Centrelink Q&A: The downside to gifting

Chris could be about to come into some money, but will it be a blessing?

When a gift isn't so welcome

Chris’s father would like to gift her some money, but both are unsure if his Age Pension and her Widow’s Allowance will be affected. So we take some time to clarify the rules.

•••

Q. Chris
My 93-year-old father is on the Age Pension and wishes to gift me some money. I don't know the exact amount but I’m guessing it's around $20,000 or $30,000. He has no other assets, such as a house or large investments to speak of. I need to know if he will be penalised by Centrelink if he does this, as I will inform him not to do it, if that’s the case. I am on the Widow’s Allowance and have nothing of value, so if all goes ahead, could I be penalised for receiving the gift?

A. Your father can gift up to $10,000 a year but no more than $30,000 in a five-year period. Therefore, if he was to gift you $20,000 or $30,000 in one year, then the amount over the $10,000 would be considered a deprived asset and he would be assessed as though he still had that money. Therefore, he wouldn't actually be penalised, as his financial situation would be more or less the same. However, he would receive no real benefit of reducing his assets, other than by the amount of $10,000.

If you receive an amount, the gift itself will not be assessed as income; however, what you do with it could affect your Widow’s Allowance payment. For example, if you were to buy an asset, such as a car, this will count towards the asset test. If you were to put the money in a bank account, it would be deemed to earn interest as a financial asset and this income will be counted under the income test.

Find out more about deeming rates.

Before accepting any money from your father, you should contact Centrelink to confirm the effect this will have on your payment.

If you have a Centrelink question, send it to newsletters@yourlifechoices.com.au and we’ll do our best to answer it, or find someone who can.

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    Financial 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

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    GrayComputing
    16th Jul 2018
    1:18pm
    It is time for all of us (that means you) to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    A pension is not welfare.

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

    Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

    Help scrap it now. Become a hero.

    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

    Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Does your MP really like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

    Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

    We all need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

    Also contact opposition and independent MPs who can help us to get a fair deal on pensions

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    Blondie
    16th Jul 2018
    2:21pm
    Is Centrelink going to check on what goes in and out of your bank account?! NO.its none of their business if your kind, caring Dad wants to give you some money to be enjoyed now! I bet the politicians don’t report any ‘ gifting’......Oz is gradually sliding into a police state, and the pensioners are totally fed up with Big Brother telling us how to live their lives!
    Sundays
    16th Jul 2018
    2:48pm
    I agree Blondie, but a 93 year old doesn’t need the stress of Centrelink finding out, or doing a desk audit. They do all sorts of data matching. For example withdrawals of $10k or more are reported by banks, they know how much interest which gives them an idea how much you have etc.
    tex
    16th Jul 2018
    2:40pm
    Do any other countries have asset testing? (to this degree)?
    41Alpha
    16th Jul 2018
    3:28pm
    What a weird and complicated system we have. Whats with this , you can gift $10K a year, but no more that $30K in 5 years......who thinks this stuff up ? this must be some reason for this, but I don't see it.
    Greg
    16th Jul 2018
    6:03pm
    An example of how this can work in your favour - 65 yo who receives a part pension because they have $700,000 invested in a term deposit, if they "give away" to their son $500,000 (who really only holds the funds and knows it still belongs to the 65 yo) their investment is now only worth $200,000 so now they will receive the full pension. That's the reason for this ruling.
    Rae
    16th Jul 2018
    6:13pm
    Idiots who are paid far too much in think tanks and organisations designed to interfere in all our lives while being paid quite a lot to do so.

    Some of these organisations have very nasty ideologies and plans for our future.

    They'll go too far eventually and be torn apart.
    Anonymous
    17th Jul 2018
    9:56am
    Well Greg - you must really trust a son with $500'000 to do that as you know legally the money will be the son's. You try to get it back would be interesting indeed. Gifting money to children as housing loan deposit and so claiming the full pension is a more likely case scenario. Most people do things like that before they are 60 so it will not be counted when they apply for the age pension 5 years later.
    Greg
    17th Jul 2018
    5:24pm
    It was an EXAMPLE of how gifting can benefit a pensioner as 41Alpha asked "this must be some reason for this, but I don't see it". Don't know about your family but I can trust mine.
    With the mortgages being so large the funds could be put into an offset account so the children don't pay as much interest on their home loan, or invested in the child's name, doesn't matter, the point is the money is in someone else's name so the pensioner receives a higher pension.
    ray from Bondi
    16th Jul 2018
    4:23pm
    I agree with sir Grey Computing, or is the mss :) we have been taken over by Orwellian governments, though labor does pay lip service to left-wing policies it is nothing more, these days it is a choice between Tweedle Dee and Tweedle Dum once there is NO appreciable difference. I believe it has been made unassessably complicated for two reasons, ALL of our money trees have been sold, how would the bottom line of the budget look with income from the banks, Telstra, Qantas and the power industry coming in, there would be money for all, not just the multinational corporations.
    Another Reason is to make it so difficult those on the border will not apply due to all the big brother rules, try and find a bank account with the deeming rate, it is very very hard, but the government forces its will upon us in this regard, if BIG BROTHER tells us what our accounts receive they should also tell the banks to supply it, but then their job after politics would be in jeopardy, and I suspect they are nothing put puppets doing the bidding of others, I do not believe the population would want all our jobs sent overseas but we do not have a say.
    Anonymous
    17th Jul 2018
    9:59am
    The Military Bank was the last I heard of having deeming accounts but was a few months ago. You might find out by googling it.


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