The gifting rules for age pensioners are outdated, too restrictive and must change, says advocacy group National Seniors Australia (NSA).
It is urging the federal government to overhaul the LIMITS.
Currently, older Australians can ‘gift’ some money to family and friends without affecting their Age Pension payment. But to ensure the system is not exploited, there are caps in place that restrict the amount you can give.
The yearly cap sits at $10,000, or a maximum of $30,000 over five years. If that limit is exceeded, Centrelink will include the excess amount when calculating your pension (for a maximum of five years from the date of the withdrawal).
Read: Centrelink Q&A: Will higher interest affect your pension?
While $10,000 might sound like a reasonable figure, it is perhaps less so when considering that’s exactly what it was 20 years ago. Had it been indexed to inflation, that amount would be now around the $16,000 mark.
Over that 20-year period, as National Seniors points out, “housing prices have risen 8.6 per cent per annum from 2002 to 2020, and inflation has increased on average by 2.7 per cent per annum”.
Inflation has been at historically low levels during that period, but is now rising sharply, and that $10,000 is beginning to shrink rapidly in real terms.
NSA chief advocate Ian Henschke says: “Similar to the income test issue, there should be changes made to the gifting rules. Labor is now in power. They should look at the gifting rules as something that they could easily improve in the upcoming budget.”
Read: Report highlights the problems for renting pensioners
National Seniors is also campaigning for permanent change in other areas affecting pensioners, most notably to the amount of money a retiree can earn – from both employment sources and investment income sources – before their Age Pension entitlement is affected.
Mr Henschke points out: “We have 480,000 job vacancies in Australia and if you allow pensioners to work, this will assist the economy. And modelling shows that the government does not lose out by allowing retirees to work and still retain their full Age Pension. The government makes it back from the income tax they’ll collect on the wages earned.”
Mr Henschke says Australia is lagging behind other countries in the number of older people in the workforce. “Internationally, 20 per cent of people over the age of 65 work, however in Australia we are lagging behind at 14 per cent.”
Read: What assets will rule out qualifying for the Age Pension?
At present, a single person on the Age Pension cannot earn more than $190 per fortnight before their entitlement is affected. For a couple, the amount is $336. NSA is calling on the government to exempt employment income from the Age Pension income test, and has launched a petition to that effect.
The federal government pledged to make changes in this area at the recent jobs and skills summit and, from December, pensioners will receive a one-off income credit that will allow them to earn an extra $4000 this financial year without penalty.
The temporary top-up will increase the amount pensioners can earn from $7800 to $11,800 before their pension is reduced.
But Mr Henschke is seeking more permanent measures. “They need to take the handbrake off the system by making changes in the upcoming budget (on 25 October).”
Would an increase to gifting limits make a difference to you? Are the rules discouraging you from working? Why not share your experience and thoughts in the comments section below?