Deeming

Deeming rules

The deeming rules assume your financial assets are earning a certain amount of income, regardless of the income they actually earn. Deeming encourages you to earn more income from your investments and reduces the extent that your payments may vary.

Deeming is used to calculate income for pension, benefit and allowance payments. As Family Tax Benefit is based on taxable income, it is not affected by deeming.

From 4 November 2013:

  • if you are single and getting either a pension or allowance, the first $46,600 of your financial investments is deemed to earn income at 2% per annum and any amount over that is deemed to earn income at 3.5% per annum
  • if you are a member of a couple:
    • if at least 1 of you is getting a pension, the first $77,400  of your and your partner's financial investments is deemed to earn income at 2% per annum and any amount over that is deemed to earn income at 3.5% per annum, or
    • if neither of you is getting a pension, the first $38,700 for each of your and your share of jointly owned financial investments is deemed to earn income at 2% per annum and any amount over that is deemed to earn income at 3.5% per annum

If your investments earn more than the deemed rates

If the actual income you receive from your investments is more than the deemed income we calculate, the extra income is not counted when assessing your rate of pension, benefit or allowance.

Setting the deeming rates

Deeming rates are continually monitored to ensure that they are appropriate and reflect returns across a range of investment choices available in the market.

Deeming rates are set by the Minister for the Department of Social Services.

After deemed income from investments is worked out

The deemed income is added to any income you have from other sources such as income from employment. Your total income is then used to work out how much pension, benefit or allowance can be paid to you.

Deeming exemptions

Deeming exemptions are granted to financial investments under special circumstances. Examples include:

  • where a financial investment has failed
  • some superannuation investments where funds are fully preserved or inaccessible
  • an account which only contains funds paid to participants for a 'funded package of support' through DisabilityCare Australia, the national disability insurance scheme.

If an investment is given an exemption, then your assessable income is the return you actually earn from the investment, not the deemed amount. If all income from the investment has ceased then we assess your income as nil.

Exemptions are not granted because of poor investment performance, such as shares producing negative returns, or companies or funds in short-term difficulties. Deeming exemptions do not alter the assessable asset value of an investment.

Who can exempt an investment from deeming

The Minister of the Department of Social Services is the only person who can exempt an investment from deeming.

Once the exemption is granted the Minister will decide the start date. In most cases, that is the date an application for an exemption was made or when an insolvency practitioner is appointed. The deeming exemption will remain until the circumstances for the exemption no longer apply.

How deeming exemptions are determined

There are different guidelines for different types of investments. These include loans, failed investments with a company or financial institution, and superannuation investments.

Failed investments with a company or financial institution

Factors taken into account by the Minister when considering an exemption for failed investments with a company or financial institution include:

  • is the purpose of the deeming rules compromised
  • is the investment not operating to provide a return
  • does the investor have access to any of the investment capital, and
  • has the cessation of returns and the inaccessibility of capital been caused by either a:
    • legal impediment imposed by a third party, other than the investor or the fund manager or
    • conditions that were not reasonably foreseeable, when the investor obtained the investment not declared in the Product Disclosure Statement or Prospectus

Where there has been national and widespread impact from an investment company’s collapse, the Minister may decide to grant a deeming exemption for all investors affected. If this occurs, individual investors do not need to apply for an exemption from deeming for that particular investment. If these circumstances occur please contact us  to confirm that a deeming exemption has been granted for your investment product.

Superannuation investments

Factors taken into account by the Minister when considering an exemption are:

  • the investment is inaccessible because the rules of the superannuation fund prevent release of the investment
  • the investment is inaccessible because it is subject to:
    1. an order of the Court, or
    2. the operation of the Superannuation Regulations

Superannuation exemptions are provided for individual superannuation investments rather than for a superannuation product itself. Customers must not have access to any part of their superannuation investment, including interest, at the time of applying for the exemption.

Exemption of superannuation investments apply to both the income and asset values of the investment and not just to the deemed income.

Church and charitable institution development funds

A number of church and charitable institutions’ development funds have received a deeming exemption in the past. These exemptions ceased 1 January 2010 for all customers claiming or reclaiming an income support payment.

For new customers, this means that even though a particular fund may have been granted an exemption from the deeming provisions in the past, normal deeming provisions now apply.

For customers, this means that any previously granted exemption for 1 of these fund types will continue if the customer continues to receive a Centrelink payment. If the customer ceases to receive their payment, the exemption will cease and will not be reinstated if or when the customer reclaims a Centrelink payment.

Any funds added to an existing investment in a church and charitable institutions’ development fund on or after 1 January 2010 will not be granted an exemption from the deeming provisions.

Evidence you need to provide

If you are requesting a deeming exemption for a loan or financial investment that has failed you need to provide evidence that the relevant criteria have been met. For example, it may be appropriate to confirm that legal action has been taken in an attempt to recover the investment. In such cases suitable documents may include:

  • a report from the appointed Insolvency Practitioner
  • a letter from the solicitor detailing the legal action taken, or
  • court documents

For a superannuation investment, evidence would be the latest statement and other documentation showing the:

  • current value of the investment, and
  • current status of the investment that shows the:
    • preserved amount, under the Superannuation Industry (Supervision) Act 1993
    • restricted non-preserved amount, paid on termination of employment
    • unrestricted non-preserved amount, previously met release conditions

If in doubt, check with your superannuation fund to see if any of the investment is accessible.

The latest statement must be the information that is current at the date of your application. If you have had a birthday since you received your last statement, you must obtain an updated statement as your access to the investment may have changed.