Can gifting affect your entitlements?

Simple sums that share the rules

The Retirement Essentials advice team is currently handling a lot of questions about Age Pension eligibility and the gifting of money or possessions to family members. At one level, the rules are fairly straightforward. But it is the interpretation of what is a gift, loan or asset transfer and who ultimately owns that asset that seems to cause confusion. We’ve outlined the rules below and can help you with the finer points of these rules if you need support.

But first, let’s share some simple sums which show when gifting can work really well.

And when it doesn’t…

SIMPLE SUMS

Mary’s grandson’s HECs debt

Q. I can almost qualify for the Age Pension. I am a single homeowner and have $605,700 in assets and am receiving only $32,000 per year in income from part time work. My assets are $6050 above the threshold for Age Pension eligibility ($599,750). So I wondered if I was to give my grandson $9500 to repay his HECs liability, whether this would mean I would qualify?

A. Hi Mary, in answer to your question of whether gifting might affect your entitlements, the answer in this case is a resounding yes, for the better. Here’s how this could work for you:

Your current situation

• Assets, $605,700. Income $32,000
• Ineligible for Age Pension as assets exceed threshold.

After gifting

• Assets reduced by gift of $9500
• Assets $596,200  Income $32,000

Including Age Pension and supplements you are now eligible for  $1,293.60 additional income per annum.  Importantly, you have also automatically qualified for a Pension Concession Card, which will deliver approximately $2,500+ in benefits and discounts over the course of a year.

And your grandson will no doubt think you are simply the best!

Jeffrey and Hannah’s pre-retirement gift

Q. Our daughter has been through a hard time due to a relationship breakdown so we have given her $90,000 to help her get back on her feet. Hannah doesn’t work and I plan to retire in the next year or so. Our assets are now (after the gift) just under the couple’s threshold of $405,000 for a full Age Pension. But reading the rules makes me think that Centrelink will claim this $90,000 is part of our assets, which we don’t believe is true. Does this mean we will end up on a part pension instead?

A. You are right about Centrelink’s ruling on a gift, Jeffrey. The rules state that there is a limit of  $10,000 in one financial year and $30,000 over five financial years.

If you gift in a five-year period prior to retirement, the money can still be deemed to be your asset. You have exceeded the gifting limits by $60,000 for a five year period and this $60,000 will be included in your assets and deemed income will also be calculated on it for the five years from when the money was gifted.

Want to check your pension eligibility before you commit to a gift or a loan? Why not use our Age Pension Eligibility Calculator to ensure you make the right decisions when it comes to giving money or assets?

Gifting Limits

The limits are the same for singles and couples. The most you can gift without it affecting your Age Pension payments is:

• $10,000 in 1 financial year, or
• $30,000 over 5 financial years – this can’t include more than $10,000 in any year

Amounts you gift in excess of these limits will:

• count in your assets test, plus
• have deemed interest applied and this will be included in your income test for 5 years after the gift date.

Read more about gifting here.

Our free calculator has all the latest rates and thresholds and will help you work out what you could be entitled to receive.
 

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