Will a loan affect your Age Pension eligibility?

A YourLifeChoices member wants to know if lending money to her daughter will affect her Age Pension


Q. Carole

My daughter wants to borrow $15,000 for about a month. Will that affect my pension?

A. A person’s assets (aside from their principal residence) can affect their eligibility for the Age Pension and the rate of pension they receive.

Centrelink has strict rules in place to ensure that people do not reduce their assets by gifting them to family members or others in an effort to influence their eligibility for the Age Pension or aged care costs.

Read: How does Centrelink assess caravans

However, these rules also recognise that retirees may have a genuine wish to help their family members by giving them cash or signing over property.

For example, if a retiree sells their house to a family member for significantly less than it is worth, the difference (in what the family member paid, and what the market value of the house is) would be assessed by Centrelink as an asset.

Read: Can Centrelink check your bank records?

A person receiving (or about to receive) the Age Pension can give away up to $30,000 over a five-year period without it affecting their pension. Any amount over $30,000 will be counted, for five years, as a person’s asset and included in the asset test.

A loan like yours to your daughter is not included in the gifting amount and will not affect your pension rate. However, this needs to be a genuine loan and Centrelink will require proper documentation and evidence, as a verbal agreement is not enough.

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Jan Fisher
Jan Fisherhttp://www.yourlifechoices.com.au/author/JanFisher
Accomplished journalist, feature writer and sub-editor with impressive knowledge of the retirement landscape, including retirement income, issues that affect Australians planning and living in retirement, and answering YLC members' Age Pension and Centrelink questions. She has also developed a passion for travel and lifestyle writing and is fast becoming a supermarket savings 'guru'.


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