When we shared an update article on gifting rules it sparked plenty of follow up questions from our members. Retirement Essentials Head of Customer Service and Centrelink guru, Steven Sadler, was instrumental in addressing these queries. And, being the guru he is, he provided an easy way to check your gifts. We thought Steven’s insights were well worth sharing.
A quick two-question check
Before you gift money, or if you’re worried about past gifts, ask yourself:
- Have I made gifts this year of more than $10,000?
Centrelink has a limit of $10,000 per financial year. If any gifts you’ve made in either the current financial year or any of the previous four went over this amount, the extra money will be counted as a ‘deprived asset’ for five years. - What’s my total gift amount over the last five years?
The second limit is a total of $30,000. This includes all gifts you’ve made in the current financial year and the four years before it. If this total exceeds $30,000, then the amount over this limit will be counted as a ‘deprived asset’ for five years.
Note: There is no double counting of deprived assets between the annual and five year rolling periods.
For example: If total gifts over five years sum to $37,000, and $2,000 has already been assessed as deprived assets from previous annual limits, then only the remaining $5,000 that exceeds the $30,000 limit ($37,000 – $30,000 – $2,000) would be assessed as a new deprived asset under the five-year rule.
Understanding the five-year rule
If you gifted a significant amount, such as a property, in August 2021, that amount would cease to be assessed as a deprived asset after August 2026. This means that after the five-year period from the date of the gift, it will no longer affect your Age Pension.
How Centrelink tracks your gifts
You might wonder how Centrelink tracks your gifting. It’s an expectation that all Age Pension applicants and recipients disclose any amounts gifted, even if they fall within the acceptable limits. This information is recorded and can be viewed in the asset summary section of your MyGov account, alongside your other assessable income and assets.
Gifts vs. Loans: Understanding the Centrelink distinction
Many families act as the ‘Bank of Mum and Dad’ (BOMD) to help their adult children with significant purchases like homes. It’s crucial to understand that Centrelink differentiates between a gift and a loan. If there is a formal agreement for repayment, even if it’s over an extended period, it’s likely to be assessed as a loan, not a gift. Loans still affect your Age Pension through asset and deeming income tests, so it’s worthwhile to seek personalised advice for your specific circumstances.
Need clarity?
Why not start with a free 10 minute call?
If you have further questions or need to discuss your unique circumstances to understand how Retirement Essentials can help, you may like to consider booking a 10-minute ‘How We Can Help’ consultation.
If you already know you’d like answers about how Centrelink’s rules apply in your situation, then Retirement Essentials Age Pension Consultation with an experienced specialist is designed to provide guidance that’s specific to you.
At all times our goal is to help you navigate these rules and protect your Age Pension.
Over to you
What other aspects of gifting rules are most unclear to you?
Are there any specific scenarios you’d like to explore further?
