Centrelink Q&A: How does gifting affect the Age Pension?

Garry and his wife have accounts for the grandkids, but now it is time to transfer the money.

Centrelink Q&A: How does gifting affect the Age Pension?

Garry and his wife have accounts for the grandkids, but now it’s time to transfer the money.

•••

Q. Garry
My wife and I are both 71 years old and we receive a part Age Pension, which is currently assessed under the assets test. We each receive approximately $194 per fortnight.

We have bank accounts for our four grandchildren in which we place approximately $40 once a month, and my wife is nominated as trustee. We have always accounted for each of the account balances as assets in my wife’s name to Centrelink for Age Pension calculation purposes. One of the grandchildren turns 21 in November this year and we intend to transfer the balance of his account into his name for $16,000. How will this be treated for our future Age Pension calculation purposes? Will it be regarded as a gift over $10,000 in this financial year (2019/2020) and how will the excess be treated?

A. Any sum of money that you give away would be subject to gifting in the financial year that you give the money away.

Gifting allows you to give away $10,000 each year, and up to a maximum of $30,000 in a five-year period. If you gift more than these amounts, it will be considered a deprived asset and you will continue to be assessed on this amount for the five years.


So, when your first grandson turns 21 and you gift him $16,000, your combined assets will only be reduced by $10,000 for Centrelink purposes. This means that you may still see an increase in your pension payments, but not by as much, because your assets are decreasing in reality.

That $6000 will still be included as an asset for the next five years. Depending on how the birthdays of your grandchildren are staggered, it sounds like you will be gifting around $64,000 in total. The $30,000 gifting limit means that if you pay out the total in the same five-year period, you will still be assessed as holding that extra $34,000 in assets, even though you have given that money away.

Are you eligible for an Age Pension? Do you know your rights? The RetirePlanner™tool has all the information you need.

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.

RELATED ARTICLES

    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

    To make a comment, please register or login
    Karl Marx
    16th Aug 2019
    10:45am
    Just another reason for the introduction of a universal pension as touted by many on this forum. This situation will then not have any relevance.
    Under the current system better to draw out the monies over a period of time & give it to them in cash.
    Pretty bad state of affairs when you can't even save money over a period of time to give to your grandchildren on their 21st birthday although I understand why under the complex rules & regulations that even centrelink have trouble with.
    Will be interesting to see what the pension review comes up with
    tj
    16th Aug 2019
    10:51am
    Couldn't agree more
    Digby
    16th Aug 2019
    10:56am
    Totally Agree with Karl Marx
    Tanker
    16th Aug 2019
    11:01am
    It's that old chestnut of a universal pension again. The real Karl Marx would have immediately drawn attention to the increased benefit of such a thing to the wealthy with no benefit to the less well off. If anything they would suffer because the money would have to be found from somewhere and the government most likely to provide such benefit to the well off would cut the rate of the pension so the poorer would suffer.
    Tanker
    16th Aug 2019
    11:02am
    It's that old chestnut of a universal pension again. The real Karl Marx would have immediately drawn attention to the increased benefit of such a thing to the wealthy with no benefit to the less well off. If anything they would suffer because the money would have to be found from somewhere and the government most likely to provide such benefit to the well off would cut the rate of the pension so the poorer would suffer.
    Thoughtful
    16th Aug 2019
    11:45am
    @Tanker You could possibly be right Tanker but I would actually like to see a cost analysis. Stop the tax incentives for putting money into super, change the tax system to avoid tax rebates eg SAPTO, tax ALL income including the universal pension and do away with a whole heap of bureaucracy associated with the administration of these complex rules. This also avoids people manipulating the system so surely a saving there too. I don't believe this would discourage people from saving for their retirement - they are going to be much better off than if reliant on the pension, unlike the current system where if you have more limited superannuation you are actually not much better off than being on the pension. This would also mean more tax dollars to the government and keep the cash flow going. This doesn't even take into account the socio economic savings in health and housing if seniors were actually able to have genuine partnerships without the fear of losing part of their pension. I have not done any financial research on all of this but would certainly like to see the figures if somebody could provide them.
    GeorgeM
    18th Aug 2019
    9:56pm
    Quite right, Karl & Thoughtful. Universal Age Pension is the only way to go now, to get it out of the hands of politicians. There will be no reduction in pensions, as some try to lie to oppose the idea, as no party will survive if they do that.

