What are the Age Pension gifting rules? (2024)

The $10,000 and $30,000 limits apply together meaning that assets can be gifted up to $10,000 per financial year without penalty but gifts must not exceed $30,000 in a rolling five-year period.

If you exceed these limits, the amounts gifted outside these limits will result in being treated as a ‘deprived asset’ which will be counted as an asset under the assets test and deemed under the income test.

These deprivation provisions are designed to limit the potential for someone to reduce their assets for the purpose of increasing their Age Pension.

Deprived assets are assessed for five years from the date of the relevant disposal and are subject to deeming during that time. When applying for Centrelink/Department of Veteran Affairs (DVA) payments, you must disclose gifts made in the last five years and report any gifts, sales or transfers within 14 days after your application is approved.

What counts as gifting?

As mentioned earlier, for social security purposes gifting is not simply about giving away your money or savings. Some examples include the following:

• Transferring the ownership of your investments such as a property or shares for less than its market value.
• Giving up control of a company or a family trust that holds assets inside it.
• Forgiving a loan someone owes you, be it partial or full.
• Paying your grandchildren’s school fees.

What does not count as gifting?

In addition to the transfer of assets where you receive theirmarket value, other transactions that don’t count as giftinginclude:

• Selling or reducing your assets to cover regular living expenses, such as funding home improvements or paying for a vacation does not qualify as gifting.
• Asset transfers between spouses. For example, the aged pension spouse making super contributions to non-age pension age spouse’s superannuation account.
• Certain gifts made by a family member or a certain close relative to a Special Disability Trust.
• Assets given, or construction costs paid for a ‘granny flat’ interest.

Timing of the gift

An important thing to consider with gifting is timing. Centrelink only looks retrospectively at the last five years. If you gift away your $400,000 holiday house at the age of 62, when you turn 67 and claim the pension, that gift will not be assessed.

When determining whether you have gifted amounts exceeding the threshold, the rules are not straightforward as there are provisions in place to avoid double counting where excess gifts exceed both thresholds of $10,000 in one financial year and $30,000 over a rolling five financial year period.

Before making a gift, it is important to confirm whether any gifts have already been made in the current financial year or the previous four financial years.

Given the complexities around gifting rules and its potential impact on your Centrelink benefits, consulting a qualified financial adviser or Centrelink directly isadvisable.

Below are questions from our readers and answers from Karen Hunt, Age Pension expertat MyPensionManager:

Q: I understand that I can make a gift of $10,000 per year and therefore increase our pension (for married couple) per fortnight. What do I need to do to prove to Centrelink that I have done this legally (eg have a signed receipt or an agreement)?

A: Centrelink assess your money where it is. If you have given your son $10,000 from your bank account, you would provide your bank statement to Centrelink showing the money being transferred out of your account and they will record the resulting balance and they will record a $10,000 gift. The lower bank balance is what increases your pension. The $10,000 gift is not assessable. They may ask to see evidence of it being transferred into your son’s account, but you don’t need a signed agreement.

Q: If I gift $100,000 to my children in one year, I understand $90,000 will be counted as deprived assets and still under my income and assets test, not really affecting my Age Pension as the $100,000 count towards my assets and income test currently anyways. After five financial years are over, my age pension will increase due to the reduction in my assets.

A: This approach is correct in a way but there are other aspects to consider. For example, by gifting $100,000 to increase Age Pension after five years, you may miss out on the investment income the $100,000 could generate for yourself. You would need to work out the difference between that missed income versus the potential Age Pension increase after five years. Given the complexity around gifting rules. It would be best to consult a financial adviser to assist with your specific situation.