Giving while living:
End of financial year rules on gifts and loans
There’s an old joke. Never get between a freeloader and a buffet lunch. Here’s a different version. Never get between a doting parent and their adult children’s’ needs.
We know this adage continues to be true as intergenerational transfers of wealth in Australia (overwhelming from older generations to younger) continue to skyrocket.
Attitudes towards family money transfers vary. Some will subscribe to the so-called SKI theory and ‘spend the kids’ inheritance’ very happily. Others often live frugally in order to leave a substantial bequest. But both these habits are increasingly giving way to the growing trend towards ‘giving while living’.
There are many reasons for this shift and many different ways this is done.
Giving while living could be paying for education for adult children or grandchildren, loans or gifts to purchase a first home, or help with wedding expenses. Given the current rates of inflation and resultant pressure on household budgets, it could also be in the form of short-term support to meet weekly bills including energy, rent or food.
Whenever and however you may choose to give is personal – it’s your money and you decide.
But as with today’s discussion on deeming rates, there are rules for those who are on an Age Pension (or planning to be) which are tied to financial years. As the end of this financial year is imminent, it’s worthwhile taking a look at the rules and how this might affect your loan or gift decision making.
Centrelink 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 one financial year, or
- $30,000 over five financial years – this can’t include more than $10,000 in any one 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 five years after the gift date.
So if you’re feeling a generous impulse to help your kids or other nearest and dearest financially, make sure you look before you leap.
And once again, our Customer Services Team leader, Guru Steven Sadler, has come to the rescue for Robert and Mercedes who are unsure of their Centrelink obligations.
How it works for Robert, with 13 grandchildren
We have 13 grandchildren, four adult children plus spouses – 21 in total! We usually give them $100 each for birthdays and Christmas. Would these gifts count towards our gift total of $10,000 per year? Also we give $2500 every year to our local church – is this counted as part of the $10,000?
Steven says:
Hi Robert, great question! Centrelink’s wording around gifting only mentions the amounts which cause 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 single amount that you give exceeds $2,000 you are not required to notify Centrelink.
And Mercedes, who’s helping out with a wedding
My son is getting married this year and my husband and I plan to give him $25,000 to help with wedding expenses. Will we be penalised since the amount is more than the $10,000 per annum limit?
Hi Mercedes, thanks for reaching out! Given the amount you are gifting is over the limit, 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.
Here’s some further information on how ‘giving while living’ could affect your entitlements.
What’s your experience or question?
Do you have a question about a loan or gift? Or perhaps a sum you have paid to someone for a specific purpose, but you you’re unsure if it’s a gift? We’re happy to answer your most pressing questions.
Hi, I won’t be applying for the pension until the end of the year and I’m currently examining and recording my gift giving for the last 5 years. It’s very confusing. Is sponsoring a World Vision child and paying a regular small contribution towards orthodontic work considered a gift? Deb
Hi Deb, thanks for kicking off the comments! Yes Centrelink do count donations to charity as gifting. Centrelink define gifting as selling or transferring income or assets and getting less than its value or nothing in return.
On the other side of the fence, how does Aunty CLINK regard gifts from others to a pensioner?
Ahoy there Mx Fisherman, great question! Generally funds you receive from others is in the form of money in the bank so this is simply seen as an increase in your assets. There is no limit on how much money you can receive, only on what you gift to others.
Am I right in thinking that adding to my income by a reverse mortgage is not deemed as an asset? And if that’s right, would a gift of money to my daughters be counted as gifting?
Hi Christina, thank you for seeking our guidance! Reverse mortgages can be assessed in different ways depending on how yours is set up/being used so we could say for sure without discussing it further. If you were to gift money to your daughter that you could instead have kept to support yourself, Centrelink will define that as gifting regardless of the source of the funds.
We are a couple & have three children and planning to apply for age pension in October this year. We plan to gift our children before we apply. Is the $10K limit per person or per couple. How much can we gift from our super balance before & after June 30
Hi Mitchell, thanks for your question! The gifting rules apply the same to both couples and singles so you can gift $10,000 between the two of you each financial year up to $30,000 within 5 financial years.
Mitchell mentioned that they plan to gift the money BEFORE they apply for the pension so would the gifting rules even apply???? It is my understanding that because it was done BEFORE applying for the pension, that Centrelink don’t need to know… Please confirm whether I am on the right track or not….
Hi Shelley, because exceeding the gifting limits impacts your situation for 5 years, Centrelink do need to know about any gifting done on the day you lodge or for the previous 5 years. So if you gift +5years before applying then no there is no impact or need to tell Centrelink but if gifting occurs within 5 years of lodging your claim you are expected to declare it.
My son has asked for a short term loan as his small business is struggling and rent is very high. How is this considered by Centrelink. If we go ahead with the loan it will be $10,000. We receive a small age pension and the rest is a superannuation fortnightly income stream payment.
Hi Sandra, good on you for considering helping out your son given the current cost of living! Given the amount in question I would suggest that you consider gifting your son the money as opposed toe lending it to him. Loans are considered assets based on the total amount outstanding so even though you would no longer have the money, Centrelink will still assess it as yours presuming your son will be paying it back. As per this article though you can gift $10,000 and it would not be assessed as an asset so your Age Pension would potentially increase.
