or encumbrances).
For assets test purposes, the value of a pensioner's asset is reduced by the value of a charge or encumbrance over that asset, such as a mortgage secured against an investment property. This means that the assets test value is the pensioner's equity in the asset.
More → [35]
personal effects and household contents [6]
Deprivation of Assets – Effect on Income
Section 9.6.5 [36]
Sale of the Principal Home and Deemed Income from Sale of Principal Home
Section 9.2.7 [28]
9.5.4/Deemed Income from Savings Investments [29]
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.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
According to section 5J(1) [16] of the VEA a financial asset means;
According to section 5J of the VEA, a financial investment means:
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.
A deprived asset is an asset:
Currently, the pension age for a veteran is 60 years of age (VEA 5QA).
The pension age for a non-veteran is determined by the table below:
Date of birth (both dates inclusive) | Age Pension age |
1 July 1952 to 31 December 1953 | 65 years and 6 months |
1 January 1954 to 30 June 1955 | 66 years |
1 July 1955 to 31 December 1956 | 66 years and 6 months |
On or after 1 January 1957 | 67 years |
One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL). [46]
According to subsection 5J(1) of the VEA [16], an income stream includes:
but does not include any of the following:
In 1990 the government introduced legislative changes called “deeming” to simplify the assessment of cash deposits and income from certain investments. These changes were made:
Deemed income is the minimum rate that the government expects income support pensioners to earn from investments.
Banks created “pensioner accounts” which paid interest at the deeming rate set by the government.
On 1 July 1996 further changes meant the deeming rate was applied to all financial assets as defined in section 5J(1) of the VEA [16].
For asset test purposes, personal effects and household contents include;
The following assets are not considered to be personal effects:
For asset test purposes, personal effects and household contents include;
The following assets are not considered to be personal effects:
John and Mary are both service pensioners [6] with a combined total of $100,000 in financial investments [6]. $65,000 is in a term deposit and they have $35,000 worth of managed investments.
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.
More → [48]
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 [49]? -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 |
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.
More → [50]
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:
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.
Last amended: 5 March 2010
DVA [6] has three investment data bases to help staff with assessing financial assets for service pension [6] and Income Support Supplement [6] purposes.
Staff can access and capture investment information in PIPSPC for the following financial asset [6] categories:
The databases display the following information:
The Deeming Exemption Register contains information on church or charitable investments that were exempted prior to 1 January 2010, and exempted failed investments including:
The Department of Veterans' Affairs.
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.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
According to section 5J(1) [16] of the VEA a financial asset means;
A superannuation fund is defined in the VEA as being:
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16140%23comment-form
[2] https://clik.dva.gov.au/user/login?destination=node/16107%23comment-form
[3] https://clik.dva.gov.au/book/export/html/16140#tgt-VEA_ftn1
[4] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn444
[5] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn445
[6] https://clik.dva.gov.au/%23
[7] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn446
[8] http://www.comlaw.gov.au/Series/C2004A04121
[9] http://www.comlaw.gov.au/Series/C2004A03268
[10] https://clik.dva.gov.au/book/export/html/16140#ref-VEA_ftn1
[11] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/91-income-and-assets-test-principles
[12] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn444
[13] http://factsheets.dva.gov.au/factsheets/documents/IS30%20Pension%20Rates,%20Limits%20and%20Allowances%20Summary.pdf
[14] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn445
[15] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn446
[16] http://clik.dva.gov.au/legislation-library
[17] https://clik.dva.gov.au/user/login?destination=node/16042%23comment-form
[18] https://clik.dva.gov.au/glossary/veteran-payment
[19] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn448
[20] https://clik.dva.gov.au/glossary/assessment-day
[21] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn449
[22] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn450
[23] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/953-exemptions-deeming
[24] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn450
[25] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn451
[26] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn452
[27] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn453
[28] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/927-departure-principal-home
[29] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/954-deeming-savings-investments/deemed-income-savings-investments
[30] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn453
[31] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn454
[32] clik://LEGIS/VEA/section 46K
[33] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn454
[34] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn455
[35] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn456
[36] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/965-deprivation-assets-effect-income
[37] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn448
[38] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams/1052-description-income-streams
[39] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn449
[40] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/92-residential-situation/922-basic-principles-assessment/principal-home
[41] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn451
[42] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/105-income-streams
[43] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn452
[44] https://clik.dva.gov.au/cspolwarning
[45] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn456
[46] http://clik.dva.gov.au/glossary/assets-value-limit-avl
[47] https://clik.dva.gov.au/user/login?destination=node/16121%23comment-form
[48] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn457
[49] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/952-general-provisions-deeming/operation-deeming
[50] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn458
[51] https://clik.dva.gov.au/www.dva.gov.au/financial-support/income-support/what-changes-your-payments/your-income-and-assets/income-test
[52] https://clik.dva.gov.au/www.dva.gov.au/financial-support/income-support/what-changes-your-payments/your-income-and-assets/asset-test
[53] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn457
[54] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn458
[55] https://clik.dva.gov.au/user/login?destination=node/16110%23comment-form
[56] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn459
[57] https://clik.dva.gov.au/book/export/html/16140#tgt-cspol_part9_ftn460
[58] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/955-deeming-shares-investments
[59] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/95-deeming-provisions/956-deeming-managed-investments
[60] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn459
[61] https://clik.dva.gov.au/compensation-and-support-reference-library/deeming-exemptions-register/overview
[62] https://clik.dva.gov.au/book/export/html/16140#ref-cspol_part9_ftn460
[63] http://clik.dva.gov.au/glossary/foreign-superannuation-fund