Originally published by National Seniors Australia. 

Gifting money or assets can have tax implications or even impact Centrelink payments.

If you’re thinking of gifting money or assets to a loved one, you might be wondering how it could impact you or the recipient financially. Here are some of the things you should consider before you gift.

What is classified as a ‘gift’?

In its simplest form, a gift is considered by the government to be handing over an asset with the expectation of getting either less than its financial value or nothing in return.

Some examples of gifts include:

  • Giving an interest free loan to a family member (such as for a home loan).
  • Selling or transferring ownership of a car or property for less than its original value. 
  • Depositing money into a trust fund that is not controlled by either you or your partner. 
  • Paying tuition fees for grandkids. 

Transferring funds between a couple or paying off a loan you owe are not considered gifting.

Age Pension and gifting

Age Pension recipients are permitted to gift up to $10,000 in cash and assets over one financial year or $30,000 over five financial years with no impact to their pension—this amount is the same for singles and couples. You will also need to let Centrelink know within 14 days of the transfer of assets or money. 

If you go over the gifting limit, Centrelink will consider this excess amount a ‘deprived asset’ and include this in your asset test—which determines whether you qualify for the Age Pension and how much you will be paid. They will also apply deeming, which will be included in your income test. Deeming is a set of rules Centrelink uses to work out your income based on the financial assets you own, regardless of whether your assets earn this or not.

While ‘over-gifting’ could result in your payments being reduced or cancelled, it could potentially improve your payments. Reducing your assets via gifting could potentially earn a higher Age Pension payment, however, any ‘deprived assets’ over the gifting limit could still be counted on your income or assets tests for the next five years from the gift date.

If you receive the Age Pension or are looking to apply for it soon, contact Centrelink to see if gifting will change your payments or eligibility.

Tax and gifting

If you gift money or assets to a family member there are no tax implications for you or the recipient, provided you made it for personal reasons and it is not intended for income-producing activities.

You will, however, have to declare any earnings that result from it (e.g. interest earned on savings or rental income generated from an asset). If you are gifted or inherit an asset such as shares or property, you only pay tax on any income produced by them or pay capital gains tax if you sell them. 

If you inherit superannuation from a deceased loved one’s super fund, it is called a super death benefit, and the super fund trustee will let you know if tax is payable. If tax is payable, it will be deducted from the super death benefit before you receive it.

All insights and information provided in this article should be considered as general advice for educational purposes only. As we are unaware of your personal circumstances, the information in this article should not be misconstrued as personalised financial advice. We recommend seeking advice from a qualified financial professional before making any major financial decisions. 
National Seniors Australia - nationalseniors.com.au

Auswide Bank Ltd AFSL and Australian Credit Licence 239686. This information provides general advice only. We do not provide advice based on any consideration of your personal objectives, needs or circumstances. Content published with permission.