The rules, regulations and tests that apply to the Age Pension can appear complex – especially if you’re applying for the first time or still becoming familiar with what you can and can’t do while receiving a pension.
Gifting is one of those rules that you should know about as it can land you in trouble.
The gifting rules are designed to prevent you from giving away assets or income over a certain level in order to increase Age Pension and allowance entitlements.
If you give away income or an asset, they may still count towards your means test under the Age Pension gifting rules.
If you sell or transfer an income or asset and you get less than its value or nothing in return, that is considered a gift.
It is not considered a gift if you sell or transfer an income or asset and you get money, goods or services equal to the same value.
Services Australia provides a short video explaining when transferring an income or asset is considered a gift.
Read: Time to overhaul Age Pension gifting rules
If you or your partner gift money, income or assets, Services Australia may assess it in your income and assets tests. Gifts are assessed to see how they reduce your assets and whether they go over the allowable amount for gifting.
Any gifts you made in the past five years may count in your income and assets tests.
How much can you gift?
You are allowed to gift up to $10,000 in one financial year or up to $30,000 over five financial years, but this cannot include more than $10,000 in a single financial year.
If you gift over these limits, the excess amount is considered to be a deprived asset of the person and/or their spouse. The gift is assessable as an asset for five years from the date of gifting, and subjected to deeming under the income test. After the expiration of the five-year period, the deprived amount is neither considered to be a person’s asset nor deemed.
Any amounts gifted in the five years prior to accessing the Age Pension or other allowance are also subject to the gifting rules.
| Date | Gift | Amount that is within the annual gifting free area | Amounts within last 5 year’s annual gifting free areas | Amount maintained as a financial asset |
|---|---|---|---|---|
| 1 May 2009 | $8,000 | $8,000 (less than $10,000) |
$8,000 | $0 |
| 1 June 2010 | $13,000 | $10,000 (maximum) |
$18,000 | $3,000 until 31 May 2015 ($13,000 – $10,000) |
| 1 April 2011 | $7,000 | $7,000 (less than $10,000) |
$25,000 | $0 |
| 1 May 2012 | $11,000 | $10,000 (maximum) |
$35,000 | $6,000 until 1 May 2017 (($11,000 -$10,000) + ($35,000 – $30,000)) |
If you sell a house
Services Australia may include a gifted amount in your income and assets tests. For example, you own a property worth $380,000. But you sell it to your child for $200,000.
Services Australia would assess the $170,000 difference as a gift. The allowable gift of $10,000 in a financial year would not be included.
Read: How is overseas property assessed?
In some cases, Services Australia won’t include it in your income and assets tests. For example, you own a house valued at $380,000. You sell it for $350,000 on the open market. This is because it was the best offer to date. You didn’t think it was a good idea to wait for a higher offer.
Other transactions that could be considered gifts include:
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- buying or transferring a car
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- transferring money into a trust or company
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- giving up control of a trust or company
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- forgiving a loan
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- paying off someone else’s loan
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- donating money.
Were you aware of the Age Pension gifting rules? Has your pension been affected? Let us know in the comments section below.
