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