Giving your assets away could reduce your Age Pension

Known as gifting, giving away your major assets for less than they are worth or even for free can cost you your full Age Pension.

It is all about timing and the value of the asset. Centrelink’s gifting rule covers any assets you have offloaded in the past five years, and includes the five years before applying for an Age Pension.

“This is to discourage people from disposing of assets just before they become eligible for a pension (for example, just prior to retirement) in order to qualify for pension payment and other ancillary benefits,” according to Centrelink.

So even if you no longer own an asset because you have given it away, Centrelink still assumes you do when it assesses your payment entitlement.

Some gifting is allowed without affecting the Age Pension, but it is limited. Regardless of whether you are a single person or in a couple, the maximum amount of assets you can give away without your pension being affected is:

  • $10,000 each financial year; but no more than
  • $30,000 over a rolling five-year period.

Think carefully before offloading your ‘stuff’, even if you no longer need it and it could be put to better use by somebody else.

Often, as we age we may no longer have the energy to enjoy that boat covered in cobwebs under the carport or the car stranded in the garage, because a doctor has advised you not to drive any more.

At the same time, you may have family or friends who would be only too willing to take them off your hands and you are only too happy to give them away.

However, Centrelink doesn’t see your generosity in the same spirit you intended. What it sees is that before gifting, your combined assets were worth more than what they are now.

Thanks to the assets test used to decide how much of the Age Pension you should receive, you may well be entitled to an increased payment because the value of what you own has decreased.

In order to discourage retirees from parting with their valuable possessions, Centrelink implements the gifting rule. Under the rule, there are all manner of things that are considered before when an Age Pension is assessed, including if you or your partner:

  • transfer your shares or units in a trust or company and don’t get full market value for them
  • give up control of a trust or company – this is a gift of all the assets the trust or company holds
  • own a rental property worth $380,000 and sell it to your child for only $200,000
  • buy a car for your child as a present
  • have 10 per cent of your wages donated to your church
  • forgive a loan
  • have to repay your child’s business loan because you guaranteed it
  • put money into a family trust when neither you nor your partner control the trust.

It would be wise to seek the advice of a financial professional before giving your assets away, in order to understand how Centrelink will assess that against your Age Pension entitlement.

Have you ever given something valuable away? Or have you sold a possession for much less than its market value? Did Centrelink continue to count an asset you no longer owned when considering your Age Pension entitlement?

Written by Olga Galacho

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