Did you know that by assisting financially your family members you can not only help your children or your friends
but you can improve your Age Pension at the same time. It's called gifting.
But before you jump into helping others, you have to fully understand rules behind gifting and allowable limits for your generosity,
otherwise it might negatively impact your Age Pension.
So today I will give you some examples how gifting can help you, but also I will give you examples of what not to do and why.
My name is Katherine Isbrandt from About Retirement, I am Certified Financial Planner and you are watching About Retirement TV,
the place to provide you with all the information you need to be well prepared for your upcoming retirement or to improve your retirement if you are already there.
"Giving freely and giving with a good heart, will never go unrewarded". - James Clear
So, what is Gifting?
Gifting can be a great strategy and a rewarding one.
Not only you feel happy and satisfied that you could help another person, but your generosity could also improve slightly your Age Pension check.
However, there are limits you should stick to, otherwise, your gift will be viewed as deprivation
and you might be financially punished by the Centrelink office and treatment of assets that you have given away.
But what exactly is gifting for Centrelink purpose?
Well, if you sell an investment or you transfer your income or your asset to another person or another party and you received less or nothing in return
and you have done it within a limits of a maximum of $10,000 in one financial year and up to $30,000 within a period of 5 financial years - this is gifting,
If you exceeded the limit, this is regarded as asset deprivation and the balance above the allowable limit will be treated as a deprived asset
& will be counted under Income and Asset Test for the period of 5 years, as if you continued holding this asset.
So in simple terms, you can give away a maximum of $10,000 in one financial year up to $30,000 within a period of 5 years.
What are examples of gifting?
Well, giving away cash - this is most straightforward form of gifting, for example, you gave your daughter $10,000 to help her with her home renovation.
Transferring to your granddaughter shares of the value of $20,000, that's gifting.
You sold your car to your grandson for example, for $5,000, while the market value of the car is $20,000.
Then it is estimated that you have given away $15,000 of your assets.
You invited the whole family for an overseas vacation and you paid $15,000 airfares for all family members, that's also gifting.
What is not gifting, but rather assets deprivation?
Giving away a car of $50,000 value with no payment to you, it is not gifting anymore but a deprivation of assets,
and will require a period of 5 years to disappear as your asset and not being counted under Asset Test
You transferred an investment property to your daughter, and you have not received any money in return, that is also deprivation of assets.
And that includes your family home.
Just because your home is an exempt asset for means testing, doesn't mean that Centrelink will accept you giving away your home.
You are still depriving yourself of an asset of a significant value that could support you in future years.
If you sell an investment property valued at $450,000 to your children for $320,000, for example.
Centrelink will view this transaction as you depriving yourself of $130,000.
Giving up a control of a company or a trust, if there are assets held within that entity.
Lending $50,000 to your niece, for example, but then forgiving that loan is also seen as assets deprivation.
Paying off your son's $100,000 loan because you guaranteed it, this will also be seen as assets deprivation.
What is not included in gifting?
If you sell or reduce a value of your assets because you need to cover your normal living costs, or you spend money for holidays,
home renovation this is regarded as your normal living expenses and arrangement and is not treated as gifting.
Moving assets between partners or contributing to your partner's superannuation is also not viewed as gifting.
How can gifting help your Age Pension?
Every $10,000 of your assets is actually worth $780.00 of Age Pension payments,
therefore if you give away a maximum allowable limit of $30,000 over the period of 3 years, so year after year, $10,000,
your Age Pension could potentially be increased by $780.00pa, hence after 3 years your total Age Pension could be higher by $2,340pa.
Please watch my previous video: "Real Value of Age Pension in Australia". I think you could be very surprised with my findings.
My very first recommendation is: organise your money well before your first visit to the Centrelink office or completing your application online.
Prepare your assets in advance, so you know your entitlement before Centrelink even comes back to you with the reply.
It is so much easier to deal with Centrelink when you know the application is final and you don't have to go through time wasters such as reshuffling papers,
uploading statements and explaining transactions.
Obviously, the easiest way to reduce your assets and your savings under Assets Test is just simply spend your money.
But spending it for the sake of getting rid of the money is pretty silly, not to mention, that Centrelink is checking the last year of your transaction history.
If you are to spend your money, do it in the way that it will provide you with a long-term benefit, and helps you with Age Pension eligibility at the same time.
I hope you found this video of benefit and interest. If so, please LIKE it and SUBSCRIBE to my channel not to miss my next video.
If you have questions or comments, please leave them below my video. Then visit my website AboutRetirement.com.au
where you can find lots of information all devoted to the issue of retirement.
And while you are there, please don't forget to sign up to my Newsletter to be kept up to date with all the changes that might impact your retirement.
And now I would like to recommend you watching the previously mentioned video, which I think
is one of the best information you can find
about the actual monetary value of Age Pension to you:
"Real Value of Age Pension in Australia"
The second video to watch: "Is my home always exempt for Age Pension"
Enjoy and I will speak with you in my next video, bye.