This Factsheet explains what is considered to be a gift for pension purposes and how giving income or assets away may affect your pension. It also explains how giving away income or assets may impact on the fees and charges you may be asked to pay in residential aged care.
What is a gift?
A gift is any money or property that you give away and for which you do not receive adequate financial consideration. Gifting is the term often used when you dispose of an asset, property or income for less than its market value. It can also be called disposal or deprivation. This does not mean that you cannot give reasonable gifts to people.
The disposal can be either a transfer to another person (including a family member), private company or trust for less than market value, or it can be a gift to a person, private company or trust.
An example is where you give money to friends or relatives and get nothing in return. Another example is where you sell property to friends or relatives for less than the property is actually worth.
Why does gifting affect my pension?
Gifting affects your pension because it either directly or indirectly reduces the assets or income available for your personal use. The gifting or deprivation provisions are intended to limit the potential for individuals to avoid the assets and income tests.
This does not mean that you cannot give reasonable gifts to people, as gifting is permissible within certain limits. Any gift made that is greater in value than the allowed limit may affect your pension. The reduction in your asset value, or in your income through gifting, continues to be counted in working out the rate of your pension. This means you may be assessed on assets you no longer own, or on income you no longer receive.
Are gifts made before pension is granted counted?
Gifts that have been made during the five years prior to claiming pension may be counted in your pension assessment. This is to discourage people from disposing of assets just before they become eligible for a pension (for example, just prior to retirement) in order to qualify for pension payment and other ancillary benefits.
How much can I give away before it affects my pension?
The maximum amount of assets you can give away, regardless of whether you are a single person or in a couple is:
- $10,000 each financial year; but no more than
- $30,000 over a rolling five-year period.
These figures also represent the total combined amount that a couple can give away before their pension is affected.
What is the rolling five-year period?
The rolling five-year period is the current financial year plus the previous four financial years.
What if I want to give away more than $10,000 of assets in a financial year?
If you give away more than $10,000 of assets in a financial year, the amount in excess of $10,000 is counted as a financial asset for five years from the date that you give it away. This excess amount will also be deemed to be earning income under the income test for the period of five years from the date that you gave the asset(s) away.
Example: On 27 January 2014, a pensioner gives his three children $5,000 each. This means he has given away $15,000 in one financial year. The amount in excess of $10,000 equals $5,000. The $5,000 excess will be counted as a financial asset for pension purposes and deemed to be earning income until 27 January 2019.
For more information refer to Factsheet IS89 Deeming and Financial Assets.
What if I want to give away more than $30,000 of assets in a rolling five-year period?
If you give away more than $30,000 of assets in a rolling five-year period, the amount in excess may be counted as a financial asset for five years from the date that you give it away. This excess amount will also be deemed to be earning income under the income test for the period of five years from the date you gave it away.
Example: A pensioner gives away $10,000 on 1 May each year for three years. During the fourth year he gives a further $10,000 away. Although he has not exceeded the annual financial year disposal limit of $10,000, he has exceeded the $30,000 limit during a five-year rolling period by $10,000. The $10,000 excess will be assessed as a financial asset and deemed to be earning income for five years commencing on the date that the $30,000 limit was exceeded.
Do I have to tell DVA about small, one-off gifts?
No. DVA does not need to be told about small, one-off gifts (for instance, purchasing a toy for a grandchild, or gift vouchers for family or friends) or spending for another person’s benefit that would be reasonable for any other member of the public on a day-to-day basis (for instance, buying someone else’s coffee or lunch, or buying the weekly groceries for your son or daughter’s family from time-to-time). These kinds of gifts would not normally be taken into account for pension purposes.
However, the $10,000 free area can be reached through the accumulation of gifts. It is recommended that you keep track of any sizable gifts, so that you can notify DVA if you are concerned that you may have gifted in excess of the free area, or be in danger of doing so. Failure to advise DVA of this may lead to an overpayment of pension, which DVA would recover. Large gifts should always be reported to DVA so that we can ensure that you receive your correct pension entitlement.
What if I deprive myself of income?
If you have deliberately deprived yourself of income - for example, by forgoing a superannuation increase so that you can maintain or increase your rate of pension, we count the deprived income as income for pension purposes. Deprived income is counted for pension purposes for as long as you deprive yourself of this income. The $10,000 / $30,000 threshold does not apply where you deprive yourself of income.
Example: If you have deprived yourself of income of $12,000 per annum by gifting your wages to your children, we would count this entire amount as income for pension purposes for as long as you continue to deprive yourself of the income.
Example: You own two houses, one of which you live in and the other that you allow a friend to occupy paying rent of $50 per week. It has been estimated that the property could earn approximately $360 per week. The purpose of this arrangement is to enable your friend to save a deposit to purchase the home from you. As you have received significantly less than market rent as your financial consideration, you can be said to have undertaken a course of conduct that diminishes your ordinary income by $310 per week. Accordingly, you are taken to have disposed of income. However, the amount of income that is held in your assessment may be reduced by certain costs involved in preparing the property for rental.
How does giving away income affect my pension?
Separate tests are applied to the total of your income and your assets. The test that results in the lower rate of pension is the one that is used to calculate your pension.
