The 2025 Federal Budget, announced on March 25, 2025, has brought welcome news for Australia’s pensioners, particularly those relying on Centrelink’s Age Pension. With the cost of living continuing to challenge retirees on fixed incomes, the government has introduced measures to provide financial stability and relief. A key highlight is the extension of the deeming rates freeze until July 1, 2026, benefiting over 460,000 Age Pension recipients. Alongside this, modest pension increases, energy rebates, and reduced healthcare costs aim to ease economic pressures. This article dives into the details of these changes, their implications for pensioners, and practical steps to maximize your entitlements in 2025.
Deeming Rates Freeze: A Financial Lifeline for Pensioners
What Are Deeming Rates?
Deeming rates are the assumed rates of return that Centrelink applies to financial assets—such as savings accounts, shares, term deposits, and superannuation—to calculate income for means-tested payments like the Age Pension. Instead of assessing actual investment returns, Centrelink uses fixed rates to ensure consistency and simplicity. The current rates, frozen since May 2020, are:
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Singles: The first $62,600 of financial assets is deemed to earn 0.25%, with amounts above this earning 2.25%.
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Couples: The first $103,800 of combined financial assets is deemed at 0.25%, with amounts above at 2.25% (if at least one partner receives a pension).
These thresholds are indexed annually on July 1 to reflect cost-of-living changes.
Why the Freeze Matters
The 2025 Federal Budget extends the deeming rates freeze until July 1, 2026, a decision that protects pensioners from potential payment reductions due to rising interest rates. Normally, deeming rates track the Reserve Bank of Australia’s (RBA) cash rate, currently at 4.35%. If rates were to rise to match this, deemed income would increase, potentially reducing pension payments or disqualifying some recipients. For example, a single pensioner with $80,000 in financial assets currently has $548 deemed annually ($156.50 from the first $62,600 at 0.25%, plus $391.50 from the remaining $17,400 at 2.25%). At a 4.35% rate, this could jump to $3,480, significantly impacting their pension.
The freeze, costing the government an estimated $450 million annually, ensures stability for approximately 460,000 Age Pensioners and 900,000 total Centrelink recipients. This measure, first introduced in 2020 and extended multiple times, reflects a commitment to shielding retirees from economic volatility, especially ahead of the 2025 federal election.
Potential Risks Post-2026
While the freeze provides short-term relief, uncertainty looms after July 1, 2026. Advocates like COTA Australia and National Seniors Australia have warned that a sharp increase in deeming rates could reduce pensions by up to $3,300 annually for some retirees. Pensioners are urged to stay informed and plan for potential changes by consulting Centrelink’s Financial Information Service (FIS) or a financial planner.
Age Pension Rate Increases for 2025
Effective from March 20, 2025, Age Pension rates have been indexed to account for inflation, based on the higher of the Consumer Price Index (CPI), Pensioner and Beneficiary Living Cost Index (PBLCI), or Male Total Average Weekly Earnings (MTAWE). The new fortnightly rates, applicable through September 19, 2025, are:
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Singles: $1,149 per fortnight ($29,874 annually), up $4.60 from $1,144.40.
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Couples (combined): $1,732.20 per fortnight ($45,037 annually), up $7.00 from $1,725.20, with each partner receiving $866.10.
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Couples separated due to illness: Each receives the single rate, totaling $2,298 per fortnight ($59,748 annually).
These rates include the base pension, Pension Supplement, and Energy Supplement. While the increase is modest—equating to $2.30 per week for singles—every dollar helps pensioners facing rising costs for essentials like groceries and utilities.
Transitional Rates
Pensioners on transitional rates (those receiving part pensions before September 20, 2009) have different rates, which are also indexed. Exact figures vary by individual circumstances, so affected pensioners should check their myGov account or contact Centrelink for details.
Additional Cost-of-Living Support
The 2025 Federal Budget includes several measures to support pensioners beyond the deeming freeze and pension increases:
Energy Bill Relief
All households, including pensioners, will receive a $150 energy bill rebate, extended until December 31, 2025, delivered in two quarterly payments. This $8.5 billion initiative aims to alleviate the burden of rising utility costs. Additionally, pensioners may qualify for an annual $300 energy rebate, further reducing financial strain.
