This is a very common and important question because there are limits to how much you can give away without an impact on your payments. The limits are part of the gifting rules.
Gifting rules apply not only to people who are already receiving the Age Pension, but also to those who intend to apply within the next 5 years. This is to discourage people from disposing of assets in order to qualify for the pension.
Furthermore, the rules are not only for those giving money to children. Gifting is where you give away assets, or transfer them for less than their market value. Below are a few common examples that Centrelink classifies as a gift:
- You own a rental property worth $380,000 and sell it to a friend or family member for only $200,000
- You buy a car for your child as a present
- You have 10% of your wages donated to your church
- You forgive an outstanding loan
- You repay your child’s loan because you guaranteed it
- You transfer your shares or units in a trust or company and don’t get full market value for them
Gifting isn’t selling or reducing your assets to meet normal costs such as a fridge, a holiday or home improvements paying for services, such as painting.
What are the limits?
The same limits apply for singles and couples. The most you can gift without it affecting your 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.
If you are thinking about applying for your Pension and are unsure how the gifting rules will be applied to your financial situation, why not speak to one of our Age Pension Specialists? Our Age Pension service has been designed to take away the stress and confusion that senior Australians commonly experience when dealing with Centrelink.