The Government have made deeming rate changes and for the first time in a long time, they’ve made them better!
You may not know this, but when Centrelink are assessing the income a retiree earns on their investments, they don’t directly assess the income that financial assets produce, but instead Centrelink will “Deem” financial assets to earn a set rate of return.
The benefit of deeming financial assets are that:
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It helps to keep payments steady instead of going up and down based on investment returns;
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Provides an incentive to invest, as any interest rate achieved above the deeming rate doesn’t count as income.
The deeming rate is considered to be a notional return of a variety of asset classes and will change from time to time due to changing economic conditions. As such recently the Australian government has cut the deeming rates from 1.75% to 1.00% for the lower threshold and 3.25% to 3.00% for the upper threshold.
The main motivation for this change is the result of subsequent RBA Cash rate cuts. Most recently down to 1%.
The table below shows the deeming rates pre change:
To illustrate how this may positively impact a person’s pension, we’ve provided an example below:
John is a 66 year old single retiree who earns $15,000 p.a. from some casual work he does form time to time. John also own his own home.
His assets are as follows:
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Residence $1,200,000
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Car $20,000
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Contents $10,000
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Super $300,000.
Understanding how to maximise Age Pension entitlement could positively impact your retirement and at the end of the day, maximising what you are entitled to is simply smart money management.
At Yield we enable Australians to live the life they love now and retire securely and we’d welcome the opportunity to review whether you are receiving all of the Centrelink entitlements you are eligible to and to discuss ways to improve your retirement position.
Click here to read more about how we can assist you to Retire Securely.
Yield Financial Planning is Here to Help
We hope this blog provided you with some clarity in regards to the recent rate changes. If you have any questions or queries about the topics explored above, please reach out to our team of industry experts here at Yield.
