The Retirement Essentials advice team is currently handling a lot of questions about Age Pension eligibility and the gifting of money or possessions to family members. At one level, the rules are fairly straightforward. But it is the interpretation of what is a gift, loan or asset transfer and who ultimately owns that asset that seems to cause confusion. We’ve outlined the rules below and can help you with the finer points of these rules if you need support.
But first, let’s share some simple sums which show when gifting can work really well.
And when it doesn’t…
SIMPLE SUMS
Mary’s grandson’s HECs debt
Q. I can almost qualify for the Age Pension. I am a single homeowner and have $605,700 in assets and am receiving only $32,000 per year in income from part time work. My assets are $6050 above the threshold for Age Pension eligibility ($599,750). So I wondered if I was to give my grandson $9500 to repay his HECs liability, whether this would mean I would qualify?
A. Hi Mary, in answer to your question of whether gifting might affect your entitlements, the answer in this case is a resounding yes, for the better. Here’s how this could work for you:
Your current situation
Assets, $605,700. Income $32,000
Ineligible for Age Pension as assets exceed threshold.
After gifting
Assets reduced by gift of $9500
Assets $596,200 Income $32,000
Including Age Pension and supplements you are now eligible for $1,293.60 additional income per annum. Importantly, you have also automatically qualified for a Pension Concession Card, which will deliver approximately $2,500+ in benefits and discounts over the course of a year.
And your grandson will no doubt think you are simply the best!
Jeffrey and Hannah’s pre-retirement gift
Q. Our daughter has been through a hard time due to a relationship breakdown so we have given her $90,000 to help her get back on her feet. Hannah doesn’t work and I plan to retire in the next year or so. Our assets are now (after the gift) just under the couple’s threshold of $405,000 for a full Age Pension. But reading the rules makes me think that Centrelink will claim this $90,000 is part of our assets, which we don’t believe is true. Does this mean we will end up on a part pension instead?
A. You are right about Centrelink’s ruling on a gift, Jeffrey. The rules state that there is a limit of $10,000 in one financial year and $30,000 over five financial years.
If you gift in a five-year period prior to retirement, the money can still be deemed to be your asset. You have exceeded the gifting limits by $60,000 for a five year period and this $60,000 will be included in your assets and deemed income will also be calculated on it for the five years from when the money was gifted.
Want to check your pension eligibility before you commit to a gift or a loan? Why not use our Age Pension Eligibility Calculator to ensure you make the right decisions when it comes to giving money or assets?
Gifting Limits
The limits are the same for singles and couples. The most you can gift without it affecting your Age Pension payments is:
$10,000 in 1 financial year, or
$30,000 over 5 financial years – this can’t include more than $10,000 in any year
Amounts you gift in excess of these limits will:
count in your assets test, plus
have deemed interest applied and this will be included in your income test for 5 years after the gift date.
Read more about gifting here.
Our free calculator has all the latest rates and thresholds and will help you work out what you could be entitled to receive.
If I gift a property to a family member 1 year before reaching pension age how is this treated by Centrelink under gifting and the assets test
Reply
Steven Sadleron January 31, 2024 at 4:56 pm
Hi John, as per the article, the value of any gifts you give is assessable (minus the allowed amount) for 5 years from the date it was gifted. Therefore in your scenario the value of the property will be assessable as a gift for 4 more years
Clare Jacksonon January 31, 2024 at 10:38 am
As your home is not counted as an asset and you gifted a share to your children how would this be interpreted?
Reply
Steven Sadleron February 1, 2024 at 8:57 am
Hi Clare, good question! As your primary place of residence is exempt from asset testing you can gift it to your children with no impact or consequence.
Reply
Soniaon January 31, 2024 at 10:43 am
We recently helped our son with purchase of a car. It is not a gift but a loan which he insisted on being. He is paying it back fortnightly for likely next 5 years. As we withdrew this $20,000 from our pension fund, do we need to advise Centrelink? As this is a loan – not a gift how does this fit within the super rules .
Reply
Steven Sadleron February 1, 2024 at 8:47 am
Hi Sonia, thanks for seeking clarity! Yes you should advise Centrelink and provide them with updated balances of your super and bank accounts. Ultimately there will be no real impact as you will simply now have a loan owing to you counted as an asset instead of super so your net position is still very much the same.
Generally, if you give away more than $500 to anyone for any reason in any given month, you risk having the gift create a period of Medicaid ineligibility if you or your spouse apply for benefits. The more you give away, the longer the period of ineligibility.
May I deduct gifts on my income tax return? Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
If you receive a gift, you do not need to report it on your taxes. According to the IRS, a gift occurs when you give property (like money) without expecting anything in return. If you gift someone more than the annual gift tax exclusion amount ($17,000 in 2022), the giver must file Form 709 (a gift tax return).
You don't even have to report them to Social Security. So, if the only Social Security payment you get is SSDI (or a Childhood Disability or Disabled Widow Benefit) you can let Santa know that there's no limit to what he can leave under your tree.
An entitlement is a gift not properly acknowledged by its recipient, taken for granted. A gift is an indication of love and affection, and the lawful division of an estate to children is inter-generational wealth.
The primary way the IRS becomes aware of gifts is when you report them on form 709. You are required to report gifts to an individual over $17,000 on this form. This is how the IRS will generally become aware of a gift. However, form 709 is not the only way the IRS will know about a gift.
A gift tax is a government tax imposed on those who give money or property to others in exchange for nothing (or less than total value). There is typically a tax-free gift limit to family members until a donation exceeds $15,000 (jumping up to $16,000 in 2022). In these instances, the IRS is usually uninvolved.
Can my parents give me $100,000? Your parents can each give you up to $17,000 each in 2023 and it isn't taxed. However, any amount that exceeds that will need to be reported to the IRS by your parents and will count against their lifetime limit of $12.9 million.
The IRS allows every taxpayer is gift up to $18,000 to an individual recipient in one year. There is no limit to the number of recipients you can give a gift to.
Giving cash is the easiest and most straightforward way to accomplish gifting money to family members. You can write a check, wire money, transfer between bank accounts, or even give actual cash.
If you are on SSI (not SSDI) then you will lose your supplemental income for any months that you have $2,000 for the whole month (If it tops $2,000 during the month but then you use some and it doesn't stay over that, then you are not penalized).
Even if you make gifts to another family member who is not your spouse, a friend, or a business associate, they are not taxable under federal guidelines, until their cumulative value exceeds $15,000 (for 2021).
Entitlements are government programs that provide monetary or other benefits to people who meet eligibility requirements established by law. Social Security, Medicare, Medicaid and food stamps are all examples of entitlement programs. Currently, entitlements account for slightly less than two-thirds of the budget.
In general, a person with a sense of entitlement has a self-absorbed view of the world and little regard or empathy for their impact on others. In its extreme form, a sense of entitlement may be part of a personality disorder (e.g., narcissistic personality disorder, antisocial personality disorder).
Under the current rules, you can give up to $18,000 to any individual in one year—and to as many people as you choose. This is an annual limit. You can give up to $18,000 to as many individuals as you choose every year without owing a gift tax. Suppose you have three kids.
You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.
You most likely won't owe any gift taxes on a gift your parents make to you. Depending on the amount, your parents may need to file a gift tax return. If they give you or any other individual more than $36,000 in 2024 ($18,000 per parent), they will need to file some paperwork.
Introduction: My name is Annamae Dooley, I am a witty, quaint, lovely, clever, rich, sparkling, powerful person who loves writing and wants to share my knowledge and understanding with you.
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