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 $701,550 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 ($695,500). 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, $701,550. Income $32,000
- Ineligible for Age Pension as assets exceed threshold.
After gifting
- Assets reduced by gift of $9500
- Assets $692,050 Income $32,000
Including Age Pension and supplements you are now eligible for $1,531 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 $470,000 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.So $80,000 will still be classed as an asset in the first year after the gift.
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.
Hi
Does this mean that after 5 years the gifting is excluded on your assets test?
Hi James, that is correct.
If I gift a property to a family member 1 year before reaching pension age how is this treated by
Centrelink under gifting and the assets test
Hi John, as per the article, the value of any gifts you give is assessable (minus the allowed amount) for 5 years from the date it was gifted. Therefore in your scenario the value of the property will be assessable as a gift for 4 more years
Hi does this mean that after 5yrs the gifting is excluded on your assets test
Hi Irma, that is correct. Centrelink cannot penalise you forever as you would have likely spent the money gifted over time on other expenses so after 5 years it ‘expires’ and is no longer assessed as an asset.
As your home is not counted as an asset and you gifted a share to your children how would this be interpreted?
We recently helped our son with purchase of a car. It is not a gift but a loan which he insisted on being. He is paying it back fortnightly for likely next 5 years. As we withdrew this $20,000 from our pension fund, do we need to advise Centrelink?
As this is a loan – not a gift how does this fit within the super rules .
Hi Sonia, thanks for seeking clarity! Yes you should advise Centrelink and provide them with updated balances of your super and bank accounts. Ultimately there will be no real impact as you will simply now have a loan owing to you counted as an asset instead of super so your net position is still very much the same.
We have just received an inheritance and we want give our 2 daughters $5000 each do we put this down as a gift
Hi Cheryl, yes if you are existing pensioners you would need to advise Centrelink that you have made this gift.
Would this be necessary when the total of $10000 in a year would not be exceeded?
Hi Liza, yes Centrelink still need to know so that they can keep an accurate record as to how far under/over the threshold you are.
I retired 2 years ago but then resumed part time work this year, which resulted in my pension being affected. I recently sold my house for $1.5million and now would like to gift my son $600,000, to help him pay off his house loan. If I continue to work part time for the next few years, how will my pension be affected and will I be liable for any fees?
Hi Zain, if you continue to work then there would be no additional impact to your pension then there has already been unless you work/earn more then you have been. Having said that the gift to your son could be of significant consequence because Centrelink Will assess the majority of that $600K as still being an asset of yours even though it is not longer in your posession. You can read more on the gifting rules HERE.
I gambled $10,000 (lost) at the Horse Races last week, is this counted as a Gift? ,not on a Pension until next year.
Hi Tom, sorry to hear your horse didn’t win. No Centrelink do not assess gambling losses as a gift.
Does Tom Brown need proof that he gambled the money on horse racing to centrelink.
Hi Andrew, it is possible that Centrelink may ask for evidence but the trigger for them to ask for evidence would simply be that they have a concern about the amount the balance has changed by when giving them an update. For example Centrelink would say “You recently advised your balance has reduced by (insert amount), can you please clarify how this money was dispersed?”. Then, once a bank statement was given showing transactions such as betting/TAB, Centrelink would know it was gambling and not gifting or reinvesting in another asset type. Centrelink will often accept small changes in balances without requiring further clarity so this will not always happen or be required.
We are considering sharing $10000 as a Christmas gift among our four boys. (not every year!) We regularly give several thousand dollars each year to our church.
Does this run us afoul of the Gifting regulations?
Hi Neil and Margaret, technically donations can be assessed as gifts and should be declared as such but we suggest applying a bit of common sense and amounts in a collection plate here and there is not what the gifting rules were brought in to prevent, they’re designed to stop people wealthy enough to support themselves without a pension gifting money to bring them under the threshold. The $10,000 between your sons would be fine as it is within the allowed range but you should still declare it to Centrelink so they can note it on your profile for future reference.
About 2 yrs ago i received a 40,000 inheritance from my late mother who wished it to be shared between my 4 children. As soon as it entered my account I transferred 10,000 to each of them. As I am about to apply for an aged pension do I have to declare this as a gift?
Hi Marina, if the money was left to you in the will then technically it is yours and so yes the transfers to your children need to be declared as gifts. If it was willed to the children and you were acting only as executor then no it doesn’t count as a gift but based on your explanation I believe it should be declared as a gift.
