Federal Budget 2025: In a significant move from the Federal Budget 2025, Centrelink pensioners are set to receive a financial boost with the government’s decision to extend the deeming rates freeze until July 1, 2026. This measure is aimed at shielding elderly Australians from potential cuts to their Age Pension entitlements due to rising interest rates and ongoing cost-of-living pressures.
Whether you’re a retiree, approaching retirement, or simply planning your financial future, understanding what this means is crucial. In this article, we’ll break everything down in a clear, easy-to-understand way. We’ll also provide expert insights, up-to-date data, and practical advice to help you make the most of this policy update.
Federal Budget 2025
| Feature | Details |
|---|---|
| Policy Update | Deeming rates freeze extended to July 1, 2026 |
| Target Group | ~460,000 Centrelink age pensioners |
| Current Deeming Rates | 0.25% on lower threshold, 2.25% on upper |
| Threshold for Singles | $62,600 |
| Threshold for Couples | $103,800 |
| Additional Budget Measures | PBS medicine cost reduction, energy bill relief, Medicare expansion |
| Official Source | Services Australia |
The Federal Budget 2025 deeming rates freeze is a well-timed and highly welcomed measure for Australian pensioners. With over 460,000 older Australians expected to benefit, the freeze offers stability during times of economic uncertainty. When combined with lower prescription costs, power bill assistance, and improved healthcare access, this budget signals a strong government commitment to supporting the ageing population.
Planning ahead and staying informed can help pensioners and pre-retirees make the most of these changes. As policies evolve, having a solid understanding of your rights and benefits ensures you’re not only protected but empowered.
What Are Deeming Rates?
Deeming rates are the rates the government uses to estimate the income you earn from financial assets, regardless of your actual earnings. Centrelink relies on these assumptions to assess eligibility and calculate the amount you receive in government payments like the Age Pension.
Your assets may include:
- Savings and transaction accounts
- Term deposits
- Shares
- Managed funds
- Superannuation (if you are over Age Pension age)
The deemed income is then used to apply the income test, one of the two key eligibility tests for Centrelink benefits (the other being the assets test).
Example:
If you’re a single pensioner with $80,000 in financial 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 amount is used to determine how much pension you’ll receive. It’s a simple system, but even a small increase in deeming rates could reduce your payments.
Why the Deeming Rates Freeze Matters
The freeze is a big deal, particularly in today’s financial climate. Interest rates have increased in response to inflation, which could have prompted a rise in deeming rates. However, by freezing the rates, the government ensures pensioners’ benefits remain stable.
Key Benefits:
- Stability: Protects against fluctuations that could lower pension payments
- Simplicity: Makes financial planning easier for retirees
- Support: Ensures older Australians aren’t penalised for saving
More than 460,000 pensioners are expected to benefit, according to Retirement Essentials. For many households living on fixed incomes, this continuation means peace of mind and better budgeting.
A Closer Look: Current Deeming Rates (2025)
For Singles:
- 0.25% on the first $62,600 of financial assets
- 2.25% on anything over that
For Couples (combined):
- 0.25% on the first $103,800
- 2.25% on the balance
These rates have not changed since May 2020 and are now guaranteed to remain unchanged until at least July 1, 2026. This is part of a broader effort to ensure income security for senior Australians.
Other Budget 2025 Benefits for Pensioners
Beyond the deeming rate freeze, the Federal Budget 2025 includes several key measures that aim to enhance the well-being and financial resilience of senior Australians.
1. Lower Pharmaceutical Costs
From January 1, 2026, the Pharmaceutical Benefits Scheme (PBS) prescription cap will drop to $25 per medicine, down from $31.60. For pensioners who rely on multiple medications, this could translate into hundreds of dollars in annual savings.
- More info: Visit the PBS official site.
2. Energy Bill Relief
The government will continue its program of electricity rebates, providing direct savings on power bills. Pensioners and low-income households will receive an average annual rebate of $300, helping to offset rising utility prices.
- This support is delivered via state and territory energy retailers.
3. Medicare Enhancements
To make healthcare more affordable and accessible, the budget includes:
- Expanded bulk billing incentives for GPs
- Greater investment in telehealth services
- Preventative health programs for chronic conditions
- More details at the Department of Health.
4. Rent Assistance Increase
An additional boost to Commonwealth Rent Assistance was also included in the budget, aimed at supporting renters facing steep increases. This change helps older Australians who are renting privately.
Practical Tips: How to Make the Most of These Changes
Whether you’re receiving a pension already or planning to apply, these tips can help ensure you maximise your entitlements:
1. Review Your Centrelink Records
Ensure that all your assets and income details are accurate and up to date. Mistakes or outdated information can result in overpayments or reduced benefits.
2. Understand the Impact on Investments
If you have financial investments, understand how deeming applies to them. A financial planner can help you structure your finances to reduce the impact of deemed income.
3. Claim All Eligible Benefits
In addition to your Age Pension, don’t forget you may be eligible for:
- Concession cards (e.g. Pensioner Concession Card)
- Discounts on utilities, public transport, and healthcare
- Car registration and license fee waivers in some states
4. Speak to a Financial Adviser
A Centrelink-savvy financial adviser can:
- Help you navigate complex rules
- Show you how to maximise your entitlements
- Prepare for future changes in income or eligibility
5. Stay Up to Date
Subscribe to government newsletters or set reminders to check:
- Services Australia
- MoneySmart
- MyGov
Knowledge is power when it comes to retirement planning.
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FAQs About Federal Budget 2025
Q1: What happens if deeming rates go up?
If rates rise after the freeze ends in 2026, deemed income could increase, possibly reducing pension payments. This is why the freeze is beneficial—it protects entitlements in the short term.
Q2: Do actual returns on investments count?
No. Centrelink uses deemed income, not actual returns. Whether your bank account earns 1% or 5%, the same deeming rate applies.
Q3: I’m applying for the Age Pension soon—does this apply to me?
Yes. The freeze applies to new and existing Age Pension recipients. Deeming rates are used for all applicants.
Q4: Is the freeze automatic or do I need to apply?
It’s automatic. No need to apply or fill out extra forms. Centrelink will continue using the frozen rates until July 2026.
Q5: Where can I get expert help?
You can speak with a Centrelink Financial Information Service (FIS) officer for free. Or work with a qualified adviser with experience in retirement planning.
