The Federal Budget for 2025 has introduced a major development that benefits Centrelink pensioners—the government has decided to extend the freeze on deeming rates until July 1, 2026.
This decision aims to protect elderly Australians from potential reductions in their Age Pension payments, which could have been caused by rising interest rates and ongoing cost-of-living pressures.
Whether you’re currently retired, preparing for retirement, or planning your financial future, it’s essential to understand the impact of this policy change.
In this article, we will break down the crucial elements of this update, including what deeming rates are, why the freeze matters, and the other benefits included in the 2025 budget. Additionally, we’ll provide practical advice to help you make the most of these updates.
Key Highlights from the Federal Budget 2025
| Feature | Details |
|---|---|
| Policy Update | Deeming rates freeze extended until July 1, 2026 |
| Target Group | Approximately 460,000 Centrelink Age Pensioners |
| Current Deeming Rates | 0.25% on lower threshold, 2.25% on upper threshold |
| Threshold for Singles | $62,600 |
| Threshold for Couples | $103,800 |
| Additional Budget Measures | Lower PBS prescription costs, energy bill rebates, Medicare expansion |
| Official Source | Services Australia |
What Are Deeming Rates?
Deeming rates refer to the rates used by the government to estimate the income you generate from financial assets. Regardless of the actual income earned, Centrelink uses these rates to determine eligibility for benefits like the Age Pension.
Assets considered in the deeming process include:
- Savings and transaction accounts
- Term deposits
- Shares
- Managed funds
- Superannuation (if you are over Age Pension age)
Deemed income is then used in the income test, one of the two main eligibility tests for Centrelink payments. The other test is the assets test.
Example of How Deeming Works
If you are a single pensioner with $80,000 in assets:
- The first $62,600 is deemed to earn 0.25% = $156.50
- The remaining $17,400 is deemed to earn 2.25% = $391.50
- Total deemed annual income = $548
This deemed income is then used to determine the amount of Age Pension you will receive.
Why Does the Deeming Rates Freeze Matter?
The freeze on deeming rates is especially important given the current economic climate, where interest rates have increased due to inflation.
A rise in deeming rates could have led to reductions in pension payments, but by freezing the rates, the government ensures that pensioners’ benefits remain unaffected.
Key Benefits of the Freeze
- Stability: Ensures pension payments are not reduced by fluctuations in interest rates.
- Simplicity: Makes it easier for pensioners to plan their finances.
- Support: Protects elderly Australians who have saved for their future from being penalised.
The freeze offers peace of mind to over 460,000 pensioners, particularly for those relying on fixed incomes, as it provides financial stability.
Overview of Current Deeming Rates (2025)
The current deeming rates will remain in place until July 1, 2026:
- For Singles:
- 0.25% on the first $62,600 of financial assets
- 2.25% on anything over that
- For Couples:
- 0.25% on the first $103,800
- 2.25% on the remainder
These rates have been unchanged since May 2020, and this freeze ensures they will remain stable for several more years, providing certainty for senior Australians.
Other Federal Budget 2025 Benefits for Pensioners
In addition to the deeming rates freeze, the 2025 Federal Budget introduces several other key measures designed to support older Australians:
1. Lower Pharmaceutical Costs
Starting January 1, 2026, the Pharmaceutical Benefits Scheme (PBS) will reduce the cost of medicines to $25 per prescription, down from $31.60.
This reduction will benefit pensioners who rely on multiple medications, potentially saving them hundreds of dollars annually.
2. Energy Bill Relief
Pensioners and low-income households will continue to receive electricity rebates, which will help offset the impact of rising utility costs. The average annual rebate is expected to be $300.
3. Medicare Enhancements
The budget also includes significant enhancements to Medicare:
- Expanded bulk billing for GPs
- Increased investment in telehealth services
- New preventative health programs for chronic conditions
These efforts aim to make healthcare more accessible and affordable for older Australians.
4. Rent Assistance Increase
An additional boost to Commonwealth Rent Assistance will help pensioners and others facing rental challenges, particularly those renting privately.
Practical Tips for Maximizing Benefits
Whether you’re already receiving a pension or planning to apply, here are some practical tips to help you maximize your entitlements:
1. Review Your Centrelink Records
Ensure that all your assets and income details are up to date with Centrelink. Mistakes or outdated information can lead to overpayments or reduced benefits.
2. Understand the Impact on Investments
If you have financial investments, it’s important to understand how deeming applies to them. A financial planner can assist you in structuring your finances to minimize the impact of deemed income.
3. Claim All Eligible Benefits
In addition to the Age Pension, ensure you’re claiming all the other benefits you may be entitled to, such as:
- Pensioner Concession Cards
- Discounts on utilities, transport, and healthcare
- Car registration and license fee waivers (in some states)
4. Consult a Financial Adviser
A Centrelink-savvy financial adviser can help you:
- Navigate complex rules
- Maximise your entitlements
- Prepare for future changes in income or eligibility
5. Stay Informed
Stay up-to-date with the latest information by subscribing to newsletters or checking:
- Services Australia
- MoneySmart
- MyGov
Knowledge is key to making the most of the benefits available to you.
The Federal Budget 2025 brings crucial updates that will benefit pensioners and senior Australians, particularly with the deeming rates freeze set to continue until July 2026.
This policy, along with additional measures such as lower pharmaceutical costs, energy rebates, and enhanced Medicare services, will provide much-needed support to the elderly.
Staying informed and taking proactive steps will ensure that you can fully benefit from these changes.
FAQs
How long will the deeming rates freeze last?
The deeming rates freeze will remain in place until July 1, 2026.
Who benefits from the freeze on deeming rates?
Approximately 460,000 Centrelink Age Pensioners will benefit from the deeming rates freeze.
How can I maximize my Age Pension?
Make sure your Centrelink records are accurate and up-to-date, and consult a financial adviser to make the most of your assets.
Will I pay less for medicines under the new budget?
Yes, starting January 1, 2026, the cost of PBS medications will decrease to $25 per prescription.