Deemed Income – What is it, how is it calculated and when do the apply?
If you thought providing Centrelink advice was exclusively for the disadvantaged and destitute, think again! Did you know millionaires in Australia are eligible for part Age Pensions? That’s right… a couple without a home can have combined assets worth up to $1,292,000 and still receive a part age pension if they are aged over age 65. Of course it’s a little more complicated but you will learn everything you need to know within this important advice area when studying our Diploma of Financial Planning or Advanced Diploma of Financial Planning.
In fact there have been some recent Centrelink changes ….here is a quick summary:
HOW ARE INVESTMENTS ASSESSED
Investments are assessed by their NET VALUE not their FACE VALUE and whilst the current net market of an investment is used in the calculation of the assets test, gross value is used to calculate the amount of DEEMED INCOME.
WHAT IS DEEMED INCOME?
Deeming rules assume that assets are earning a certain amount of income, regardless of income actually earned. Calculations are used for pensions, benefits and allowance payments. The only exemption is Family Tax Benefit which is based on taxable income.
WHAT ARE THE CALCULATIONS AND TO WHOM DO THEY APPLY?
Single and on an allowance/pension:
The first $48,000 of an investment is deemed to earn income at 2% per annum. Amounts over $48,000 are deemed to earn income at 3.5% per annum
Member of a couple and receiving a pension
The first $79,600 of the couple’s investment is deemed to earn income at 2% per annum. Higher amounts are deemed at 3.5% per annum
Member of a couple, neither on a Pension
The first $39,800 of the couple’s investment is deemed to earn income at 2% per annum. Higher amounts are deemed at 3.5% per annum
WHAT HAPPENS IF AN INVESTMENT EARNS MORE THAN THE DEEMED RATES?
Good news – the extra income is not counted when assessing the rate of pension, benefit or allowance.
WILL DEEMING RATES CHANGE?
Most likely. Rates are continually monitored to ensure they reflect returns across a range of investment choices.
ARE THERE EXEMPTIONS?
Yes but only under exceptional circumstances. Examples include:
- Where a financial investment has failed
- Some superannuation investments where funds are fully preserved or inaccessible
- “Funded packages of support” accounts through the National Disability Insurance Scheme.
For more information regarding “Deemed Investments”, exemptions and changes to benefit eligibility go to www.humanservices.gov.au