Minister for Families and Community Services Jenny Macklin announced on Saturday the new deeming rates for social security recipients.
Deeming is a calculation that is used to generate an estimate of income earned on the financial assets of a person, and is used in the calculation of the age pension assets test.
For example, let us consider a single age pensioner with $100,000 in a bank account. The new deeming rules say that the first $39,400 is deemed to earn 4% and the remainder 6%. Therefore, for income test purposes, the single age pensioner would be deemed to have earned $5,212.
Here is the important part. It does not actually matter if that person earns more than the $5,212. For the income test purposes, they are only deemed to earn $5,212.
In fact, an article on the website of the Department of Families, Community Services and Indigenous Affairs, says: "Deeming also encourages people to consider earning better returns on their investments. Prior to the introduction of deeming, many income support recipients elected to receive little or no income from their savings."
The whole point of deeming is that it provides a simple assessment of income, and then encourages people to seek higher investment returns without having to worry about being penalised under the Centrelink income test.
To find out more about deeming take a look at Scott Francis' Eureka Report acrticle - Deeming: don't be short changed published in August. NB - The deeming rates quoted in the article are not the new rates.