For many Australians, the Age Pension plays a crucial role in funding retirement. But while generosity often comes naturally – especially when helping children, grandchildren or loved ones – gifting money or assets can have unintended consequences if you’re receiving, or planning to claim, the Age Pension.
Centrelink has strict rules around gifting, designed to stop people from deliberately reducing their assets to qualify for the pension. Unfortunately, many retirees only discover these rules after a well-intentioned gift has reduced their payments – sometimes for years.
If you’re thinking about giving money away, or have already done so, understanding how gifting is assessed under current Age Pension rules is essential.
Here’s what you need to know.
What Counts as Gifting Under Age Pension Rules?
In Centrelink terms, gifting refers to giving away money or assets for less than their market value, or receiving nothing in return.
This can include:
Cash gifts to children or grandchildren
Transferring property or shares
Forgiving a loan
Selling an asset for less than it’s worth
It doesn’t matter whether the gift is made to family, friends or even certain charities – Centrelink still applies the same assessment rules.
A simple test applies:
It is considered a gift if:
You transfer an asset or income, and
You receive less than its market value in return
It is not a gift if:
You receive money, goods or services of equal value
How Much Can You Gift Without Affecting Your Pension?
Up to $10,000 per financial year, and
No more than $30,000 over a rolling five-year period
Importantly:
You cannot gift more than $10,000 in any single financial year
The five-year period is rolling, not fixed
Any amount above these limits is known as a deprived asset.
What Happens If You Go Over the Gifting Limits?
The excess amount is still counted as your asset
It is assessed under the assets test
It is also deemed to earn income under the income test
This deprivation applies for five years from the date the gift was made, regardless of whether the money is gone or cannot be recovered.
As Director of RSM Financial Services Australia Grace Bacon explains: “The Age Pension is assessed under both the assets test and the income test, with the recipient receiving whichever result provides the lower payment.”
“Any gifts above the allowable limits are treated as if you still own them, and deeming rules will apply for income assessment purposes – for five years from the date of gifting.”
What If You Gift Before Claiming the Age Pension?
This is where many Australians are caught out.
Centrelink looks back five years when assessing a new Age Pension claim. Any gifts made during that time are included under the gifting rules and may still count as assets.
That means giving away money before applying for the pension does not avoid assessment.
If you’re approaching pension age, gifting decisions should be made with extreme care.
Are There Any Exceptions?
Some limited exceptions may apply, including:
Certain funeral expenses
Some medical or health-related payments
However, these are assessed case by case, and assumptions can be costly. If in doubt, professional advice is essential.
Why Do Gifting Rules Exist?
The gifting rules exist to protect the integrity of the Age Pension system.
Without them, people could simply give away assets to qualify for taxpayer-funded support. The rules ensure that assistance goes to those who genuinely need it – while still allowing reasonable generosity.
Common Gifting Mistakes Retirees Make
Some of the most common errors include:
Gifting large lump sums without understanding deprivation rules
Helping children with property purchases without documentation
Forgiving family loans without realising the impact
Assuming “it won’t matter because it’s family”
As Grace Bacon warns: “Pensioners must look after their own financial security first. Once a gift is made, it may not be possible to recover it – even if circumstances change.”
Alternatives to Gifting
In some cases, a formal loan agreement may be more appropriate than an outright gift. This can:
Protect your financial position
Reduce Age Pension risks
Provide clarity for both parties
However, loan arrangements must be properly documented and structured to be recognised by Centrelink.
Gifting can be generous, meaningful and deeply personal – but it can also be financially risky if you’re receiving, or planning to claim, the Age Pension.
Before giving money or assets away:
Understand the $10,000 / $30,000 limits
Consider the five-year deprivation rule
Get professional advice if unsure
A well-intentioned gift should never come at the cost of your own financial security.
For personalised guidance, speak with a licensed financial adviser or contact Services Australia before making any major decisions.
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