Noel Whittaker writes exclusive weekly blog updates for the Ban Tacs Group, with IN8 Business Advisory a member of that group. Here he compares discusses rules on pension gifting.
“I am currently receiving a lot of questions about the pension gifting rules. The questions fall into two categories – from those who would like to make gifts to pensioners to help them get by, and from pensioners themselves who are keen to boost their pension by giving money away.
Let’s think first about gifts to pensioners. The asset test affects wealthier pensioners so it would be unlikely that family members would think they would need gifts to help them get by. A pensioner in need is more likely to be income tested but it would need to be a substantial gift to cause a change in the pension.
From 1 July 2019 a pensioner couple can earn $308 a fortnight combined and still be eligible for the full pension of $1396.20 a fortnight, including all supplements. They can also earn $300 a fortnight each from personal exertion – this is not included in the income test. Once income exceeds $308 a fortnight the pension reduces by $0.50 for every additional dollar earned.
If you go to the deeming calculator on my website www.noelwhittaker.com.au you will discover that it would take about $324,000 in financial assets to produce a deemed income of $308 a fortnight. Provided the total assessable assets do not exceed $375,000 after the gift they should still be able to retain the full pension.
Now let’s consider pensioners who want to make gifts. If you have a reduced pension because of the level of your assets, or are not eligible for a pension because your assets are over the cut off points, you could consider making gifts to family members or to your favourite charity. A pensioner can make a gift of up to $10,000 a year without penalty as long as they do not gift more than $30,000 over five years.
If you intend to gift more than $10 000 a year, you are better off to treat the balance over $10 000 as an interest free loan, because excess gifts are held as an asset for five years.
Think about a pensioner couple who wished to give $30 000 to their children. If they gift it in one lump $10 000 will be regarded as a gift and the balance of $20 000 will be deemed for five years. However, if they gift $10 000 immediately and treat the remaining $20 000 as an interest free loan they could progressively forgive $10 000 for each of the next two years.”
