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.
We have 13 grandchildren,/ 4 children plus spouses – 21 in total and usually give them $100 each for birthday’s and christmas. Would these count towards our gift total of $10,000/year? Also we give 2500/year to our local church – is this counted as part of the $10,000
Hi Robert, great question! Centrelink’s wording around gifting only mentions the amounts which causes the gift to be counted as an asset, technically the wording does leave the door open for them to count $100 to a grandchild as a gift however there is an element of common sense that needs to be applied also.
In Centrelink’s own words “It is optional for you to notify us of any changes in your bank balance of $2,000 or less” so that is the guide that we follow. In your instance the total amount may be $2,100 however we presume this is divided into multiple, smaller transactions and therefore as no one figure that you give exceeds $2,000 you are not required to notify Centrelink.
“Gifting” is also applied when helping family with vital overseas medical costs for serious diseases/illness not treated in Australia.
Very compassionate.
My son is getting married this year and my husband and I plan to give him $25k to help with wedding expenses. Will we be penalised since the amount is more than the $10k per annum limit?
Hi Mercedes, thanks for reaching out! Given the amount you are gifting you will need to declare this to Centrelink and your pension may be reduced. If your pension is being assessed based on income and not assets there may be no impact to the amount of pension your receive.
If you paid for some of the expenses for the wedding, would it not count as gifting?
I do not have a Pension Account set up within my Superannuation and have chosen instead to withdraw approx $10,000 per year to supplement my pension. I receive a full single aged pension and have about $185,000 in superannuation. If I continue to withdraw $10,000 each from my super, could this be seen as ‘gifting’?
Hi Lorraine, thanks for getting involved in the conversation! The scenario you have mentioned would not be considered gifting as you are still the owner of the funds, you simply transfer the money from your super to your bank account. Gifting would be if you gave the $10,000 to someone else.
Do all these examples relate to eligibility to receive the old age pension?
I am not eligible to receive the old pension, so I have to survive on SMSF pension in my retirement.
Am I/they taxed if I gift money to my children’s families directly from my SMSF?
Hi Denis. The gifting rules mentioned here relate to the Age Pension. You won’t be taxed on money you give away but it could affect Age Pension entitlements
Your examples are an embarrassment. After an inheritance, I’ll have access to 100k and own a modest houser. I am on a full pension. Do I have the ability to help our single mother daughter with an autistic child to get into a cheap house or not?
Hi Mick, thank you for your feedback and I am sorry to hear you did not find the article useful. We have another article that also talks about gifting HERE, I think you will find the alternate perspective on gifting more relevant to your question.
I am 69 years old and not entitled to a pension. I only have a “ seniors commonwealth card” My husband and I recently sold a property and are gifting my daughter 350,000. Will I loose my card?
Thank you for your response ,
Hi Anna, always good to get confirmation! The Commonwealth Seniors Health Card only tests your income, not your assets. Therefore there is no impact from gifting to worry about.
Hi,
My wife is 88 and in a nursing home living separately to me (i’m 89 and a in a retirement village). My retirement unit is fully paid and my wife’s RAD is 75% paid. We are both getting individual full aged pensions – as she only has assets of $110K and i have assets of $170k (so well under the $410k joint asset limit for the full aged pension).
We want to gift our grandson $60k ($30k each) for the deposit to purchase a unit for himself to live in. We think we can afford this, but will it impact the full aged pensions that we currently get?
Hi Don, sorry to hear that you and your wife are separated due to illness. Regarding gifting the proposed amount to your grandson, yes you can do this. The penalty for gifting too much money is that although the money is no longer in your possession Centrelink still assess it as if it were because you didn’t have to gift it. In your scenario though you are already under the minimum threshold so there will be no impact to your pension. You should still notify Centrelink of the gifting and provide bank statements to show it so that Centrelink can update their records accordingly.