That is a good thing to do and very kind. Not related to centrelink but I considered that once. But then I suspected a couple of his employees were not really working hard enough and knew some would also find its way into their pockets.
I am a self-funded retiree, I receive no income from Centrelink, how do the gifting limits affect me? I wish to gift up to $50,000 towards my son’s first home. Will I have to declare this amount, or pay tax on it?
Should I set up a mortgage over this property, (formalizing a no-interest loan). If I set up a loan will this then be deemed or count towards my assets in the future from a centrelink perspective?
Hi Anne, thank you for sharing your scenario with us! If you are not currently receiving the Age Pension then there are no immediate impacts from Centrelink for gifting or lending money. Gifts are assessable for 5 financial years though so if you believe you will be applying for the Age Pension between now and the next 5 years then yes you would need to include any amounts gifted above the allowable $10K in one year/$30K in 5 year limits. Regarding loans, yes loans are assessable as assets from the day the money is lent until it is repaid. Therefore it can sometimes be better to gift money, rather then lend it, particularly when it is a lower amount.
Hi, I am 65 and working 8 hours per week. I would like to withdraw my super and set up a $80,000 loan agreement with my son so he can purchase his first home. He will then repay it into my super account. I have under $10,000 in personal assets. How will this affect my age pension?
Hi Rosemarie, however much of the $80,000 you lend to your son is still owing to you when you turn 67 and apply for the Age Pension will be assessed as an asset of yours even though you don’t have the money because it will be getting repaid back to you. There are other minor implications but that is the main thing to be mindful of.
Common sense and Centrelink? An oxymoron if ever I heard one.
So is it all in the wording? Instead of “giving” my child money to help pay for the wedding.
I request an invoice in my name for the wedding or part there of. How would this differ to having my roof cleaned? It’s a bill for services provided surely.
Hi Susan, thank you for raising your query! Essentially the way Centrelink looks at it is whether or not you yourself (as the person giving the money) received a product/service in return. In the scenario of paying for a child’s wedding, Centrelink would say that it is your child getting the product/service and therefore the money spent would count as a gift even if you were paying an invoice.
Thanks for your reply Steven.
And we wonder why granny always had money hidden under her mattress.
When asked she said you can’t trust the “B’s”. I thought she meant the banks!
I am 72 and want to take my super out to put a 2nd house on my daughters land till i sell my house can I do this
Hi Annette, great to hear you are planning ahead! Yes you can do this and there will be no immediate penalty as your super is assessed the same way that money in the bank is. Long term though there may be some things to take into consideration, particularly if your current residence takes longer to sell than expected. If you would like to talk about it in more details please book a consultation with us HERE.
hi is gifting each financial year from July 1 to June 30 or is it each year from the date that the gift was done?
Hi Jenny, thanks for joining the conversation! Gifting counts from the financial year within which it was given and then the following 4 financial years.
My disabled daughter is paying more rent than she would pay ina mortgage.
I have offered her $50,000 as a deposit on a home. How can I get that to her without losing part of my pension?
Hi Mimulus, thank you for sharing your scenario with us! In Centrelink’s eyes what you are looking to do would be counted as a gift and therefore mean the aforementioned limits will be applicable. This does not mean you cannot or should not proceed but there is no way to give someone else your money and not have it taken into account by Centrelink.
Hi there, we lent our son 250,000 in April 2019, could this be considered a gift from that time or will Clink take it from date of pension application?
Hi Steve, two Steve’s can’t make a wrong! Centrelink will count the money lent as a gift from the financial year it was given in originally and then the following 4 financial years afterward (18/19, 19/20, 20/21, 21/22, 22/23). Therefore your 5 years will conclude at the end of this Financial Year in 10 days!
Hi Steven Sadler ,
i noticed in your comments to others that you didn’t include what people got in their superannuation as that might increase their asset and goes over the threshold limit to get age pension.please explain what the impact of super to be qualified for the pension.
Thanks
Hi Hani, good to hear the comments are getting read! I didn’t mention asset limits as that is separate to the topic at hand (gifting) however you can read more about the income and in particular asset thresholds HERE.
I do not intend to apply for an age pension either now or within the next 5 years. I’m considering giving $100 000 to each of my 4 children. Do I still have to inform Centrelink. I have a Commonwealth Health Card.
Hi Paul, thanks for seeking clarity! If you only have the Commonwealth Seniors Health Card then you do not have to report any gifting to Centrelink.
At the moment my family (of 4) are living with me as their rent increased so much. It will probably be for a year then we hope to buy something together. I would sell my house, pay off the mortgage then pool our money. Would it be best as Joint tenants or tenants in common. I am on a full pension and about to dissolve my Super fund as so little in it now so reply solely on my pension.
Hi Jo-Anne, this is a good question. The differences between Joint Tenants and Tenants in Common are largely an ownership structure which determines estate planning outcomes. Joint Tenants means the surviving owner automatically receives the property on the death of the other owner.
