Deeming rules are used to work out income from your financial assets. We add this to your other income and apply the income test to work out your payment rate.
What it means
Deeming is a set of rules used to work out the income created from your financial assets. It assumes these assets earn a set rate of income, no matter what they really earn.
What financial assets are
The main types are:
- savings accounts and term deposits
- managed investments, loans and debentures
- listed shares and securities
- some income streams
- some gifts you make
How it affects your payments from us
We include any deemed income as your income under the income test. The income test helps us work out how much income support we can pay you.
Benefits of deeming
The benefits are that it:
- helps keep your payments steady instead of going up and down based on the performance of your financial assets
- provides an incentive to invest, as any interest rate achieved above the deeming rates doesn’t count as income
- lets you choose the best investments for your needs, not how they may affect your payment
How we work out your deemed income
If you’re single
The first $51,200 of your financial assets has the deemed rate of 1.75% applied. Anything over $51,200 is deemed to earn 3.25%.
If you’re a member of a couple and at least one of you get a pension
The first $85,000 of your combined financial assets has the deemed rate of 1.75% applied. Anything over $85,000 is deemed to earn 3.25%.
If you’re a member of a couple and neither of you get a pension
The first $42,500 of each of your own and your share of joint financial assets has a deemed income of 1.75% per year. Anything over $42,500 is deemed to earn 3.25%.
If your investment return is higher than the deemed rates, the extra amount doesn’t count as your income.
Where the deeming rates come from
The Minister for Social Services sets these rates. They reflect expert advice about what the markets are doing.
Getting a deeming exemption
You may be able to get a deeming exemption in some cases.
If this happens, how much you actually earn from the investment is the income amount that counts for the income test. This actual income could be $0.
A deeming exemption won’t change the value of the investment for the assets test.
What may be exempt
- a failed financial investment
- some superannuation if it’s fully preserved or inaccessible
- an account that only contains money from a National Disability Insurance Scheme package
What won’t be exempt
You can’t get a deeming exemption just because an investment performs poorly. This includes:
- shares with negative returns
- companies or funds having short term problems
How to apply
You will need to talk to one of our Financial Information Service Officers and complete an application.
The Minister for Social Services is the only person who can grant a deeming exemption.
If they grant you a deeming exemption, they’ll decide the start date. In most cases this is:
- the date when you applied for the deeming exemption, or
- the date when an insolvency practitioner starts
The exemption keeps going until the reason for it no longer exists.
How they decide
The Minister considers a range of factors for each type of investment.
Factors include if:
- it would be unfair to apply the deeming rules in this case
- the investment is not providing a return
- you have access to any of the investment capital
- the reason why there are no returns and you can’t get the capital back is:
- a legal obstacle from a third party or someone other than the fund manager
- conditions that you couldn’t have foreseen and that weren’t in the product disclosure statement or prospectus
If there’s widespread impact from an investment company collapsing, there may be a deeming exemption for all investors. In this case you don’t need to apply for a deeming exemption. Just contact us to check if the group one covers you.
The Minister will consider why you can’t get your money. It could be because of:
- the rules of the fund
- a court order
- the regulations about super
You can’t get an exemption if you have access to any part of your super when you apply.
An exemption will also affect how we value the investment for the assets test.
Church and charitable institution development funds
Until 1 January 2010 many of these funds had a deeming exemption. Normal deeming rules now apply.
Your investment in one of these funds may still be exempt if you:
- invested before 2010
- were getting an income support payment then, and
- have been on the same payment ever since
If you stop getting the payment, the exemption will end for good.
The exemption is only for amounts you invested before 2010. Anything you put into the fund since then isn’t exempt.
Evidence we need from you
If you apply for a deeming exemption you need to give us proof of the reason for it.
Failed loan or investment
We may ask for:
- a report from the appointed insolvency practitioner
- a letter from your lawyer with details of the legal action you’ve taken to get your money back
- court documents
- the latest statement from the super fund. If you’ve had a birthday since then, you need to get a new statement
- documents showing the investment’s current value and status - this includes:
- the preserved amount
- the restricted non-preserved amount
- the unrestricted non-preserved amount
If in doubt, check with your fund to see if you have access to any of the investment now. If so, you can’t get an exemption.
Financial Information Service
- what to do if your investment seems to be failing
- how to apply for a deeming exemption