A not unexpected measure in the budget was the extension of the existing two-year freeze on deeming rates at their current levels by a further 12 months. The prevailing lower deeming rate of 0.25 per cent and upper deeming rate of 2.25 per cent will remain frozen until June 30, 2025.A change in deeming rates would alter pension payments for retirees.
Initially, deeming rules put a notional income on bank accounts only, but from 1 July 1996 it was extended to other financial investments, such as managed funds, shares and superannuation , though it was never applied to property assets. The big question now is whether any government will ever move the deeming rates in line with the market.
When the cash rate was 1 per cent in 2019, deeming rates were 1 per cent and 3 per cent respectively. A year later when the cash rate was 0.25 per cent, they fell again to 0.25 per cent and 2.25 per cent, where they still sit – because during the pandemic the rates were frozen until 30 June 2024.Obviously, deeming rates should go up but with an election less than a year away there was no way the Albanese government was going to make changes now.
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