There are no rules that stop you from giving away your own money or property. But if you’re getting or claiming a payment from Centrelink, it is important to understand how gifting can affect that payment.
When Centrelink looks at gifting, we are looking at whether you have given away cash, assets or income and received less than market value in return, or nothing at all. A gift can be obvious, like handing over $20,000 to a family member. It can also happen in other ways. For example, if you sell a car worth $8,000 for $3,000, the difference may be treated as a gift. If you pay someone else’s bills, school fees or loan repayments and do not expect that money back, that can also be a gift.
Donating money to a church or charity is also gifting.
There is a gifting free area, which is the amount you can give away and Services Australia accepts you don’t have that money anymore. It’s the same amount regardless of whether you are a single person or a member of a couple – a maximum of $10,000 in any 1 financial year, and a total maximum of $30,000 over a rolling 5 financial year period which can’t include more than $10,000 in a financial year.
If you give away more than those limits, the amount above the free area is still counted as your asset for five years from the date of the gift. We also apply deeming to the amount above the free area. That means we use the deeming rules to work out how much income that amount would earn, even if you are no longer getting any real income from it.
This can affect both the assets test and the income test. In some cases, it can reduce your payment. In other cases, it may affect whether you qualify at all. That is why it is important to think carefully before making any gifts.
You also need to tell Centrelink when you make a gift. If you don’t tell us, you may be paid too much and have to pay money back later. The safest approach is to let us know as soon as the gift happens.
Every situation is different. Some transfers may be treated differently depending on the circumstances. If you are thinking about gifting money, property or other assets, it’s a good idea to get information before you act. That can help you understand the effect on your payment and avoid surprises later.
Until next time.
Hank Jongen
General Manager
Services Australia