Social Security (Deeming Threshold Rates) Determination 2013 (No. 2)

Administered by Department of Social Services

Legislation au F2013L01854 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

 

Social Security (Deeming Threshold Rates) Determination 2013 (No. 2)

 

 

Summary

 

The Social Security Act 1991 (the Act) prescribes rules for calculating income from financial investments.  These rules are generally known as deeming rules.  Under these rules the value of a customer's financial assets are added together and income is deemed on these assets using a ‘below threshold rate’ and an ‘above threshold rate’.  The first $46,600 of a single person’s financial assets (or $77,400 for pensioner couples and $38,700 for each member of a couple who is a social security allowance recipient) is deemed to earn the below threshold rate, and the balance over this amount is deemed to earn the above threshold rate.

 

Background

 

Under section 1082 of the Act the below threshold and above threshold rates for the purposes of Division 1B of Part 3.10 of the Act are determined, by legislative instrument, by the Minister. From 20 March 2013 until the commencement of this instrument, the below threshold rate is 2.5 per cent and the above threshold rate is 4 per cent.

 

Deeming rates are subject to continuing review to ensure they are set to reflect the returns available in the market to people for their financial investments. The deeming rate is regularly reviewed by analyzing the medium to long term trends in a wide range of investment indicators such as term deposit rates, cash management account returns, changes in share prices, share dividend yields, managed investment returns, and data and analysis from the Reserve Bank of Australia and Treasury.

 

The principles that are considered when reviewing the deeming rates include:

  • that deeming should be a simple and fair way to assess income from financial investments, so that people with the same amount held in different financial assets receive a similar assessment;
  • it should reduce the extent to which income support payments fluctuate; and
  • it should simplify investment choice to encourage people to choose investments on their merits.

 

Based on these factors, it is considered appropriate to reduce the below threshold rate to 2 percent and the above threshold rate to 3.5 percent, from 4 November 2013.


Explanation of Provisions

 

Section 1 and 2 of the Determination are mechanical provisions that provide for the name of the instrument and its commencement, respectively.

 

Section 3 revokes the Social Security (Deeming Threshold Rates) Determination 2013.

 

Section 4 provides that ‘Act’ means the Social Security Act 1991.

 

Section 5 sets out the below threshold rate of 2 per cent.

 

Section 6 sets out the above threshold rate of 3.5 per cent.

 

 

Regulatory Impact Analysis


The Determination does not require a Regulatory Impact Statement nor a Business Cost Calculator Figure. The Determination is not regulatory in nature and will not impact on business activity and will have no, or minimal, compliance costs or competition impact.

 

Consultation

Consultation for this Determination is not necessary.The Determination is of a machinery nature. Existing arragements are not substantially altered; the Determination does not change the operation of the deeming provisions. Rather, deeming rates are being changed, informed by returns available in the market for financial investments.

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Social Security (Deeming Threshold Rates) Determination 2013 (No. 2) (the Determination)

 

The Determination is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Overview of the Legislative Instrument

 

The Determination will have the effect of changing the deeming rates from 2.5 per cent and 4 per cent for the below and above threshold deeming rates respectively, to 2 and 3.5 per cent.  The deeming rates are used to assess income from financial investments for social security and veterans’ affairs pension/allowance purposes. The first $46,000 of a single person’s financial assets (or $77,440 for pensioner couples and $38,700 for each member of a couple who is a social security allowance recipient) is deemed to earn the below threshold rate, and the balance over this amount is deemed to earn the above threshold rate.

 

The deeming rates assume that financial investments are earning a certain rate of income, regardless of the amount of income they are actually earning. If a person earns more than these rates, the extra income is not assessed.

 

Deeming rates are subject to continuing review to ensure they are set to reflect the returns available in the market to people for their financial investments. The deeming rate is regularly reviewed by analysing the medium to long term trends in a wide range of investment indicators such as term deposit rates, cash management account returns, changes in share prices, share dividend yields, managed investment returns, and data and analysis from the Reserve Bank of Australia and Treasury.

 

As a result of the reduction in the below and above threshold deeming rates under the Social Security (Deeming Threshold Rates) Determination 2013, this Determination may increase the rate at which individuals receive social security and veterans’ affairs pensions and allowances.

 

Human rights implications

 

Changes to the deeming rate are compatible with human rights.

