Social Security (Deeming Threshold Rates) Determination 2015 (No. 1)

Administered by Department of Social Services

Legislation au F2015L00312 Not in force Legislative Instrument

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EXPLANATORY STATEMENT

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 $48,000 of a single person’s financial assets (or $79,600 for pensioner couples and $39,800 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 4 November 2013 until the commencement of this instrument, the below threshold rate is 2 per cent and the above threshold rate is 3.5 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 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.

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 1.75 per cent and the above threshold rate to 3.25 per cent, from 20 March 2015.

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 (No. 2).

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

Section 5 sets out the below threshold rate of 1.75 per cent.

Section 6 sets out the above threshold rate of 3.25 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 2015 (No. 1) (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 per cent and 3.5 per cent for the below and above threshold deeming rates respectively, to 1.75 and 3.25 per cent. The deeming rates are used to assess income from financial investments for social security and veterans’ affairs pension/allowance purposes. The first $48,000 of a single person’s financial assets (or $79,600 for pensioner couples and $39,800 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.

As a result of the reduction in the below and above threshold deeming rates under the Social Security (Deeming Threshold Rates) Determination 2015 (No. 1), 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 Scott Morrison MP, Minister for Social Services

Overview

The Social Security (Deeming Threshold Rates) Determination 2015 (No. 1) was enacted to adjust the deeming rates under the Social Security Act 1991, which are used to calculate income from financial investments for social security purposes. The objective of this legislative instrument is to ensure that the deeming rates reflect the returns available in the market for financial investments, thereby maintaining fairness and consistency in the assessment of income for social security and veterans' affairs pensions and allowances. This Determination was made by the Minister for Social Services and reduces the below threshold rate from 2 per cent to 1.75 per cent, and the above threshold rate from 3.5 per cent to 3.25 per cent, effective from 20 March 2015. This adjustment aims to align the deeming rates with the prevailing market conditions, thereby potentially increasing the rate at which individuals receive social security and veterans’ affairs pensions and allowances. The changes are compatible with human rights, as they ensure the income testing of social security payments operates fairly and consistently with changing financial market conditions. The Determination is not regulatory in nature and does not require a Regulatory Impact Statement or a Business Cost Calculator Figure. It is of a machinery nature and does not substantially alter existing arrangements. Instead, it updates the deeming rates to reflect the returns available in the market for financial investments. This approach ensures that social security recipients with financial investments have their income assessed accurately and consistently, regardless of the actual income earned from their investments. By regularly reviewing and adjusting the deeming rates, the legislation aims to simplify investment choice and encourage individuals to choose investments based on their merits rather than potential impacts on social security payments.

Scope and Application

The Social Security (Deeming Threshold Rates) Determination 2015 (No. 1) applies to individuals and couples who are recipients of social security and veterans’ affairs pensions and allowances, under the Social Security Act 1991. This legislation governs the calculation of income from financial investments by applying deeming rates to assess the value of a person's financial assets. Specifically, it sets the below threshold rate at 1.75 per cent for the first $48,000 of a single person's financial assets, $79,600 for pensioner couples, and $39,800 for each member of a couple where one member is a social security allowance recipient, while the balance over these amounts is deemed to earn the above threshold rate of 3.25 per cent. This instrument applies on a national level across Australia and is not restricted to any particular jurisdiction. While the Determination itself does not provide for exclusions or exemptions, the deeming rates are subject to review and adjustment to ensure they reflect market conditions, and any changes made by subordinate instruments will also apply nationally.

Key Provisions

The Social Security (Deeming Threshold Rates) Determination 2015 (No. 1) introduces new rates for calculating deemed income from financial investments under the Social Security Act 1991. The determination specifies a below threshold rate of 1.75 per cent and an above threshold rate of 3.25 per cent, effective from 20 March 2015 (sections 5 and 6). These rates are applied to the value of an individual’s financial assets to calculate income for the purposes of determining eligibility for social security and veterans’ affairs pensions and allowances. The first $48,000 of a single person’s financial assets (or $79,600 for pensioner couples and $39,800 for each member of a couple where one is a social security allowance recipient) is assessed at the below threshold rate, with any amount exceeding these thresholds assessed at the above threshold rate. The determination imposes obligations on individuals subject to the deeming rules to accurately report the value of their financial assets. This ensures that their income is correctly assessed for the purposes of social security and veterans’ affairs payments. The deemed income calculated using the prescribed rates is then used to determine the individual's eligibility and the amount of any payments they may receive. The determination also mandates that these rates be applied consistently across different types of financial assets to ensure fairness and simplicity in the income assessment process. There are no specific offences or penalties outlined within the determination itself. However, any failure to comply with the requirements to accurately report financial assets or to adhere to the deemed income rates could result in civil or criminal consequences under the Social Security Act 1991. Such consequences may include fines, imprisonment, or other penalties as prescribed by the Act. The maximum penalties for offences under the Social Security Act can include fines of up to $22,200 for individuals and $111,000 for corporations, in addition to potential imprisonment terms. The determination ensures that the deeming rates are reflective of actual market returns, thus maintaining the integrity of the social security system.

Area of Law: Social Security Law
Instrument: Legislative Instrument
Concepts: Commencement Provisions; Regulatory Standards; Enforcement Powers

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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.

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