Did you know that there are strict rules about how much of your money or assets you can give away without affecting your eligibility for the Age Pension in Australia? Read on to find out everything you need to know about gifting and the Age Pension, including answers to FAQs.
What is a gift in the Age Pension context?
A gift in the Age Pension context includes:
- Anything that you give away (for example, money as a gift to a family member).
- Any asset that is sold for less than market value. In this case, the difference between the market value and the selling price will be deemed to be a gift. For example, if you sell a car worth $30,000 to one of your adult children for $10,000, then you will be deemed to have gifted your child $20,000.
How much can you give away without it affecting your Age Pension?
If you give away more than $10,000 in a single financial year or more than $30,000 over a five-year period, then you must notify Services Australia within 14 days. The excess amount will be included in your Assets test, and you will also be deemed to have earned interest on the excess amount for the Income test.
If you subsequently exceed Assets test or Income test thresholds, then your Age Pension will be proportionally reduced. However, if you still don’t exceed any of those thresholds, then your Age Pension won’t be reduced.
It’s important to understand that there are a variety of Assets test and Income test thresholds depending on:
- Your living situation (i.e., whether you are single or part of a couple)
- Whether or not you own your own home.
How do you notify Services Australia about gifts?
There are two ways to do it:
Can you give money or assets away before you get the Age Pension?
If you’re currently too young to start receiving the Age Pension, the gifting rules apply for five years before you reach your Age Pension eligibility age. As of 1 July 2023, the Age Pension eligibility age in Australia increased from 66 years and 6 months to 67. There are no further increases scheduled.
If you are more than five years away from your Age Pension eligibility age (i.e., aged 62 or younger), there are no gifting restrictions. You can give away as much money or assets as you like. However, whether or not you should do that depends on your individual financial situation and needs.
IMPORTANT: You should seek independent and professional financial advice before making such a gifting decision.
What other factors can affect your Age Pension?
Other factors can affect your Age Pension entitlements, including:
- The amount of super that you have or receive. You can read more about super and your Age Pension.
- Any inheritance that you may receive. Find out what you need to know.
The bottom line
Whether or not gifting any of your money or assets will affect your Age Pension entitlements depends on your individual situation and your Assets and Income tests. It could reduce your Age Pension entitlements, but it may not.
IMPORTANT: It is worthwhile talking to a licensed financial planner to understand the implications based on your individual circumstances and needs.
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