The Australian Government has made an announcement that dimming rates will be held steady for a year, giving pensioners some relief and enabling them to keep their Centrelink payments.
The move is part of the 2025 Federal Budget to enable seniors to keep up with growing inflation.
What are dimming rates?
Dimming rates are rates set by the government at which a person’s projected income from financial assets is assessed, even if actual earnings are higher or lower.
These rates apply to a range of financial assets such as shares, superannuation and bank accounts.
If your actual income is higher than the dimming rate, the government does not include the additional income in calculating Centrelink payments.
The Government presumes individuals will receive a certain rate on their financial investments, and this is the principle where pension benefits are calculated.
Who will be impacted?
This freeze in dimming rates will impact every individual who is receiving Centrelink payments, with over 460,000 pensioners most affected.
Their pension levels are based on dimming rates, and there will be no cut to their existing payment rates because of this move.
Dimming rates today
Since May 2020, dimming rates have remained at the following levels:
- ✅ Floor rate: 0.25% (on initial financial assets)
- ✅ Floor rate: 2.25% (on assets above a certain amount)
Typically, dimming rates are reviewed in accordance with the Reserve Bank of Australia’s cash rate, which is presently 4.10%.
But the Government has resolved to leave it frozen notwithstanding this.
Historical background to the dimming rate freeze
In 2022, the Coalition Government initially froze dimming rates for two years, giving relief to pensioners following an interest rate rise.
Now the Labor Government has extended this freeze to 1 July 2025.
But if the Government had raised dimming rates by 1%, it would have saved $1.8 billion over four years, or approximately $450 million annually.
Pensioners’ specific dimming rates The Government prescribed dimming rates are:
| Financial Asset Amount | Deeming Rate (Singles) | Deeming Rate (Couples) |
|---|---|---|
| First $62,600 | 0.25% | First $103,800 → 0.25% |
| Above $62,600 | 2.25% | Above $103,800 → 2.25% |
How are dimming rates applied?
For single pensioners: If their assets are as high as $62,600, the 0.25% dimming rate will come into action. Any amount exceeding this will go towards the 2.25% rate.
For couple pensioners: If their combined assets are up to $103,800**, the *0.25% dimming rate* will come into action. Any amount exceeding this will go towards the 2.25% dimming rate.
The dimming rate limits are revised on every 1 July to reflect inflation and cost of living.
Other Pensioner benefits in the 2025 Federal Budget
In addition to deeming rate freezing, the Labor Government has made some additional relief measures for pensioners in the 2025 Federal Budget.
PBS drug prices reduction
The Government has pledged to lower the cost of medicines on the Pharmaceutical Benefits Scheme (PBS) list if it is re-elected.
- ✅ The cost of PBS medicines will be lowered to $25 per prescription.
- ✅ This adjustment will take effect from 1 January 2026.
- ✅ This will affect 80% of PBS medicines.
PBS medicine costs to remain stable for pensioners
Moreover, the price of medicines for concession card holders and pensioners will be maintained at $7.70 per prescription until 2030.
Why is this Government decision important?
This Government decision is highly advantageous for pensioners because:
- Dimming rates will be maintained even with interest rate rises.
- Centrelink payments will be sustained.
- PBS medicine prices will be lower, making healthcare more affordable.
- Pensioners will be more financially secure.
Conclusion
Dimming rates freeze is a move that will bring economic stability to pensioners, granting them more economic benefits.
Moreover, the Labor Government’s move to cut down the cost of PBS medicines will give pensioners relief during periods of inflation.
These actions of the Government will turn out to be significant in consolidating the economic security of elderly citizens.
FAQs
Q1. What are deeming rates?
Deeming rates are government-assumed interest rates used to estimate income from financial assets when calculating Centrelink payments.
Q2. How does the deeming rate freeze benefit pensioners?
The freeze prevents pensioners from losing part of their Centrelink payments despite rising interest rates, allowing them to retain more benefits.
Q3. Until when will the deeming rates remain unchanged?
The Australian government has extended the freeze on deeming rates until July 1, 2025.
Q4. What are the current deeming rates?
0.25% on the first $62,600 (singles) or $103,800 (couples) in financial assets.
2.25% on amounts above these thresholds.
Q5. What other benefits does the budget provide for pensioners?
The government plans to cap PBS medicine costs at $25 per script (starting January 1, 2026) and freeze pensioner medicine costs at $7.70 per script until 2030.