You can gift as much money or assets as you like, but Centrelink rules determine how these gifts are assessed for Age Pension and aged care purposes. You can generally gift up to $10,000 in one financial year and up to $30,000 over a rolling five-year period without the excess being treated as a deprived asset. Gifts above those limits may continue to be assessed for Age Pension and aged care purposes for five years. It is essential to understand how the rules apply to your specific situation before making significant financial decisions.
Key Takeaways
- There is no legal limit on how much you can gift to others.
- For pension purposes, you can gift up to $10,000 per financial year without penalty.
- You cannot gift more than $30,000 over a rolling five-year period without it being assessed as a deprived asset.
- Gifting financial assets like bank accounts or shares within limits can potentially improve part-pension payments.
- Gifting non-financial assets like a family home can negatively impact your pension and increase aged care costs.
One of the most common questions older Australians ask is: “How much can I gift to my children or grandchildren?”
The short answer is simple: as much as you want.
There is no limit on how much you can give away. The confusion comes from the Centrelink gifting rules, which don’t restrict gifting itself but determine how gifts are assessed for Age Pension and aged care purposes. If you are also planning for future care needs, it is worth understanding how gifting may affect aged care funding and future aged care costs before making a decision.
Age Pension Gifting Rules
For pension purposes, whether you are single or a member of a couple, you can gift $10,000 in a financial year, with no more than $30,000 over a rolling five-year period. Gifts above those limits are treated as a “deprived asset” for five years.
A deprived asset continues to be counted as though you still own it. Centrelink includes it in your assets test and deems it to earn income under the income test, just like it was in your bank account. After five years both the asset and the income disappear from the assessment altogether.
When Gifting Can Improve Your Pension
Here’s the crucial point that many people don’t realise: If you’re gifting from financial assets (like bank accounts, term deposits or shares) giving it away won’t hurt your pension and can sometimes improve it.
If you are receiving the full Age Pension, gifting from financial assets normally won’t reduce your pension because your assessable assets and income are already below the relevant thresholds.
For part-pension recipients, gifting can actually increase pension payments. If you are assessed under the assets test, reducing your assessable assets by gifting can increase your pension. A $10,000 reduction in assessable assets can increase your Age Pension payments by $780 a year.
The Gifting Trade-Off
So, what’s the catch?
Of course, there is a trade-off. Once the money is gifted, it belongs to someone else. The capital and any income it would have earned are gone.
If you gift more than the exempt amount, Centrelink assess the excess for five years. If the money had remained in your investments, it would have been assessed anyway. The difference is that Centrelink continues to assess it even though it is no longer under your control.
The same rules also apply if you enter residential aged care. Any deprived amount is included in the aged care means assessment for five years and can influence residential aged care fees, accommodation contributions and Support at Home costs and contributions.
Risks of Gifting Non-Financial Assets
Where people can run into trouble is when they gift assets that are not financial assets.
A holiday home, vacant block of land, motor vehicle or caravan is counted under the assets test but is not deemed to earn income. Once gifted, however, the deprived value is assessed as both an asset and deemed to earn income for five years. The outcome can be a lower Age Pension and higher aged care costs.
The impact can be even greater when exempt assets are gifted. The family home, for example, is normally exempt from Centrelink assessment. Giving it away can effectively transform an exempt asset into one that is assessable and deemed to earn income for five years.
Planning Your Gifts and Finances
Many parents and grandparents want to “give with a warm hand rather than a cold one”. They would like to see the benefit their gift provides, help children into a home, contribute to education costs or simply share their wealth. Too often, fear of breaching Centrelink rules prevents them from acting.
In reality, the consequences are frequently less severe than people expect. In some situations, gifting financial assets can even improve pension outcomes and reduce aged care costs.
As the end of the financial year approaches, it may be worth reviewing your circumstances. The gifting limits apply per financial year, which means someone could gift $10,000 on 30 June and another $10,000 on 1 July while remaining within the annual exemption.
The key is understanding how the rules apply to your situation before making a decision. Gifting should be driven by what you want to achieve, not by misconceptions about pension penalties. With the right advice, you can determine how much you can comfortably afford to give and what impact, if any, it will have on your future entitlements.
Get Your Free Aged Care Options Report
If you are thinking about gifting, you are probably also thinking about your aged care costs and care options. Get your FREE Options Report with home care providers matched to your needs, location and budget. For a limited time, you will also receive Rachel Lane’s free Support at Home Cost Report to help you plan ahead.
FAQs About Gifting and the Age Pension
How much can I gift without affecting my Age Pension?
You can gift up to $10,000 in a single financial year without penalty. You cannot exceed $30,000 over a rolling five-year period. If you stay within these limits, your Age Pension payments and aged care fees will not be negatively impacted.
Can gifting money actually increase my Age Pension?
Yes, gifting financial assets can increase payments for some part-pensioners. If your pension is assessed under the assets test, reducing your assessable assets by gifting can improve your outcome. A $10,000 reduction in assessable assets can sometimes increase Age Pension payments by $780 a year.
What happens if I gift more than the Centrelink limit?
Any amount gifted above the limit is treated as a “deprived asset” for five years. Centrelink will continue to count this excess amount in your assets test and deem it to earn income, even though the money no longer belongs to you.
When is the best time to gift money to family?
The end of the financial year is often a good time to review your gifting plans. Because Centrelink limits apply per financial year, you could gift $10,000 on 30 June and another $10,000 on 1 July while remaining within the annual exemption.
Will gifting my family home affect my pension?
Yes, gifting your family home or other non-financial assets can have a significant negative impact. It transforms an exempt asset into one that is assessable and deemed to earn income for five years. This can result in a lower Age Pension and higher aged care costs.
The information in this article is purely factual in nature and does not take into account your personal objectives, situation or needs. It is not intended to imply any recommendation, opinion or advice. You should seek advice from a qualified professional about your specific needs, financial situation and objectives.