 

These changes, whether an increase or a decrease, are made to ensure that the income testing of social security payments operates consistently and fairly as financial market conditions change. Where returns from financial products are high, the deeming rate is set higher to ensure that social security recipients who hold financial products have more income assessed for the relevant income test. Conversely, when returns are low, the deeming rate is set lower to enable less income to be counted for the assessment of recipients’ income support payments.

 

Deeming is merely an assessment methodology and, as such, its application does not change the core parameters of the relevant income test which include the income free threshold and taper rates.

 

Conclusion

 

The Determination is compatible with human rights.

 

 

 

 

 

 

 

The Hon Kevin Andrews MP, Minister for Social Services

 

 

Overview

The Social Security (Deeming Threshold Rates) Determination 2013 (No. 2) was enacted to address the need for a dynamic and fair system of assessing income from financial investments for social security purposes. The Social Security Act 1991 introduced deeming rules that aggregate the value of financial assets and apply income rates to these assets, with a below and above threshold rate to reflect different levels of investment. This determination was introduced by the Minister under section 1082 of the Act to adjust these rates based on market trends, ensuring they accurately reflect the returns available in the market. The policy objective is to maintain fairness and consistency in the assessment of social security payments by adapting to changes in financial market conditions, thereby supporting a stable and predictable social security system. The determination was made in response to the need for regular review of deeming rates to ensure they accurately represent market returns, thus impacting the income assessment for social security recipients. The rates were set at 2 per cent below threshold and 3.5 per cent above threshold, effective from 4 November 2013. This adjustment aims to ensure that social security payments remain consistent and fair, considering the actual returns on financial investments. The determination is compatible with human rights, as it ensures that the assessment methodology for income testing is fair and does not alter the fundamental parameters of the income test, such as the income-free threshold and taper rates.

Scope and Application

The Social Security (Deeming Threshold Rates) Determination 2013 (No. 2) applies to the deeming rates used under the Social Security Act 1991 to calculate income from financial investments for the purposes of assessing eligibility for social security benefits. The deeming rates are applied to individuals and couples who hold financial assets, with different thresholds for single individuals, pensioner couples, and members of a couple where one is a social security allowance recipient. The instrument sets the below threshold rate at 2 per cent and the above threshold rate at 3.5 per cent, applicable from 4 November 2013, and replaces previous rates of 2.5 per cent and 4 per cent. The rates are determined by the Minister for Social Services and are subject to ongoing review based on market trends to ensure they reflect actual investment returns. The Determination has a Commonwealth jurisdictional reach and does not require a Regulatory Impact Statement, as it is not considered regulatory in nature and does not substantially alter existing arrangements.

Key Provisions

The Social Security (Deeming Threshold Rates) Determination 2013 (No. 2) amends the deeming rates used for assessing income from financial investments under the Social Security Act 1991 (the Act). Specifically, section 5 of the Determination sets the below threshold rate at 2 per cent, and section 6 sets the above threshold rate at 3.5 per cent. These rates apply to the first $46,600 of a single person’s financial assets, with different thresholds for pensioner couples and social security allowance recipients. The below threshold rate is applied to the first specified amount, while the above threshold rate applies to any amount over this specified limit. The Act imposes several obligations on individuals subject to deeming provisions. Firstly, they must report their financial assets accurately and completely to the relevant authorities to ensure proper assessment of their income. Secondly, individuals must understand how these deeming rates affect their social security payments. If they earn more from their financial investments than the deemed income, the extra income is not assessed, but they must still declare it. The Act also requires the Minister to review these rates regularly to ensure they reflect current market conditions. For breach of the obligations outlined in the Act, there are potential civil and criminal consequences. While the Determination itself does not specify penalties, the Act provides for various offences related to the provision of false or misleading information, which could lead to fines or imprisonment. For example, under section 212 of the Act, knowingly providing false information can result in fines up to $13,200 or imprisonment for up to two years, or both. In addition, under section 213, failing to report income can lead to similar penalties. The principles underpinning the deeming rates include ensuring a fair and simple assessment of income from financial investments, reducing fluctuations in income support payments, and simplifying investment choices. The rates are reviewed regularly based on medium to long-term trends in various investment indicators to ensure they accurately reflect market returns. These reviews are crucial for maintaining the integrity and fairness of the social security system.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.