Deeming rules apply to your financial investments and help us work out your rate of payment.
The deeming rules are a central part of the social security income test. They’re used to assess income from financial assets for Social Security and Veterans' Affairs income support payment purposes. Deeming assumes that financial investments are earning a certain rate of income, regardless of the amount of income they’re actually earning. If income support payment customers earn more than these rates, the extra income isn’t assessed.
The main types of financial assets are:
- savings accounts and term deposits
- managed investments, loans and debentures
- listed shares and securities
- account-based income streams from 1 January 2015, and
As Family Tax Benefit is based on taxable income, it’s not affected by deeming.
Deeming is a simple and fair way to assess income from financial investments, as:
- customers with the same amount held in different financial investments receive a similar assessment
- it reduces the extent to which income support payments fluctuate
- it increases incentives for self-provision because returns above the deeming rate are not counted as income, and
- it simplifies choice of investments, as it encourages you to choose investments based on their merits, rather than the impact on your payment
Deeming is used to calculate income for assessment of your payment.
From 1 July 2017:
- if you're single and receive an income support payment, the first $50,200 of your financial investments is deemed to earn income at 1.75% per annum and any amount over that is deemed to earn income at 3.25% per annum
- if you're a member of a couple and at least one of you receive a pension, the first $83,400 of your and your partner's combined financial investments are deemed to earn income at 1.75% per annum and any amount over that is deemed to earn income at 3.25% per annum, or
- if you're a member of a couple and neither of you receive a pension, the first $41,700 for each of your own and your share of jointly owned financial investments are deemed to earn income at 1.75% per annum and any amount over that is deemed to earn income at 3.25% per annum
If you earn more than the deemed rates
If your investment return is higher than the deemed income we calculate, the extra income doesn't count towards your assessable income for your income support payment.
Setting the deeming rates
Deeming rates are continually monitored to ensure that they're appropriate and reflect returns across a range of investment choices available in the market.
Deeming rates are set by the Minister for Social Services.
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 income support can be paid to you.
Deeming exemptions are granted to financial investments under special circumstances. Examples include:
- when a financial investment has failed
- some superannuation investments where funds are fully preserved or inaccessible
- an account that only contains funds paid to participants for a funded package of support through the National Disability Insurance Scheme
If an investment is granted an exemption, your assessable income is the return you actually earn from the investment, not the deemed amount. If all income from the investment has ceased, we assess your income as nil.
Exemptions aren't granted due to poor investment performance, such as shares producing negative returns, or companies or funds experiencing short term difficulties. Deeming exemptions don't alter the assessable asset value of an investment.
Who can exempt an investment from deeming
The Minister for 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, it's either 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.
Deeming exemption guidelines
There are different guidelines for different types of investments. The Minister will take into account various factors for each type of investment when considering an exemption.
Failed investments with a company or financial institution
- whether the purpose of deeming rules are compromised
- whether the investment is providing a return
- whether the investor has access to any of the investment capital, and
- if the cessation of returns and the inaccessibility of capital has been caused by either:
- a legal impediment imposed by a third party other than the fund manager, or
- conditions that weren't reasonably foreseeable when the investor obtained the investment, or weren't 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. Individual investors don't then need to apply for an exemption from deeming for that particular investment. If this applies to you, contact us to confirm that a deeming exemption has been granted for you.
The Minister will consider if the investment is inaccessible because:
- the rules of the superannuation fund prevent release of the investment
- it's subject to an order of the court or the operation of the superannuation regulations
Superannuation exemptions are provided for individual superannuation investments rather than for a superannuation product itself. You mustn't have access to any part of your superannuation investment, including interest, at the time of applying for the exemption.
An exemption for a superannuation investment applies to both the income and asset values of the investment, 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 automatically in the past. These exemptions ended on 1 January 2010.
For new customers, this means that even though a particular fund may have been granted an exemption in the past, normal deeming provisions now apply.
For existing customers this means that any previously granted exemption will continue if you keep receiving an income support payment. If you stop receiving a payment, the exemption will end and won't be reinstated if you claim the payment again.
Any funds added to an existing investment in a church and charitable institutions’ development fund on or after 1 January 2010 won't be granted an exemption from the deeming provisions.
Evidence you need to provide
If you're requesting a deeming exemption for a loan or financial investment that has failed, you need to provide evidence that the relevant criteria are 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
If you're requesting a deeming exemption for a superannuation investment, the evidence you need to provide is the latest statement and other documentation showing:
- the current value of the investment, and
- the current status of the investment showing:
- the preserved amount, under the Superannuation Industry (Supervision) Act 1993
- the restricted non-preserved amount, paid on termination of employment
- the 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's current at the date of your application. If you've had a birthday since you received your last statement, you must obtain an updated statement. This is because your access to the investment may have changed.
Financial Information Service
Call 132 300 to make an appointment with a Financial Information Service officer who can:
- discuss your options should you believe that your investment is no longer performing as outlined in the fund’s Product Disclosure Statement, and
- help you understand how to apply for a deeming exemption if it is impacting your payment