Finance Your Budget Ask the Expert: How gifting money to your children affects your age pension
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Ask the Expert: How gifting money to your children affects your age pension

pension asset test craig sankey
Licensed financial adviser Craig Sankey answers your burning finance questions. Photo: TND
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Question 1: How are an age pensioner’s assets affected when selling and gifting to working children? Is the limit $253,750, above which I will lose my age pension? 

How much age pension you receive is based on your overall situation, not just how much you give away to friends or family.

The Centrelink (and DVA) assets test depends on:

  • If you are single or a member of a couple, and
  • Whether you are home owner or non-home owner.

The below table sets out the relevant thresholds:

The asset test generally includes all of your assets but it excludes your home.

Gifting

If you gift your assets, including to your children, they may be caught under Centrelink’s deprivation rules.

If gifts of assets exceed $10,000 in a financial year, or $30,000 over any rolling five-financial-year period, the excess amount is still counted as an asset under the asset test.

For example, if you give your children $200,000, then $190,000 would still be counted under the asset test. The $190,000 would be considered under the asset test for a period of five years before Centrelink stop including it in its assessment.

The Centrelink rules are designed so that individuals make use of their assets first, and don’t simply loan or gift them away just to increase their potential age pension benefits.

It’s also worth noting that the $190,000 would be ‘deemed’ and counted under the income test as well.

You should give careful consideration before loaning or gifting any money, so as not to leave yourself short, as there will be Centrelink implications.

Centrelink will be able to let you know how loaning or gifting money would affect your situation.

Question 2: I have retired early to help out family members with child care and aged support, and to reduce my stress levels. I am not receiving any government benefits and am drawing a super “pension” of $28,000 a year. I live modestly. I own my home. I was born in 1959. I have good health.

On retirement, most of my super was in cash, but it is being moved into low-risk shares to keep some type of growth.

I am not confident there will be an age pension for me but am unlikely to find paid employment again. Do you have any lifestyle or investment suggestions?

With unemployment rates being low, and some employers finally recognising the benefits of employing older staff, don’t give up on paid employment.

Even working casually or part time to supplement your superannuation pension income could make a big difference.

As you are over 60, all your superannuation pension payments will be paid tax free, so keeping the funds within this structure would make sense.

The investments held within your superannuation should reflect your investment objectives – i.e. what type of return you would like to achieve – but also factor in how much risk you can afford to take.

As you are in good health, hopefully you have many years still ahead of you, so I do think it is appropriate that you have some growth-style assets, such as shares and property, within your superannuation portfolio.

In relation to ‘risk’, APRA requires all super funds to label their investment options as per the table below, and you will find this in the super fund’s investment guide, or on their website:

If you need some advice regarding which investment option(s) to invest in, most super funds will provide this advice as part of their standard services and will not charge you a direct fee.

Drawing an annual superannuation pension of $28,000 equates to $1077 per fortnight. By way of comparison, the full age pension is $953 per fortnight.

Your pension age is still a few years away, but when you reach that age you may be eligible for a part age pension.

The current cut-off for a home owner to receive any age pension is $588,250 (as at September 2021) but this will index up over time.

It’s important to understand how superannuation and the age pension interact.

The retirement system is designed so that as you draw down more of your super to fund your lifestyle, you then become eligible for a part age pension.

Therefore, don’t feel like you must live overly modestly, as the age pension is a great back-up plan or ‘insurance policy’ that kicks in once your income and assets fall below the relevant threshold.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives. 

The New Daily is owned by Industry Super Holdings