- 2 mins
Many Australians find themselves in a position where they would like to assist their children by gifting them money or assets, such as a house. However, they often have concerns about how these generous gestures may adversely affect their eligibility for the age pension. In this article, we will explore the rules and regulations surrounding gifting assets, including property, and how these actions can potentially impact one's age pension benefits.
The government has set limits to prevent individuals from transferring their assets and retirement savings to others in an attempt to increase their age pension benefits. Under the current rules, Australians can gift up to $10,000 per year, up to a maximum of $30,000 over a rolling five-year period, without triggering any negative pension consequences. This means that if you exceed this limit within the five-year timeframe, any additional gifts will be counted as a deprived asset.
A deprived asset refers to an asset you once owned but gave away in excess of the specified gifting limits. While these assets are no longer in your possession, they are still considered as part of your assets for age pension assessment purposes. In other words, gifting a house or any asset beyond the allowed limits will not directly reduce your age pension payments. Instead, it may make you ineligible for additional age pension benefits due to your decreased asset threshold.
The introduction of these gifting rules was driven by a desire to prevent retirees from circumventing the age pension system by transferring their assets to others. Some individuals might have considered giving away their assets, including property, to appear asset-poor and thereby qualify for a higher age pension payment. The gifting limits serve as a safeguard to maintain the integrity of the age pension system.
Aside from the age pension implications, gifting a house can also trigger capital gains tax (CGT) events. When you transfer ownership of a property to another person, it may be subject to CGT if the property has appreciated in value since its purchase. It is crucial to seek tax advice before proceeding with such gifts to understand the potential tax consequences and plan accordingly.
While gifting a house or other assets in Australia can be a generous and well-intentioned gesture, it's essential to be aware of the rules and regulations surrounding asset gifting, especially when it comes to the age pension. Exceeding the specified limits may not directly reduce your age pension payments, but it can affect your eligibility for additional pension benefits. Additionally, gifting property may have capital gains tax implications, so it's advisable to seek professional advice before making any significant transfers of assets. Understanding these rules can help retirees make informed decisions about their financial future and the impact of their generosity on their age pension.
This blog contains general and factual information and does not take into account anyone's individual objectives, financial situation, needs or tax circumstances. We strongly recommend you contact one of our Advisers if you would like personal advice.
Redpoint Investment Holdings Pty Ltd (trading as CY Financial Advice), is a corporate authorised representative (No. 378099) of CY Financial Services (AFSL No. 509648)