If you are currently receiving the Age Pension in Australia (or will soon be eligible to receive it), there are rules around how much you can give away without it affecting your Age Pension entitlements. Read on to find out all about the Age Pension gifting rules in Australia and what to watch out for.
What are the rules?
A gift in the context of the Age Pension gifting rules includes anything that you give away or that sell or transfer for less than its market value. If you sell or transfer an asset at less than market value, then the difference between the selling price and market value will be considered to be the gift amount.
For example, if you sell a car with a market value of $20,000 to a family member for $10,000, then the gift amount will be considered to be $10,000.
If you give away an asset or income, then its entire market value will be considered to be a gift. For example, if you gave away a car worth $20,000 to a family member for free.
You can currently gift up to $10,000 each financial year if you are currently receiving the Age Pension in Australia, provided that you do not gift more than $30,000 over a five-year period. These limits are known as your “allowable disposable amounts“ or “gifting free areas”.
Any gift that you make must be reported to Services Australia within 14 days of you making it, or on or before your next regular reporting date. You can do this through myGov or by contacting Services Australia directly.
What to watch out for
If you exceed either your annual or five-year gifting limits, then Services Australia will:
- include the excess amount in your assets test.
- use the deeming rate on the excess amount and include the deemed amount in your income test.
Passing both the income and assets tests are part of the eligibility requirements for continuing to receive a full or part Age Pension.
If the value of your assets exceeds the current minimum threshold limit, then your Age Pension will progressively reduce until it cuts off completely. Your threshold limit depends on whether you:
If you exceed your minimum income test threshold limit, then your Age Pension reduces by 50 cents for each dollar you exceed the limit until it cuts out completely. Once again, your limit depends on whether you are single or part of a couple, and whether you are receiving a full or part Age Pension.
As mentioned earlier, gifts include assets or income that you either give away or sell at less than market value. Common examples include:
- units in a company or unit trust, and
It can also include more abstract items such as:
- forgiving a debt that is owed to you,
- paying a debt on someone else’s behalf, and
- deprived income (for example, if you refuse an increase in your super pension because you don’t want your Age Pension entitlement to decrease).
In addition, if you donate a significant amount of money to a church or charity (such as 10% of your annual income), it may also be counted as a gift by Services Australia for the purposes of determining your Age Pension entitlements.
There are some limited exceptions to the gifting rules, including:.
- transferring the ownership of a property in exchange for the right to live there for life.
- transferring the ownership of a farm in return for past unpaid work.
- a gift to a special disability trust if you have an immediate family member who is the principal beneficiary of the trust.
It’s important to be aware of gifting rules if you are (or soon will be) receiving the Age Pension in Australia, and to comply with those rules so that you don’t affect your entitlements. Gifts include assets or income that are either given away for free, or sold or transferred for less than their market value. There are limits to the gifts you can make each year and cumulatively over a five-year period without affecting your Age Pension entitlements.
The information in this article is general in nature.