If your pension is income tested
If you give away income, DVA will count that income as if you were receiving it. Subject to the income limits, this may affect the rate of pension payable to you. For more information refer to Factsheet IS87 Income Test Overview.
If your pension is assets tested
If your pension is assets tested, your pension will not be affected if you deprive yourself of existing income. If, however, you deprive yourself of new income (e.g. a superannuation increase) and this income would change your pension from being assets tested to income tested, your pension will be affected as detailed above.
How does giving away assets affect my pension?
A separate test is applied to the total of your income and your assets. The test that results in the lower rate of pension is the one that is used to calculate your pension.
If you are income tested
You can give away assets of up to:
- $10,000 in a financial year; but no more than
- $30,000 in a rolling five-year period.
The amount exceeding either limit will be combined with the rest of your financial assets for five years from the date of the gift and income will be deemed under the deeming rules.
If you are asset tested
If your pension is assets tested and you give away assets within the gifting limits, your pension may increase. It is in your interests to advise us of any gifts in excess of $500. For more information refer to Factsheets IS88 Asset test overview and IS89 Deeming and Financial Assets.
What happens if a deprived asset is returned?
If, during the five year period, you subsequently receive adequate consideration for a gifted asset (either in part or full), or it is returned to you, then the value will no longer be assessed as a deprived asset from the date that you notify DVA that the asset has been returned or adequate consideration has been received. The returned asset or consideration may, however, be included in your other assets.
Example: A person gives $40,000 to a family member and receives nothing in return. Consequently, $30,000 is held in the person’s pension assessment as a deprived asset, and will remain there for five years from the date of the gift. Two years after the date of gift, the family member returns $30,000 to the person. The $30,000 is no longer assessed as a deprived asset but will be treated under the normal rules depending how the asset is used.
How does giving away income or assets affect residential aged care?
Disposal of assets and disposal of income may affect the amount of income you are deemed to be receiving for the purposes of determining your aged care fees and charges. The maximum asset gifting amounts outlined earlier for pension purposes also apply for residential aged care payment purposes.
For more information refer to Factsheet IS82 Aged Care and your finances.
How does gifting affect the Pension Bonus Scheme?
If you or your partner are already registered for the Pension Bonus Scheme, gifts that either of you have made, or intend to make, may affect whether you can be paid a bonus. For more information refer to Factsheet IS07 Pension Bonus Scheme or contact DVA on the phone numbers under the section titled ‘More Information’ at the end this Factsheet.
Is gifting assessed if I resign from a private trust or private company?
If you or your partner control a private trust or private company and you relinquish control of that entity without receiving adequate financial consideration, you will be considered to have gifted the assets held by the trust or company.
Are distributions from a private trust or private company counted as gifts?
Distributions of capital or income from a private company or private trust may be assessed as a gift by the controller of that entity. For more information, please see Factsheets IS155 Business Structures - Private Trusts and IS156 Business Structures - Private Companies.
Are gifts made by immediate family members to a Special Disability Trust counted?
Gifts made by immediate family members to a complying Special Disability Trust may be disregarded for the purposes of the donor’s income support payment. Special Disability Trusts are for the support of people with a severe disability. For more information refer to Factsheet IS163 Special Disability Trust.
When you are granted an income support pension and periodically after that, you will be notified of your obligations. You will be required to tell us within14 days (28 days if you live overseas or receive remote area allowance) of changes to your circumstances that might affect the rate of income support pension you receive or your eligibility to receive that pension. These obligations apply equally to trustees.
If you give away assets valued at more than $10,000 in a financial year or $30,000 in a rolling five-year period you need to tell us within 14 days (28 days if you live overseas or receive remote area allowance). The things we need to know are:
- the value of the asset given away;
- who you gave it to;
- the date that you gave the asset away; and
- any other changes to your income and assets as a result of giving the asset away.
If you have given away any significant amounts of property or goods (e.g. real estate) you should also provide any relevant documentation which relates to this action. You would also need to tell us within 14 days (28 days if you live overseas or receive remote area allowance) if you have deprived yourself of income.
Usually an overpayment of pension will not occur when you have met your obligations. However, sometimes even if you have met your obligations, an overpayment can occur, because we have not been able to process the change before the next payday. We do our best to prevent this occurring, but it is not always possible. To provide you with your exact entitlement we are obliged to recover overpayments of pension where they do occur.
DVA General Enquiries
Metro Phone: 133 254 *
Regional Phone: 1800 555 254 *
DVA Website: www.dva.gov.au
Factsheet Website: www.dva.gov.au/factsheets
* Calls from mobile phones and pay phones may incur additional charges.
- IS07 Pension Bonus Scheme
- IS82 Aged Care and your finances
- IS87 Income Test Overview
- IS88 Asset test overview
- IS89 Deeming and Financial Assets
- IS155 Business Structures - Private Trusts
- IS156 Business Structures - Private Companies
- IS163 Special Disability Trust
The information contained in this Factsheet is general in nature and does not take into account individual circumstances. You should not make important decisions, such as those that affect your financial or lifestyle position on the basis of information contained in this Factsheet. Where you are required to lodge a written claim for a benefit, you must take full responsibility for your decisions prior to the written claim being determined. You should seek confirmation in writing of any oral advice you receive from DVA.