The Centrelink Gifting rules are a regular topic of conversation with retirees and often a bone of contention.  The application of these rules can frequently lead to confusion.

The rules themselves are fairly straightforward; you are allowed to Gift $10,000 per annum to a maximum of $30,000 over any five year period.

I’ve lost count of the amount of clients who have said to me, “it is my money, Centrelink can’t tell me not to give money to my children” (or whoever else).  Of course this is true, they can’t you are able to do what you want with your money, however, funds given away remain as an asset for the calculation of the Pension.

The logic behind this rule is to stop families transferring wealth and still claiming Centrelink benefits they would not otherwise be entitled to receive.  I heard it said once that the Government should not subsidise pensioners’ gifts to their children.

To demonstrate the Gifting rules as a working example; “John” is on a Centrelink pension and would like to give away $50,000 to his son.  The gift would be treated by Centrelink as follows;

Under the Centrelink asset test $40,000 of John’s gift would still be considered an asset in year one, despite the fact that John no longer has access to these funds. In year two  $30,000 would be considered an asset and the following year $20,000 would be considered an asset. That remaining $20,000 would be considered an asset until 5 years after John initially gifted the money.

Funds gifted are also deemed for income test purposes.

Giving away assets to increase Centrelink entitlements is, in general, counterproductive. As a retiree you are always in a better position with more retirement assets, despite receiving less in Centrelink pension.

If you are planning on gifting some of your assets to assist family and friends, for Centrelink purposes it might be worthwhile doing so before you are entitled to an age pension or at least as early as possible. Remember, the assets given away count towards asset testing for a maximum of 5 years (less for the first $30,000 given away).