The Age Pension is a fortnightly payment for Australians aged 67 or older. It’s designed as a financial safety net to help retirees cover basic living expenses.
Not everyone is eligible though. Not only do you need to meet age requirements (67 years old), you also need to be an Australian resident who has lived here for at least 10 years, with at least five of those years in a single continuous period.
You’re also subject to an asset and an income test, the results of which determine how much Age Pension you can get, if any. Centrelink assesses you under both tests then applies whichever gives the lowest rate of payment for your individual circumstances.
The income test assesses all income pooled from all sources, including wages, superannuation, investment income, commission payments, and any other types of income including those from overseas.
Meanwhile the asset test assesses everything you own, whether it’s in full, in part, or you have an interest in it. It does exclude the home you live in but includes any assets you hold overseas.
How much can I earn and own?
To receive the full Age Pension, single Australians can earn up to $226 per fortnight. Meanwhile, couples can earn up to $396 per fortnight.
Meanwhile, the asset rules just changed. As of the 20th of September, in order to receive the full Age Pension, single homeowners can now own assets (including superannuation) up to a value of $333,000, and non-homeowners can own assets up to $600,000 in retirement.
Again, a couple has a different threshold, and it’s not double the amount of one person. A couple combined can now own up to $499,000 in total if they own a property, or $766,000 if they don’t.
But it’s still possible to earn something if you’re over these limits. A part payment is assessed on a sliding scale depending on your income and assets.
The rules are strict. So it’s easy to see why so many retirees or soon-to-be-retirees try to reduce their income or assets by gifting off money to their kids to try to meet thresholds for the Age Pension.
But that’s a huge no-no.
Gifting money can backfire.
Here’s why.
Centrelink has strict rules about gifting money
Centrelink has strict rules to deter Australians from giving away money to influence their Age Pension eligibility.
If you give away your income or assets, they may still count towards your income and asset tests. This also applies if you sell them for less than they’re worth.
This includes selling or gifting property, a car, money, moving money into a trust, giving up control or a trust or company, forgiving a loan, donating money, or even refusing income to fall under the Age Pension limits.
Gifting limits
You can choose to give away any amount and as many gifts as you like. If the total value of your gifts is more than the value of the gifting-free area, your Age Pension payment may be affected.
If you gift over the value of the gifting free areas, Centrelink will count the excess in your asset text and apply deeming and include it in your income test.
This applies for five years from the date you make the gift.
The value of the gifting free areas is the same whether you’re a single person or a couple.Â
You can gift up to $10,000 in one financial year and $30,000 over five financial years. The $30,000 can’t include more than $10,000 in a single financial year. This won’t affect your asset or income test, but any amount over this will be counted for the next five years.
The post Gifting money to your kids? How it could accidentally dent your Age Pension appeared first on The Motley Fool Australia.
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