    Heaps of ways to afford it, including putting aside the ongoing 7.5% taxes paid through Personal Income Taxes into a Future Fund, besides reduced Centrelink costs, as well as a tightening of tax evasion say by ensuring Minimum Taxes are paid by all. Economy will also get a boost, with this massive restriction removed on earning more leading to more taxes (more of the 7.5% inbuilt into it), as well as by more unrestricted property transactions from downsizing, etc.
    Fluffy Duck
    16th Aug 2019
    11:27am
    What happens if you're already below the asset limit and receive a full pension? Giving your money away isn't going to get you any more pension, so why would you even have to tell Centrelink?
    leek
    16th Aug 2019
    5:53pm
    Fluffy Duck. I agree with you.
    sunnyOz
    19th Aug 2019
    7:37am
    Totally agree. I too am under the asset/income limit and recently sold my caravan and tow vehicle. Notified Centrelink. I had to buy another car, and needed to get a carport built. I was appalled when Centrelink asked to see receipts, (I suppose in case I made a huge profit) but I refused. What, where and how I spend my money on is none of their business. A simple check of Red Book would have shown I had lost heavily on the change. They did not push the issue, but I wonder how many seniors would bow? What is also ridiculous is the absurd low amount you are required to notify Centrelink of. If your assets (also meaning money) changes up or down by $1000, you are supposed to notify Centrelink.
    johnp
    16th Aug 2019
    12:16pm
    Agree completely re universal pension, save billion on bureaucracy.
    Also Govt has to depress the average retired person otherwise the pollies wont be able to afford their extremely exorbitant huge salaries, increases, allowances, perks etc. $180 per day meal allowance for pollies, $6 per day for aged care resident !! Australia is one of the lowest countries allocating in percentage terms from GDP to welfare. Starting to feel nauseous about the whole situation.
    GeorgeG
    16th Aug 2019
    1:53pm
    Universal pension only common sense. Then adjust taxes to compensate the government. Maybe Centrelink would then be able to provide a better serfvice.
    Tricky
    16th Aug 2019
    3:04pm
    Under Deeming Rate provisions pension should go up!
    Tricky
    16th Aug 2019
    3:07pm
    No separate accounts for AKA 3 grand children just separate accounts for; 1.Rates 2. Electricity 3.Water.
    leek
    16th Aug 2019
    5:59pm
    Under the Austrac rules banks must report transactions over $10,000. Not sure if any of these transactions make their way back to Centrelink. Just suppose they did. The $16k would get picked up. better up breaking it up into smaller junks, as was suggested by an earlier poster.
    Farside
    17th Aug 2019
    10:54am
    Have you considered withdrawing a conservative cash amount for your weekly expenses and simply putting the leftover in your sock draw? Who knows, those leftovers could add up to a decent sum before too long.
    GrayComputing
    17th Aug 2019
    11:32am
    Universal pension is the only way to go.
    Our PM does everything opposite to what his Christian beliefs tell him to do.
    Following the examples of Jesus is not what he does in his politics.
    He is not meek and instead is so severely unkind to the poor, the sick and our farmers in drought.
    The P.M is also overly fond of giving billions of our money to the money changers (banks) and instead of thrashing them like Jesus did at the temple gates.
    johnp
    17th Aug 2019
    5:14pm
    Agree again. Morrison is the opposite to a christian !!
    Farside
    17th Aug 2019
    5:57pm
    and how do these comments relate to the topic? It's about as relevant as discussing toast preferences.
    East of Toowoomba
    19th Aug 2019
    8:23am
    How about opening a joint account with each of the grandchildren and pop the money in there. They are given access to joint account upon their 21st birthday.
    johnp
    19th Aug 2019
    11:00am
    Upon their 21st birthday the amounts within will then begin to disappear into the ether !!


    Join YOURLifeChoices, it’s free

    • Receive our daily enewsletter
    • Enter competitions
    • Comment on articles