Be aware of major changes to age pension coming into effect

SMSFs and advisers should be aware of the four major changes applying to the age pension from 20 September, a superannuation legal consultant has said.

Michael Hallinan, special counsel for SUPERCentral, says the first and most significant of these changes is the deeming rates used for the income means test, which has increased by 50 basis points.

“The increase in the deeming rate by 50 basis points is the most significant change. The deeming rates (there are two rates – being the low deeming rate and the standard or higher deeming rate) determine the notional income of financial assets owned by age pensioners and individuals applying for the age pension,” he said.

“The low deeming rate applies to the first $64,200 for single pensioners/applicants and to the first $106,300 for pensioner couples/applicants of the value of financial assets, with the standard (or higher) deeming rate applying to the balance of the value of financial assets.”

Hallinan continued that from 20 September 2025, the low deeming rate will be 0.75 per cent and the standard (or higher) deeming rate will be 2.75 per cent, compared with the pre-20 September 2025 rates of 0.25 per cent and 2.25 per cent, respectively.

“Increasing the deeming rates will increase the amount of income counted for the income means test. All things being equal, the increase in the deeming rate will mean more income is deemed to have been earned from the financial asset, thereby reducing the age pension entitlement.”

“A simple illustration of the impact of the increase in the rate is that for each $1,000 of financial assets, the fortnightly age pension entitlement will decrease by $2.50. Before 20 September 2025, $1,000 of financial assets are deemed to produce $22.50 of income per fortnight.”

He continued that from 20 September, the same $1,000 of financial assets will be deemed to produce $27.50 of income per fortnight; an increase of $5.00 per fortnight, which, at the 50 per cent reduction rate, will decrease the age pension by $2.50 per fortnight.

The second major change is that the maximum rate of age pension will increase by $29.70 per fortnight for a single age pensioner and by $44.80 per fortnight for a pensioner couple who are both eligible for the age pension.

Hallinan said the next change to be aware of relates to the cut-off limits for part age pensions, which will increase.

“The part pension cut off limit (also known as the pension disqualifying income limit) will, from 20 September 2025, be $2,575.40 a fortnight (single age pensioner) and $3,934.00 (couple combined) which is an increase of $59.40 and $89.60 respectively.”

“The part pension cut off limit is the amount of counted income at which the pension entitlement under the income means test is nil. This limit automatically increases, by reason of the increase in the maximum age pension amount, by twice the increase in the maximum age pension amount (as the withdrawal rate is 50 per cent).”

Individuals who were previously excluded from the age pension due to the application of the income means test by a small amount should consider reapplying for the age pension.

Finally, he said there will be a change in the taxable income limit for entitlement to the Commonwealth Seniors Health Card.

From 20 September 2025, the income limit for entitlement to the Seniors Health Card will be $101,105 per annum for individuals (an increase of $2,080.00) and $161,768 per annum for couples (an increase of $3,328.00) – combined limit.

“Individuals and couples who would, but for the application of the age pension means test, be entitled to the age pension, will, however, be entitled to the Seniors Health Card if their income is less than the specified income limits.”

“Individuals and couples who have previously not satisfied the income test because their income exceeded the relevant income limit should consider applying for the Seniors Health Card from 20 September 2025.”

Keeli Cambourne

September 22 2025

smsfadviser.com