‘If I use my inheritance on gifts for my kids, will our pension be affected?’

May 31, 2019
Centrelink has rules that limit gifts to $10,000 a year or $30,000 over five years Source: Getty.

Q. I am expecting some money from an inheritance in the near future. My husband is on a full Age Pension and I work casual hours and report my income fortnightly to Centrelink. My earnings reduce his pension on average of $1 for each $4 earned. My question regards the inheritance money.

I would like to gift my two children a car each from this money and put the allowable amount into superannuation. How will this affect our standing with Centrelink, as I have read that you can only gift $10,000 per year. Does this ruling affect me as I am not a pensioner (yet) and the inheritance is being paid to myself? Could the ‘gifts’ be paid from the estate prior to dispersing my share of the inheritance?

A. Some pensioners-to-be think they can engage in some clever ‘impoverishment planning’ in anticipation of becoming eligible for the pension in order to decrease their assets and receive a higher pension when pension time arrives. It is called ‘spending down’ your assets. Centrelink says nice try but it doesn’t work generally speaking because of the gifting rules.

The gifting rules not only apply to what you gifted after you become eligible for the pension but also for five years before you were eligible for the pension. If you gift more than $10,000 in any year, or more than $30,000 in aggregate over five years, anything over that will be deemed to still be your asset. We call it the Claytons Asset – the asset you give away but which Centrelink says you still have.

If you gift anything to your children now, even though you are not eligible currently for a pension, and you become eligible for a pension within the next five years, that gift will be regarded still as an assessable asset over and above the limits above.

It will not help to have the gifts made directly from the estate rather than from you as you would then have assigned your gift and that assignment is just another form of gifting.

If you have a question for Starts at 60’s money experts, email it to [email protected].

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial situation, objectives or needs. That means it’s not financial product advice and shouldn’t be relied upon as if it is. Before making a financial decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services advice.

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