Gifting

Regardless of whether you are choosing to give away assets and/or income for altruistic reasons or for reasons relating to how you are means tested, it is important to understand the rules around disposal of assets. If you dispose of an asset for less than ‘adequate financial consideration’ it is considered a gift and the deprivation rules are applied.

Does this mean I cannot give something away?

Of course, these rules do not mean that you cannot give away your assets and/or your income. What they do mean is that if you do so and you exceed the allowable amount, then you will be assessed on the value you gave away.

How much can I gift?

The allowable amount is $10,000 per financial year with a limit of $30,000 in any five-year period. These limits apply to both singles and couples. There is no allowable amount for gifting income.

What if I exceed the allowable amount?

Once you exceed the allowable amount for assets, the value of the assets given away or sold for less than their worth more than the allowable amount is assessed for assets test purposes for 5 years from the date of disposal. If the asset is a financial asset, then deeming is applied to the value of the asset over this period.

So I will just give my assets away before applying for the pension!

It is worth noting that if you are not yet eligible for the pension but will be in the future, these rules only apply to disposals made in the 5 years before you are assessed for the age pension benefit.

Some interesting things to think about?

The rules are complex and broad and I am unable to cover all of them in this article. However, I thought the following might be of particular interest.
Where a person waives their right to an interest in a deceased estate or superannuation fund or directs the executor of the will or the trustee of a superannuation to distribute their interest to a third party and adequate financial consideration is not received, then this is considered gifting.

There are some substantial concessions where a farm is transferred to a near relative. These concessions are designed to assist Australian farmers to retire and hand ongoing control of the farm to the next generation. The concession is that past contributions made by the near relative can be taken into consideration when calculating the deprivation amount. These past contributions can include forgone wages, contributions to improve the farm, purchase of livestock and equipment and unpaid care of the person.

What does this all mean for me?

Please be aware that this is just a snapshot of the information available on this subject and you should not make any decisions based on this article without seeking further advice about your individual circumstances.

Gifting can be a valid strategy for reducing your assessable assets. But there are rules and you need to be sure that you are aware of them before giving away an asset.