If you’re thinking of gifting some of your assets or retirement savings, there are some things you should be aware of that gifting affects, things like the Age Pension and other Centrelink benefits.
While you can gift or transfer assets for any value you choose, if you gift within certain government limits you could increase the amount of benefit your receive. But if you exceed the government’s allowable gifting amount, your rate of pension or allowance may be negatively affected.
Allowable gifting limits
You have a gifting free area of $10,000 per financial year, limited to $30,000 per five financial years. If the total of gifts made in a financial year exceeds $10,000, the excess will be assessed as a deprived asset. This is called the $10,000 rule.
A maximum of $30,000 can be gifted over a rolling period of five financial years, but must not exceed $10,000 in any one year to avoid deprivation. Only $30,000 of gifting in a five year period can be exempted. This is called the $30,000 rule.
The same amount applies whether you are single or a couple.
What’s included as gifting
Some examples of gifting for Centrelink purposes include:
- Giving money for the purposes of a loan
- Transferring an asset for less than its market value, eg. transferring a car or property to someone for less than its true value. The difference between the market value and the amount received for the asset can be considered as a gift by Centrelink
- Putting money into a family trust that you or your partner do not control
- Paying school fees for grandchildren.
Money gifted to your spouse/defacto is not classified as a gift.
Centrelink will assess all the gifts that you make to see how they have directly or indirectly reduced the assets available for your personal use and whether they have exceeded the allowable amount. You must tell Centrelink about any gifts or transfers within 14 days of when they have occurred.
Can gifting improve my age pension?
If you are a part age pensioner and are affected by the asset test, gifting is a way of reducing your assets and to gain a slightly higher Age Pension payment. If you have some excess funds that you would be comfortable to gift to the children, bearing in mind the above mentioned limits, then this strategy might be worth considering.
For every $1,000 of assets you gift your pension may improve by $3 per fortnight or $78 per annum. If you gift the maximum $10,000 and you are within the asset test free area and pension cut off limit you would be entitled to another $30 per fortnight. See the example below:
Here is an example of how gifting within the limits of the $10,000 rule might work to increase the age pension payments.
|Year||Maximum annual amount allowed for exclusion under the assets test (maximum $30,000 over 5 years)||Increased fortnightly pension if your total assets are between:|
$253,750 - $552,000
$380,500 - $830,000
|1||$10,000||$30 per fortnight ($780 pa)|
|2||$10,000||$30 per fortnight ($780 pa)|
|3||$10,000||$30 per fortnight ($780 pa)|
|Total over 3 years||$30,000||If within asset limits above, gifting has increased the age pension by:
Year one a $30 per fortnight /$780 pa increase
Year two a $60 per fortnight / $1,560 pa increase Year three and ongoing a $90 per fortnight / $2,340 pa increase
- This example is for homeowners only. Non-homeowners can have more assets before the assets test affects their pension.
- Age pension amounts used in this example are for the assets test and not the income test.
- If assets are under $253,750 (singles) or $380,500 (couples) you are already receiving your maximum pension under the asset test and this strategy will not improve your pension.
- No pension payable when assets reach the pension cut-off amount.
- Pension cut off amount is at September 2017 and is updated in March, June, September and December each year.
This is a general example used as an illustration and isn’t tailored to your personal circumstances. You should consider your personal circumstances and seek financial advice if you are unsure about what’s right for you.
Is this the right strategy?
Deciding if gifting is right the strategy for you can be complicated to say the least. Perhaps some advice from a financial adviser^1 could help you.
Advice is available through our wholly owned financial planning business.
Financial planning services are provided by our financial planning business State Super Financial Services Australia Limited, trading as StatePlus, ABN 86 003 742 756, AFSL No. 238430. StatePlus is wholly owned by First State Super. This is general information only and does not take into account your specific objectives, financial situation or needs. Seek professional financial advice, consider your own circumstances and read our product disclosure statement before making a decision about First State Super. Call us or visit our website for a copy. Issued by FSS Trustee Corporation ABN 11 118 202 672, AFSL 293340, the trustee of the First State Superannuation Scheme ABN 53 226 460 365. ↩