How does Centrelink assess an inheritance? 

There was an article in the news this week about an inheritance that garnered a lot of attention.

Regular YourLifeChoices contributor and finance expert Noel Whittaker advised someone who had written in to The Age about the fact that they had inherited $1 million but as a result lost their pension. The couple wanted to know if there was anything they could have done to keep their pension.

Noel quite politely answered that they would have a far better quality of life under the inheritance than they would under welfare. And rightly so.

But it does raise the question, what are you meant to do if you inherit money and you are on a Centrelink payment?

Let’s look at their rules.

Centrelink includes inheritances under its ‘lump sum’ payments rules and defines it as a ‘one-off’ payment. 

Lump sums Centrelink doesn’t count as income need to be: 

  • unlikely to happen again
  • hard to predict
  • not for a service or work provided.

Other lump sums not included in the income test are a one-off gift, prize, reward, lottery win, a redress payment or compensation from an Australian trust.

However, an inheritance will be classed as an asset, and as such it will need to be declared. 

If the money is invested into a financial product such as a high interest account or shares, the income will be subject to Centrelink’s deeming rules

If you report to Centrelink fortnightly, you need to declare the money in the reporting period you receive it.

If you do not report to Centrelink regularly, you must declare it to Centrelink within 14 days of receiving it. 

To avoid the money being classed as an asset, you can invest it in a non-assessable asset under Age Pension rules such as the primary home. For instance, you could use the money to renovate or make your home more accessible.

If you use the money to pay off any mortgage on your principal home, it will not affect your pension. 

If you have a younger spouse under Age Pension age, it can be contributed to their accumulation account and will not be assessable by Centrelink. 

If you try to give away your inheritance in order to once again be covered by the Age Pension, the Age Pension gifting rules still apply. 

Anything over the gifting free areas counts in the assets test. It will also be assessed under the income test through deeming. The gifting free areas are:

  • $10,000 in a financial year
  • $30,000 in five financial years – this can’t include more than $10,000 in any financial year.

Centrelink gives the example: If you gift $10,000 in one financial year, you have reached the gifting free area for that year. If you gift $10,000 each financial year for three years within five financial years, you have reached the gifting free area.

For more information, it’s a good idea to call Centrelink’s Financial Information Service. You can book a video chat appointment, a personal appointment or call the Centrelink Older Australians line and say “Financial Information Service” when you are asked why you are calling. The number is 132 300.

Have you received an inheritance? Did it change your life? Why not share your experience in the comments section below?

Also read: Are you on the right carer payment?

Jan Fisher
Jan Fisher
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'.


  1. Do the gifting rules still apply if you are under the assets/income limit? If you have (for example) $100,000 in savings/super and receive a full pension, and receive an inheritance of $300,000, you would still as a couple be under the limit to receive a full pension. If you gave away part of the inheritance why would Centrelink need to be involved? It’s not going to affect your pension at all.

  2. After I received a small inheritance, I wanted to make provision for my funeral. I found a funeral bond. This has an upper limit which you can keep to, if you wish to make it not counted as an asset. Plus I have the Reassurance it will be there for my family.

  3. I am interested to know just how much is required to put aside as provision for a funeral. Costs had gone up very steep. Long ago, I read that $5K would cover a funeral cost, but now I read that $15K is still not enough. I also read somewhere that one person paid monthly instalments for a $15K insurance for funeral, and up till now this person has paid double or even treble the amount and should this person die, his family would only receive $15K. If this person opts out not to continue, the family would not get anything at all. This is really a shame! Is there no rule that after having paid the full amount, future instalments should be lessened?

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