For pensioners who wish to help their families, the end of the financial year sees the re-setting of the annual $10,000 gifting-free area. In this post, we explore how the gifting rules work in more detail.
The end of financial year may provide an opportunity for gifting $20,000 in a short space of time ($10,000 in June and $10,000 in July). Similar to super contribution limits, the gifting rules are ‘use it or lose it’, so acting now may have merit depending on your situation.
How do the gifting rules work?
You can only gift up to $10,000 each financial year or up to a maximum of $30,000 over five years without impacting your pension. As an example, you could employ either of the following scenarios to remain within the Centrelink gifting rules:
|Year||Option 1||Option 2|
Do couples get a higher gifting limit?
The short answer is no. A couple has the same total combined gifting-free area of $10,000 per financial year and a maximum of $30,000 per couple over five financial years.
What happens if you gift over these limits?
If you gift over these limits, Centrelink will assess the excess amount as a ‘deprived asset’. For example, if you gift $50,000 in one financial year, then $40,000 ($50,000 minus $10,000) is defined as a deprived asset. The deprived asset will continue to be counted as an asset and deemed under the income test against your pension for a period of five years.
The gifting rules apply to any gifts made in the five years prior to receiving a pension or allowance. On the Age Pension claim form (Income and Assets section), you will be required to provide details of gifts made by either you or your partner within the last five years.
Can you gift other assets besides cash?
Gifting doesn’t necessarily need to take the form of cash. You can potentially gift other property and assets, although you need to consider issues such as any tax or stamp duty. Obtaining advice beforehand is essential.
Do you need to notify Centrelink?
Yes. You always need to tell Centrelink within 14 days if your circumstances change. It is no different with gifting, even in situations where the gifts are below the gifting-free areas.
You should notify Centrelink about any gifts or transfers within 14 days of when they have occurred. They may require details including the amount of the gift, to whom it was made and the date that it occurred.
The Department of Human Services has good information on the topic of gifting, including some useful examples of how the limits can work in practice.
If you have found this information helpful, please share it with your friends. Thanks!