Nick Bruining: The big Centrelink winners (and losers) in Chalmers’ can-kicking Budget

Jim Chalmers has conveniently drop-kicked a cut in almost 880,000 pensions and allowances past the next election, but a big proportion of Centrelink customers will receive a little extra from last week’s Federal Budget.

The Government says more than 876,000 welfare payment recipients will benefit from the announcement of an extension to a freeze in Centrelink’s deeming rates until July 2025.

“Nearly 450,000 receive the age pension, around 136,000 receive JobSeeker payment and around 96,000 receive parenting payment single,” said Social Services Minister Amanda Rishworth.

That leaves the remaining four million-plus Centrelink customers receiving no benefit from the announcement.

Deeming rates are applied under Centrelink’s income means test system and are a notional rate of interest applied to all financial assets including banks accounts, shares, cash, bullion, income stream investments and superannuation funds for those aged 67 or older.

Once the deemed income exceeds certain thresholds, the income support payment is reduced.

Deeming rates were frozen in the midst of the COVID-19 pandemic after interest rates plunged as an emergency response to save the economy.

With the Reserve Bank’s official cash rate set near zero at the time, deeming rates were frozen at 0.25 per cent and 2.25 per cent until July this year. With the cash rate now at 4.35 per cent, many expected them to return to more “normal” settings such as 4 per cent and 6 per cent, respectively.

The 12-month extension to the freeze means that pensioners with more than about $250,000 in savings won’t see their pension clipped on July 1 as expected.

Anyone with less than about this amount, and with no other income, is unlikely to see any benefit from the announcement.

Meanwhile, renters receiving Centrelink support are set to pick up an extra 10 per cent in rent assistance payments.

Under current rates, the maximum rent assistance payable for a single on JobSeeker or an age pensioner is $94.10 a week. With the announced increase, that would lift the payment to $103.51. That assumes they’re paying at least $198.47 a week for rent.

These figures will rise slightly by the time the increase kicks in after September 20, but that’s well under Perth’s average rent of more than $600 a week.

Those taking prescription medications with a Centrelink-issued concession card will be assisted by a freeze to the PBS co-payment rates. The current rate of $7.70 per prescription will be frozen until 2030. It also means the annual PBS safety net of $277.20 will stay the same, meaning once you reach this limit each year, you pay no more. That’s the equivalent of 36 dispenses.

For non-concession card holders, the maximum prescription price is $31.60 up to an annual PBS safety net limit of $1647.90 per household. Once you hit this level, you can move on to the $7.70 co-payment arrangements. The $31.60 level has been frozen for two years.

Centrelink recipients will also benefit from the $300 energy payment, with $75 credited quarterly directly to their household electricity account. That comes on top of the State Government’s $400 credit announced two weeks ago.

Single JobSeeker recipients with a capacity to work at least 14 hours a week will gain access to the higher rate of payment, which is currently available to singles with dependent children and those aged over 55. The Government said this would add at least $54.90 a fortnight to those eligible.

But fewer than 5000 Jobseekers will benefit from this change.

And on the back of ongoing complaints about processing delays for new Centrelink claims highlighted by Your Money over the past few months, the Government has announced funding for 4030 new staff in the next financial year.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association