The Australian social security landscape is undergoing a significant transition this February as two major financial mechanisms—indexation increases and deeming rate adjustments—intersect. For millions of Australians, these updates represent a delicate balancing act between rising cost-of-living support and the government’s shift toward pre-pandemic financial assessments. While indexation typically brings a welcome boost to fortnightly bank balances, the concurrent rise in deeming rates serves as a reminder that the “freeze” era has officially ended. This article explores how these changes affect pensioners, job seekers, and families, and what the new data tells us about the future of welfare support.
Understanding the February Indexation Boost
Indexation is the government’s primary tool for ensuring that welfare payments don’t lose their purchasing power as the price of bread, milk, and electricity climbs. These adjustments are usually calculated based on the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI). In early 2026, many Australians on Youth Allowance, Austudy, and Carer Allowance saw their first adjustments of the year. However, the February cycle specifically targets a broader range of supplements and base rates for those nearing the major March pension overhaul. These incremental increases are designed to act as a financial buffer, helping low-income households absorb the persistent inflationary pressures seen across the retail and energy sectors.
The Return of Active Deeming Rates
For several years, the federal government maintained a “freeze” on deeming rates to protect retirees from losing their pension entitlements during the volatile interest rate climate of the COVID-19 era. That period of stability has now given way to a more dynamic environment. As of late 2025 and into February 2026, the Minister for Social Services has moved to raise deeming rates to better reflect the actual returns Australians can now get from high-interest savings accounts and term deposits. While this move is intended to modernize the system, it means that the “assumed” income from your assets is now higher, which can lead to a slight reduction in the pension amount for those assessed under the income test.
Comparative Impact on Primary Payments
The dual nature of these changes means that while your base payment might go up due to indexation, the income test might pull back a portion of that increase if you hold significant financial assets. For a single pensioner with modest savings, the indexation boost often outweighs any impact from deeming. However, for self-funded retirees or part-pensioners with substantial investment portfolios, the February updates require careful calculation. The government has emphasized that the increases to deeming rates are “gradual,” aiming to prevent a “cliff-effect” where recipients suddenly lose eligibility for concession cards or supplements.
Data Overview: Payment Rates and Deeming Thresholds
The following table provides a snapshot of the current rates and the updated deeming thresholds that impact how much “income” Centrelink assumes you are earning from your investments.
| Category | Lower Deeming Rate | Upper Deeming Rate | Single Asset Threshold | Couple Asset Threshold |
| Current Rates | 1.25% | 3.25% | $64,200 | $106,200 |
| Previous Rates | 0.75% | 2.75% | $64,200 | $106,200 |
| Indexation Type | CPI / PBLCI Linked | Market Performance | Reviewed Annually | Reviewed Annually |
Navigating the Income and Assets Test
One of the most complex parts of the February update is determining whether you are “income tested” or “assets tested.” If your financial assets—like bank accounts, shares, and superannuation in the pension phase—are high, the new 3.25% upper deeming rate might push your assessed income higher than it was last year. This doesn’t necessarily mean your payment will drop, as the indexation of the base rate provides a lifting floor. The goal of the Department of Social Services is to ensure that the system remains sustainable while encouraging Australians to seek the best possible returns on their private savings without being unfairly penalized.
Preparing for the March Pension Milestone
While February brings essential updates for students and certain allowance recipients, it also serves as the precursor to the massive March 20 indexation. Historically, the March update is when the Age Pension, Disability Support Pension (DSP), and Carer Payment see their most substantial biennial increases. By aligning deeming rate hikes with these indexation periods, the government attempts to “soften the blow.” For many, the $20 to $30 fortnightly increase expected in the coming weeks will be the primary focus, effectively neutralizing the minor changes caused by the revised deeming percentages.
Managing Your Portfolio and Reporting
As these rates shift, it is more important than ever for Centrelink recipients to keep their asset details up to date. If the value of your shares has dropped or you have spent a portion of your savings on home repairs, reporting these changes can actually increase your fortnightly payment. Conversely, ignoring the new deeming environment could lead to overpayment debts if your investments have grown significantly. Utilizing the “Express Plus” mobile app or the myGov portal remains the fastest way to ensure your financial profile matches the current 2026 benchmarks.
FAQs
Q1: Do I need to apply for the indexation increase?
No, indexation is an automatic process. If your payment is eligible for an increase, it will be applied to your account automatically on the scheduled date.
Q2: Will the higher deeming rate make me lose my Pensioner Concession Card?
Most recipients will not lose their cards. The government adjusts the income and asset limits alongside the rates to ensure that the majority of people retain their fringe benefits even as rates rise.
Q3: How often do deeming rates change?
Unlike indexation, which happens on fixed dates (usually March and September, or January for student payments), deeming rates are set by the Minister and can be changed whenever market conditions shift significantly.
