A YourLifeChoices reader wants to know how Centrelink assesses a loan as compared to a gift when it comes to the Age Pension.
Q. Ron
I know that up to $10,000 can be gifted in one financial year or $30,000 over five financial years. Does gifting include where a loan greater than these amounts is made out to someone which will be repaid over time?
A. If you or your partner gift or loan assets (including cash), Centrelink may assess it in your income and assets tests for Age Pension payment.
Services Australia general manager Hank Jongen says Centrelink will assess gifts to see if they go over the value of the gifting-free areas.
“If you gift assets over the gifting-free areas, it’s counted as a financial asset for five years from the date of the gift and is subject to the deeming rules,” Mr Jongen says.
“The gifting-free areas are $10,000 in one financial year and $30,000 over five financial years, however, this can’t include gifting more than $10,000 in a single financial year.”
A financial asset
The gifting-free areas are the same if you’re single or if you’re part of a couple.
“Money you loan to someone is counted as a financial asset and is subject to the deeming rules. The amount assessed is reduced as the loan is repaid,” Mr Jongen says.
“If you forgive a loan you’ve made, this may count as a gift.”
You must tell Centrelink if there is a change in your financial assets of $2000 or more from what they have recorded, including the repayment of a loan.
“We have more information about asset types, including financial investments such as loans, on our website,” Mr Jongen says.
“Before you or your partner make a gift or a loan, contact us to check if it will change your payment. You should call your regular payment line.”
Centrelink also has a free Financial Information Service to help you make informed decisions about your finances.
To speak to a FIS officer one-on-one call 132 300, and just say “Financial Information Service”.
Has a loan effected your payments? Was the loan repayed? Why not share your experience in the comments section below?
Also read: Centrelink Q&A. Separated couple living under the same roof