It has been four years since the deeming rates changed, but the government has responded announcing a rate cut from July 1, 2019. The lower rate reduces by 0.75 per cent and the upper rate by 0.25 per cent. The new rates announced are:
The rates are announced to change effective from July 1, 2019, but it will take some time to process so clients won’t see the change to pensions (and allowances) until September. At that time, a lump sum back payment will also be paid to reflect any increase due from July 1.
Who is affected?
Anyone receiving a full means-tested pension or non-means tested payments will see no change to payments. Nor will changes be seen by clients whose payment is determined under the assets test. This change will only see an increase to pension/allowance payments for those part-pensioners (allowees) whose payments are assessed under the income test.
Impact for aged care
The lower deeming rate will also flow through to means-test amount (MTA) calculations for clients and may reduce the MTA calculated (and means-tested fee payable) for some clients.
The lower deeming rates are unlikely to have much impact on the MTA for low-means clients as the income component is usually not a driver for these clients. For low-means clients, the MTA is normally impacted by assets only. But in some cases, a decrease may apply. These adjustments are not likely to be evident for existing aged care clients until the next quarterly MTA assessment due from September 20. Further clarification is required from the Department of Health on when the changes will apply to new aged care clients or those who request an interim review.
When a client leaves aged care, the refundable accommodation deposit starts to accrue interest at the lowest deeming rate plus 2 per cent. This was 3.75 per cent but will now reduce to 3 per cent.