Cheaper Medicines
From January 1, 2026, Pharmaceutical Benefits Scheme (PBS) medicines will be capped at $25 per script, down from $31.60. For pensioners and concession cardholders, PBS costs remain frozen at $7.70 until 2030, ensuring affordable access to essential medications.
Healthcare Enhancements
The government has allocated $8.5 billion over four years to boost bulk billing at GP clinics, aiming for nine out of 10 doctor visits to be free by 2030. From November 1, 2025, all Medicare-eligible Australians can access bulk-billed GP care at participating clinics. This is a significant win for pensioners, who often face high out-of-pocket healthcare costs.
Commonwealth Rent Assistance
While no increase was announced for 2025, the 10% boost to Commonwealth Rent Assistance (CRA) in 2024 continues to support pensioners renting privately. Pensioners should verify their eligibility for CRA and other concessions to reduce housing costs.
One-Off Bonus Payments
Eligible Age Pension recipients will receive two tax-free, non-assessable cost-of-living payments in 2025, automatically credited between April 15 and April 30:
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$250 Payment: To assist with general living expenses.
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$750 Payment: To cover costs like healthcare and utilities.
To qualify, pensioners must be receiving the Age Pension as of May 1, 2025. These payments do not affect regular pension entitlements, providing a timely financial boost.
Eligibility for the Age Pension
To receive the Age Pension in 2025, applicants must meet the following criteria:
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Age: Be 67 or older (you can apply up to 13 weeks before turning 67).
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Residency: Be an Australian resident for at least 10 years, with at least five continuous years, or qualify under an international social security agreement.
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Income and Assets Tests: Your income and assets must fall below Centrelink’s thresholds. For 2025, the income test allows singles to earn up to $212 per fortnight and couples up to $376 combined without affecting payments. The assets test excludes the family home but includes financial investments, with thresholds varying by homeownership status.
Pensioners must update their income and asset details with Centrelink to ensure accurate payments. Errors can lead to overpayments or underpayments, which may need repayment or adjustment.
Practical Tips for Pensioners
To make the most of the 2025 Federal Budget changes, pensioners can take these steps:
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Update Centrelink Details: Ensure your income, assets, and personal information are current via myGov or by contacting Centrelink. This prevents payment errors.
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Understand Deeming Impacts: Review how deeming rates affect your pension, especially if you have investments. A financial planner can help optimize your asset structure.
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Claim All Entitlements: Check eligibility for additional benefits like the Commonwealth Seniors Health Card, rent assistance, or concession cards. Use Centrelink’s online calculators or consult an FIS officer.
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Plan for 2026: Prepare for potential deeming rate changes post-July 2026 by exploring options like reallocating investments to non-deemed assets (e.g., paying down a mortgage).
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Stay Informed: Subscribe to government newsletters or follow trusted sources like Services Australia to stay updated on policy changes.
Community and Advocacy Concerns
While the deeming rates freeze and other measures are positive, some pensioners and advocacy groups argue they fall short. National Seniors Australia has called for a review of income and assets test taper rates, which reduce pensions sharply for modest increases in income or assets. Others, like COTA Australia, emphasize the need for transparency if deeming rates rise post-2026, as sudden changes could destabilize retirees’ budgets. Pensioners are encouraged to engage with local MPs or advocacy groups to voice concerns and influence future policies.
Final Words
The 2025 Federal Budget delivers meaningful support for Centrelink pensioners through the deeming rates freeze, modest pension increases, energy rebates, and healthcare improvements. These measures provide stability and relief for over 460,000 Age Pension recipients navigating rising living costs. However, with the deeming freeze set to end in July 2026, pensioners must plan ahead to mitigate potential impacts. By staying informed, updating Centrelink details, and seeking professional advice, retirees can maximize their benefits and secure their financial future. The government’s commitment to pensioners is clear, but ongoing advocacy will ensure their needs remain a priority in future budgets.
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