Your questions on gifting answered
When we wrote about the basics of gifting in late December, we thought Amanda Hardy Lai’s article, Gifting gone wrong, had covered most of the detail. But the thing the team at Retirement Essentials loves most about our members is the intelligent and interesting questions you ask; questions which help all of us – including other members – to better understand the rules. Read on to see what you asked and the finer details of Centrelink’s gifting rules.
Peter asks if the limit applies to couples as well?
Q. Hi, does the $10,000 annual limit applies to a couple or a single?
Meaning can my wife and I each give $10,000 to our son without this affecting our Age Pension?
Says Amanda:
A. Hi Peter, great question. The gifting thresholds apply to singles and couples combined. So a couple combined can gift up to $10,000 in any one financial year, (not each), without affecting their age pension entitlement.
Christina asks if super counts too?
Q. This article is very helpful – thank you. I wrestle with gifting as there is no (government) sympathy for the helpful transfer of wealth to the next generation. What about gifting from superannuation? Would that count as an asset for five years, but not affect the Age Pension?
Amanda replies:
A. Hi Christina, thank you. When gifting from superannuation, withdrawing funds to cash and then making a gift is assessed under normal gifting provisions. This means it could affect your Age Pension entitlement for five years if the allowable gifting amounts are exceeded.
It might be worthwhile exploring strategies for managing your investments and super, considering both your beneficiaries and the potential effect on your Age Pension. If you’re unsure, you can book a free 10 minute consultation to see how Retirement Essentials advisers can assist.
Bevan wants clarification on the 5-year ruling
Q. While you have discussed the 5-year penalty period for exceeding the yearly or three yearly gifting limits, you have not discussed whether there is a defined period after the gifting where there would no longer be a penalty to the pension payments. For example, no gifting excess or no gifts at all for a five year period.
Amanda further explains how deprived assets work
A. Hi Bevan, A deprived asset counts against the person’s or couple’s assets test and deemed income for 5 years from the date of the relevant gift, then that defined period for that deprived asset amount ends.
The gifting rules are applied so gifted amounts in excess of the allowable amounts are not double counted when considering the annual or 5 year rolling periods together. However, both rules continue to apply, so further gifts that are in excess of either $10,000 in one year or $30,000 over a rolling five year period will be considered deprived with a new 5 year commencement date.
Deborah checks on money used to book travel:
Q. Is there a difference how Centrelink treat giving money to family members for overseas holidays against me booking and paying for this?
Amanda confirms the Centrelink treatment:
A. Centrelink will treat it as a gift when you give money away and don’t receive adequate financial consideration. So it would be treated the same whether you give your family members money to book a holiday or if you were to book and pay for it yourself.
Adrian ‘flips’ the discussion:
Q. What about the other side of the coin? That is when a person not in receipt of any Government handout wants to gift say $10,000 or maybe more to someone who is receiving a pension or other government income?
Amanda responds:
A. Hi Adrian, good question. Receiving money as an Age Pensioner from someone else doesn’t count as a gift – but it will count as an asset for the person receiving it, if not spent.
For the giver, if they are close to Age Pension age (67), then it’s worth knowing that any gifts in the five years prior to claiming will be counted towards the gifting limits when their Age Pension application is assessed.
Jenny plans to help with her son’s wedding:
Q. Can we transfer some money directly to our son’s wedding venue for wedding costs? We have already reached the limit by gifting money to one of our daughters three years ago.
Amanda says, it depends …
A. Hi Jenny, That’s wonderful news of your son’s upcoming wedding! Regarding your question, Centrelink will treat it as a gift when you give money away and don’t receive adequate financial consideration. If you are hosting the wedding and attending it, then a direct payment to the service provider may not be considered a gift because you would be receiving fair value from hosting and enjoying the happy occasion with family and friends. I would recommend you discuss this with Centrelink first to be sure of how it will be treated.
David asks about a younger partner:
Q. One complication that I don’t see mentioned is where only one partner is eligible for the Age Pension. I have just turned 67, but my wife is four years younger. Does her gifting from her own funds affect my pension entitlement?
Amanda agrees it can seem complex:
A. Hi David, great question – Centrelink rules can certainly be complicated! To answer your query, yes, gifting thresholds apply to couples as a unit, regardless of whether one partner is under Age Pension age. Centrelink assesses a couple’s combined assets and does not separate funds between partners. This means any gifts made by a younger spouse who has not yet reached Age Pension age can potentially affect any Age Pension entitlement.
We trust these answers will help you understand the finer points of gifting, loans and Age Pension entitlement, but ask away if there are further concerns on this subject.
If you are unclear about your entitlement situation more generally, using the free Age Pension Entitlement Calculator is a great way to check how the rules are applied to your particular circumstances.
