Last week I discussed some of the tax implications when gifting, this week I’ll turn my attention to gifting when receiving Centrelink benefits.
As I said previously, most gifting of a substantial nature is from retired parents or grandparents to their children or grandchildren.
Often these parents or grandparents are likely to be receiving some form of aged pension and it’s important to be aware of Centrelink’s rules on the issue before gifting large amounts of cash or substantial assets.
Of course you can give away any amount of money, or significantly valued asset you choose, but staying under the following limits allows you to reduce your asset base without reducing Centrelink benefits.
Centrelink’s rules on gifting allow pensioners (a single person or a couple) to gift a maximum of $10,000 in a year.
However this rule exists within a wider five year rule, where pensioners (a single person or couple) can only gift $30,000 over a rolling five year period
Gifts above either of these amounts are considered by Centrelink to be deprived assets and will continue to be deemed as a financial asset held for five years.
What if you’re not yet receiving a pension?
Often the benefits that are available with an aged pension, such as rates discounts or pharmaceutical benefits can lead impending retirees to consider gifting early.
This is in the hope of reducing their asset base to qualify for a future pension and subsequently receive the extra benefits that come with it.
For anyone considering this strategy, Centrelink is way ahead of you because the five year rule still applies.
Any gifting in the five years prior to receiving a benefit will be considered, and if above the $30,000 limit, it will be classified as a deprived asset and be deemed as held for five years.
As always, understanding Centrelink or ATO rules can avoid any nasty surprises in the future.
Peter Mancell is a director of Mancell Financial Group and FYG Planners AFSL / ACL 224543. This information is general in nature and readers should seek professional advice specific to their circumstances.