By comparison, Tenants in Common means the ownership can be divided between multiple owners at any percentage they each contribute when the property is purchased. On the death of any one of the owners, their portion of the property is dealt with by the wishes of the deceased owner, in their Will.
From a Centrelink perspective, if you live in the home you own, this property is an exempt asset if your name is on the title. The ownership structure is not relevant to Centrelink.
The last mention of Tenants in common should be Joint tenants
Hi Steve, I am retiring in October this year. If I gift my son $10000 now and $20000 dollars in next financial year will the 5 years be counted from the next financial year. Can $30000 total be given in 3 separate lots?
Hi Judith, thanks for keeping the conversation going! If you were to gift $10K now and then $20k in the new financial year, the first $10K transfer will be fine and then $10K of the $20K transfer will also be fine but the remaining $10K would be assessed as an asset of yours for the rest of the new financial year before becoming exempt the following year. You will need to declare each of these payment amounts and dates to Centrelink even if there is no impact so they can record it accordingly.
Hi we are on a part pension after selling off a investment property we are purchasing a block of land to build on and down size to while still living in our home which we will sell off once the new home is built in a years time how will this affect our part pension and what do i need to inform centre link
Hi Michael, thanks for your question. Your home where you live currently is an exempt asset for Centrelink purposes, and therefore is not counted as an asset. Other property is counted as an asset, such as investment properties and blocks of land. Once you have built your new home and moved in, this would become your principal home. At this time, your previous home would be counted as an investment property until sold.
When sold, the sale proceeds would then be counted as an asset and deemed. It is possible to consider strategies where you can maximise your Centrelink entitlements if one of you is under Age Pension age, but this would be a discussion in one of our strategy consultations to determine what strategies might be suitable. Our strategy consultation meetings can be booked here.
To inform Centrelink you need to update your asset values, this can be done online using your myGov account.
Hi Stephen,
We are hoping to apply for the age pension after the 30th June. Twelve months ago we helped our son to buy a home. I loaned him the money from my super, he does hope to be able to repay this further down the track.
Just wondering if it will have a big impact on us getting the age pension. The amount was $80,000
Hi Clare, thank you for seeking our guidance! There will not be a “big impact” on your claim so you can rest easy. What will happen is that Centrelink will still assess some of that $80,000 as an asset of yours even though you do not have it. The amount Centrelink will assess as an asset will depend on when you gave the money to your son. So long as you declare it to Centrelink during your claim you should not run in to any issues.
In Centrelink’s own words ‘It is optional for you to notify us of any changes in your bank balance of $2,000 or more’ so that is the guide that we follow.
I find this comment confusing. Does this imply that any account changes under $2000 need to be reported to CL and that it is not necessary to report account changes over $2000 unless you want to?
Maybe there are some other comments on this matter that I haven’t found yet.
Hi Gary, thank you for picking up on the typo! It should have been $2,000 or less and has now been amended thanks to you 🙂
Hi guys,
I have two questions-
Firstly… I am a permanent resident in Australia and I have been living here permanently for 11 years… I am 68 at the moment… Can I apply for age pension or do I need to be an Australian citizen to be able to claim?
Secondly- My husband and I split up recently – we sold our house and we will be getting
$ 600 000.00 each from the proceeds. I would like to move in with my daughter and contribute $250 000.00 towards a house we wish to buy together. How will this affect my claim please? Will I be considered a homeowner in my application?
Hi Karin, thank you for seeking our guidance on the best next steps! The residency criteria is that you need to have been an citizen OR permanent resident (so you are counted) for at least 10 years in total. For at least 5 of these years, there must be no break in your residence. So if you arrived in Australia as a permanent resident then you will have met this by now however if you gained permanent residency some years after arriving then you may not be eligible yet. Regarding your options for the proceeds of your house sale, it would be best to speak with one of our specialists to understand the pros/cons and make the best decision for you. TO make a booking please CLICK HERE.
As a full pension recipient, if I receive an inheritance and direct the solicitor to disperse part of it to my two children and the balance to me, is that above board? If the money is never received by me?
Hi Robyn, thank you for your question! Based on your explanation it sounds as though you are the sole inheritor of the amount as per the will however are choosing to share it with your children? Meaning they are not directly inheriting the money? If this is the case then the amount you choose to give to your children will be counted as a gift. You can red more about gifting HERE and regardless of your final decision you should declare the total amount of inheritance you receive to Centrelink within 14 days of it hitting your account.
My 85 year old father is on a government super income stream (approx. $70K/annum) with an untaxed element. Aside from minimal bank interest, this is his only income. He does not get the Age Pension. His only asset is the refundable, partial deposit ($220K?) paid to the care facility he lives in since his stroke. Services Australia review his assets & income which then dictates his Aged Care fees and accommodation costs.
As he doesn’t get the pension, can he gift any amount of money to his adult children?
Hi Peter, if your Dad plans to go on to the Age Pension within the next 5 years then gifting could impact him at that time, We are not familiar enough with Aged Care and how it’s calculated to know if gifting will impact the assistance he currently receives.