will an inheritance make you lose your Age Pension

Australian society is witnessing the greatest intergenerational transfer of wealth ever seen. According to McCrindle Research, an estimated $3 trillion will be bequeathed to adult children over the next two decades. We don’t all have parents like the driven, mega-rich Logan Roy from the Succession TV series who is leaving squillions to his kids. But many older Australians are now inheriting sizeable sums from their Depression era parents.

This week we spoke with Maria about her expected inheritance of $270,000. The consultation was triggered by her question: 

‘My 92 year old mother is in age care and I’ve been told that she is not expected to last long. She has no home, but some savings, so I expect to receive an inheritance of about $270,000 in the next few months.

I hope I don’t seem callous, but as I am 69 and receive a full Age Pension, I’m really scared of this inheritance threatening my current income. Can you tell me:

  • What do I need to do?
  • When I receive it, where do I put it (cash account, super, etc?)
  • What else do I need to know?

With Maria’s permission, we are sharing this question and our answers as this dilemma comes up often for baby boomer beneficiaries. 

The following suggestions are general in nature – not financial advice. But they helped Maria and will hopefully help others to understand rules around inheritances for retirees. Put simply, inheritance is no different to any other financial asset being assessed, it’s counted as an asset and deemed for the income test. There are, however, some opportunities for it to be exempt.

Once you receive the inheritance,  you must declare it to Centrelink within 14 days.

From this point onwards, Centrelink will treat it as an assessable asset.  If it is immediately spent (e.g. to pay off debt) then there are no implications for your Age Pension. But if you invest it in super or a  bank account etc,  it will be assessable and also have income deemed.

There are lots of things to consider and no simple answers here as this depends very much on other aspects of Maria’s life, including whether she is a homeowner, if she is carrying debt, if she is partnered and her current assets and income. The following points are thought starters, and Maria will do well to seek further advice if she is struggling to weigh up the pros and cons of these various options.

Seven ways to use an inheritance

Invest in super

Maria could put part, or all of it into super.  She could also use ‘Bring Forward’ provisions to do that if she chooses to contribute more than $110,000.  Any money contributed to super will be an assessable asset.

Invest in cash or shares

Maria can put the money into a bank account or similar investment. Again it will be an assessable asset. Dividends on shares are subject to Dividend Imputation so this aspect would need further investigation.

Pay off debt 

Depending upon how much she chooses to use to pay down debt, only the remaining portion will be assessable and there will be extra income available when repayments of interest cease.

Renovate the home

If Maria is a homeowner and chooses to renovate, then only the remaining balance is assessable.


Maybe she will go on a big-ticket holiday, spend up big. or treat the family to some fun adventures (beware the gifting rules).  If so, only the remaining balance is assessable. But before spending up big, it’s useful to run a safe spending forecast to see if the money being spent might have been better utilised to fund a more comfortable retirement.

Buy a new car.  

This is an interesting one, as the new car will be assessable as an asset (and so could alter Maria’s eligibility depending upon her other assets). But cars, caravans and motor bikes are not deemed, so this will make no difference to Maria’s Centrelink income status. 

Contribute to a younger spouse’s super

We don’t know her relationship status, but if Maria has a younger spouse who is under Age Pension age, the full amount can be contributed to their accumulation account.  This means it is not assessable by Centrelink.  

These rules are fairly easy to follow, but it’s the pros and cons that can be difficult to assess. As we mentioned, Maria’s options can’t be fully compared without further information including whether she is single, a home owner and/or carrying debt.  Also, if one half of a couple, her partner’s age and super (if any). 

Do you have similar questions? 

If you would like to learn more about the younger spouse strategy or maximising entitlements to structure your assets to minimise any inheritance impacts on Age Pension benefits Retirement Essentials offers tailored affordable consultations  to support your decision-making. 

Inheritances may be financially helpful, but their very nature means they start with a loss. Have you any insights that may help others grappling with financial decision making at a time of grief?