It’s the season of giving and what better way to show love and support to your family than to gift your children or grandchildren some much needed cash. But BMO Business Centre is advising clients to make sure your generosity does not see you fall foul of Centrelink and impact your Age Pension entitlement.
With gifting taking all sorts of forms, from forgiving a loan, donating 10 per cent of your wages to the church, selling a rental property to a relative at below market price or even repaying a business loan where you were guarantor for a relative.
BMO Partner Adrian Rasmussen said with the increasing home prices, school fees and student debt many are looking to gift money in preference of a traditional item gift.
“As the saying goes it’s better to give with a warm hand rather than with a cold one. However there are rules and limited around gifting. The aim of the gifting rules is to stop people giving away assets such as money, property or shares to qualify for the Age Pension,” Mr Rasmussen explained.
The gifting rules are irrelevant if you are not seeking to receive a Centrelink Age Pension. But if you are already receiving or expecting to get a pension in the next five years, then it is worth making sure you don’t cross the line and end up worse off.
“If you give away assets while you are on a pension or within five years of qualifying for one, then Centrelink imposes gifting rules. These rules say you can gift a maximum of $10,000 a year or $30,000 over a rolling five-year period. These figures apply whether you are a single person or a couple,” Mr Rasmussen explained.
With the new assets test coming into effect on January 1, 2017, it’s particularly important for those effected to know the rules and how they could be impacted.
“While the assets test threshold has risen, helping those at the lower end of the scale, the top level where your part pension cuts out completely has dropped from $1,178,500 to $816,000 for a couple with their own home and from $793,750 to $542,500 for a single home owner,” he said.
“It’s really important to talk to your accountant or financial advisor regarding your particular investment objectives, financial situation and individual needs to stay within the gifting rules. After all the season of giving shouldn’t be giving you heartache.”