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

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

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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.

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Written by Ben

21 Comments

Total Comments: 21
  1. 0
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    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

    • 0
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      Couldn’t agree more

    • 0
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      Totally Agree with Karl Marx

    • 0
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      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.

    • 0
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      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.

    • 0
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      @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.

    • 0
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      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.

  2. 0
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    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?

    • 0
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      Fluffy Duck. I agree with you.

    • 0
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      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.

  3. 0
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    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.

  4. 0
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    Universal pension only common sense. Then adjust taxes to compensate the government. Maybe Centrelink would then be able to provide a better serfvice.

  5. 0
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    Under Deeming Rate provisions pension should go up!

  6. 0
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    No separate accounts for AKA 3 grand children just separate accounts for; 1.Rates 2. Electricity 3.Water.

    • 0
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      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.

  7. 0
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    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.

  8. 0
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    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.

  9. 0
    0

    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.


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