When a gift is not a gift, according to Centrelink

It’s a well-known tactic, to improve your chances of being eligible for the Age Pension or part payment, that you can reduce your assets by gifting them.

However, don’t think you can just give a bunch of money or a car to friends or family and the government will reward you for that. 

You can give away some assets, but there are limits. Centrelink rules are that you can give away money or assets to the value of: 

• $10,000 in one financial year
• $30,000 over five financial years – this can’t include more than $10,000 in a single financial year.

These limits are the same if you are single or a couple.

Larger gifts

Anything above the limits, and the rules become tricky. And if you try to defraud Centrelink with your gifting, the financial punishment can be quite onerous. Anything above these limits and Centrelink will be counted in your assets test and will have deemed income assessed off it for five years after the date of the gift.

So when is a gift not a gift?

Centrelink’s rules regarding what is a gift and what’s not a gift are as follows: 

It’s a gift if both of these apply:

• you sell or transfer an income or asset
• you get less than its value or nothing in return.

It’s not a gift if both of these apply:

• you sell or transfer an income or asset
• you get money, goods or services to the same value.

Not just about the money

So it’s not just about monetary gifts. If you sell a car for less than the market value to a friend, then under Centrelink rules the difference is considered a gift. 

Other things Centrelink considers gifts are putting money into a family trust or company if you control that trust or company, if you forgive a loan, any charity donations, and if you agree to ‘deprived’ income.

What that last one means is that you agree to less income so you can continue your pension payments. The following Centrelink example demonstrates the rules. 

“Frank gets a superannuation pension of $6000 per year. He refuses an increase of $1000 per year because he doesn’t want his Age Pension to go down. We call this deprived income.

We include the $1000 in Frank’s income test for the Age Pension each year. This means Frank’s payment from us will be at a lower rate. We can include the $1000 in Frank’s income test indefinitely.”

Deprivation of assets

Technically, giving too much away under Centrelink rules is called ‘deprivation of assets’ and Centrelink doesn’t like it one little bit. 

To complicate matters, there are four main exceptions to the gifting rules.

• The Granny Flat rules, where you transfer a house for less than its value but negotiate the right to stay there for life. Find out more here.  
• If you transfer a farm for less than its value, it may not be a gift. This applies if it’s in return for past unpaid work. Find out more here. 
• It may not be a gift if you give up to $500,000 to a Special Disability Trust. Find out more here. 
• And unforeseen circumstances, where you give a gift, and unexpected circumstances arise that would normally affect your payment, however in some instances, Centrelink will overlook the gift. This is considered case by case.

If you report regularly to Centrelink and you make a gift that will affect your Age Pension eligibility, you must report that gift on or before your next reporting date.

If you do not report regularly, you must let Centrelink know within 14 days of making the gift. 

Do you give financial gifts to your family? Did it change your Age Pension payments? Why not share your experience in the comments section below?

Also read: Cost of living not adding up for pensioners