And don’t forget the Retirement Essentials advisers can show you how to make the most of your financial resources and how they combine with Centrelink in a Maximising your entitlements consultation.
Have you ever been caught out by gifting rules?
If so, is there anything Retirement Essentials’ other members can learn from this experience?
This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.
I am on a full pension and now have a daughter and granddaughter living with me, we are in need of a bigger house, can I take all my super to pay for this and will there be any repercussions from doing this with Centrelink?
Hi Beryl, purchasing a house is a legitimate use of your money so Centrelink would not penalise you for doing this but there may be other long term financial impacts that you should consider before deciding to proceed. I’d recommend speaking with one of our specialists HERE before making a decision to make sure you understand all of your options and the pros/cons of each.
You asked about issues affecting gifting.
My sisters ex husband by many years passed away with dementia. A few years before while still capable named her executor of his will and left all his money to her, for her to distribute to his two adult children. Even though the money went into her account and straight out it was seen as her money and gifting. She is still working at 72 and planned to retire on pension this year. Now she is ineligible for 5 years.
Hi Julie, yes this can happen. The issue is that the money needs to be willed to the other person(s), in this case the children, directly. If it was willed to your sister then legally it is her money, not the children’s and so Centrelink do count it as gifting.
Perhaps the children should have challenged the will (depending on the relevant state law). Based on the above and that the lady could affirm his wishes and therefore not challenge the claim, the court could well change the beneficiaries. Plus, unless the will was written many years ago, if no cognitive test was performed at the time, it could also be claimed that the mistake the testator made in structuring the will was evidence that there may have been dementia then.
This sounds like a situation where a review by Centrelink could be requested. It does not sound, on the limited information as a true gift and an attempt to receive more pension; it sounds like the error of an elderly person who did not receive adequate legal advice, or perhaps he didn’t want to pay to update his will.
I am selling an investment property. I am 73 and have plenty of Super for myself and my wife. I do not get a Government pension, nor do I want to.
From the sale of the rental property I intend to give $100,000 to my son to help him with his home purchase.
Am I right in saying I would have to wait 5 years before receiving a full pension in the very unlikely event that my wife and I need one (as I said, extremely unlikely!)
Hi Jeff, there are actually a couple of things to unpack here. Firstly, yes, the $100,000 given to your son would count as a gift. Secondly, yes, gifts are assessed as assets for 5 years from the date they are given. Thirdly, With regards to the impact this has on you receiving a pension, you said “before receiving a FULL pension”. As the Age Pension is means tested, this amount you intend to gift may preclude you from receiving a small/part pension however based on your comments about your financial situation I doubt a FULL pension would be possible regardless of the gifting.
So the answer to your question is technically no the gifting will not prevent you from receiving a full pension but the full pension was not likely on the cards for you to begin with. The gifting may prevent you from receiving a part pension for 5 years until it expires.
Hi, My husband has been retired for 4 years with no pension or benefits he is 72. I am 63 still working hopefully till 67 with an income of around $90,000. We own our home have 2 investment properties fully paid. My daughter rents one for $150 p/w. Can I gift my daughter money out of my super. I believe we won’t get ant pension. Also would my husband be entitled to a health care card.
Hi Leanne, there is a bit to unpack here. Gifting rules are applied to both of you as a couple so although you may not be eligible for a pension your gifting can impact your husband’s eligibility. Your husband may be eligible for the Commonwealth Seniors Health Card but there are a few other details we’d need to confirm. I’d recommend booking a consultation (HERE) so that we can properly discuss the gifting rules and explain the potential impact as well as check what Centrelink benefits you/your husband may be eligible for.
Hi
My husband is 62(63 in July) and I’m 61. We will receive a small inheritance in the future from a home we part own that my 84 year old mum is living in. We have always promised this money to our children. I am thinking we might gift the money now from our super then replace it with the funds when we receive them. We are thinking $200 000 in total. Have we missed the boat on the gifting rule? Thank you.
Hi Kerin, the gifting rules apply for the financial year within which the gift is given and the next 4 also. Therefore you could give the gift now so that the time has elapsed by the time you apply for the Age Pension. Having said that, you would need to weigh up what will be of greater value to you, the additional Age Pension available to you because you gifted earlier vs the return on your super should you keep the money in there.
Could the inheritance/will be edited so that the money goes straight to the children rather then to you so you don’t have to gift it and can keep you super invested?
I’d recommend booking in a consultation with one of our specialists (HERE) who can do the calculations to weight up the long term financial impact of both options so you can decide on the best way to proceed.
centrelink are demanding my peersonal information from from 2018 I received pension 2023
is this right
thanks
Katie
Hi Katie, you are well within your rights to ask Centrelink for an explanation as to why they need this information but yes they are permitted to ask for it if they have a concern about something that happened at that time.