We are well below the assets limit and receive a full couples pension. 2 years ago we sold a property and declared the settlement outcome to Centrelink. We paid out a loan and a credit card, discover work around our home, replaced some appliances and used the remainder to supplement the pension. The balance is very low now. Should I have been updating Centrelink? Because we’re so far under the cutoff I didn’t think I needed to.
Hi Robyn, once you are on the full pension the impact of spending money is less relevant so don’t feel bad that you haven’t been keeping Centrelink up to date, you won’t get in trouble.
I have a disabled son who has trouble managing money. As I’m 70 years old, I have concerns for his living situation (possible homeless) when I pass on. I’m thinking of selling my property ($900,000 value) and setting him up. .? Buy acreage on two titles with separate dwellings so he gets his inheritance earlier than the other son or buy 2 separate properties. I’m on a part pension, have $480k in super. How will Centrelink treat my financial help for my son.
Hi Pat, there are a few different ways you could do this, to discuss the pros and cons of each you’d need to book a consultation with one of our specialists HERE.
If my Husband receives a pension but I don’t as under the pension age ( work casually) and we give money to our children to help them, is it counted as gifting if the money comes from my account, not our joint account?
Hi Leann, although you are not receiving a pension your income, assets and unfortunately gifting, do form part of Centrelink’s assessment as they assess you as a couple. Having said that if the amounts “gifted” are only small things here or there then you are likely under the $10K per year you are allowed to gift so although it should still be declared to Centrelink (so that they can keep a tally) it likely won’t impact the amount of pension your husband receives.
I am aged 68yo and retired, my husband is 66yo, self funded retiree. His super is $710,000 and he draws a pension of $1300 per f/nt. I own my own home which we both live in and I have 2 super pensions. 1st has $175,000 and pays $335 per f/nt. 2nd is a pss for life pension of $80,000 converted to $95 per f/nt. Husband owns a negative geared investment property worth $500,000, rents it for $500 a week, and gives me $400 per week. We have a joint saving account with $9000 in. Husband has $5000 in shares. Husband has a casual job paying $4000 per annum. Assets worth about $40,000. I don’t think we are entitled to any pension but thought I’d check as we keep our money separate except for the $9000 joint account in case larger bills happen.
Hi Virginia, you can check your eligibility using our free, online calculator HERE or if you would like to go over through it with a specialist you can book a consultation HERE.
As I have commented previously: the GIFTING amount has not changed since 2011: $10,000 pa and $30,000 per 5 years. The value of these amounts in 2024 is considerably less than it was in 2011.
It is in no government’s interest to change it, is not of interest to Centrelink and it appears that no retirement group has taken it as a matter that is of concern for their constituency. It should at least have gone up with the CPI each year/or inflation amounts.
Does Retirement Essentials know of/ or recommend other groups that may advocate a change in the rules?
As I was worried about my daughter’s inheritance of the family home, I found the following of use:
If the family home is gifted as an inheritance and then sold (and settled) by the family within two years of death, there MAY be an exemption to Capital Gains Tax. And perhaps a further extension of time for exemption if ATO rules are followed. See “Inherited property and CGT” on the ATO website. (URLs can change, hence no link)
Whilst I was still employed, I sold my home (two years ago) and used the funds to build a house in Thailand for myself, my wife and for my son and his family. The intention was and is that my wife and I will live there in our retirement and my son and his family will look after us instead of us going into a retirement home.
In Thailand, we cannot own land, but my daughter in law is a Thai national and she is the registered owner. Whilst it is my house, the documentation says it belongs to my daughter in law.
I had intended to remain in Australia whilst I was still employed, but my contract was terminated early as the company I was consulting for is changing hands.
My intention is to move to receiving the aged pension after I dispose of my financial entities and attend to my medical issues. I will be ready to move to Thailand in July 2025 and need to determine how my asset position will be viewed. Is my Thailand house still my asset (family home) or is it considered a gift?
No doubt the situation is far more complex than stated here, but the flavour of the problem is still the same.
Hi Wes, to better understand your individual Age Pension eligibility I would recommend an Entitlements Consultation. You can find out more about the consultations that we offer here.
Would like to know some of the suggestions for Wes … This Thai deal sounds interesting and a bit hopeful ..
It seems to be that as soon as there is a “good one’ the suggestion is come see an advisor and so unless you come and pay then you do not get any suggestions in the newsletter ?
That is disappointing as yes the newsletter it great and offers some really good advice …
Maybe somewhere down the line we hear the outcome
Hi Len, sorry to hear you feel that way, we reply to as many comments as we can and make our articles as informative as we can but we do need to ‘keep the lights on’ so yes we do need to refer some people to a paid service.