Q: I am applying for the Age Pension and the Income and Assets form (SA369) is asking about gifts. I assisted my daughter 4 years ago to buy a house by contributing $80,000 to her deposit. What are the consequences for my Age Pension? If this gift is counted as an asset, it may mean we do not receive the Age Pension.
A: In applying for the Age Pension, Centrelink applies an Assets and Income Test to determine your entitlement to a Pension benefit. Broadly speaking whichever test delivers the lower Pension benefit is the test that will apply. There are limits as to how much an Age Pension applicant can gift in order to reduce the amount of assets they own to increase their Pension entitlement.
You are entitled to gift up to $10,000 a year or $30,000 over a five year period. The same limits apply as a single person or as a couple. If you exceed these limits, the amount in excess of the limit is considered a deprived asset and the excess amount counts as an asset for five years from the time you made the gift. Even though you are applying for the Age Pension now, as you gifted your daughter the $80,000 4 years ago, $70,000 which exceeds the limit will count as a deprived asset and therefore count for Assets Test purposes. However next year, once the 5 years has expired from the date of gifting, it will no longer be counted.
Under the Assets test, all of your assets excluding the family home are counted at current market value. The Asset test reduces your Age Pension by $1.50 per fortnight for each $1,000 that the Assessed Value of your assets exceeds the threshold. Please note, from 1 January 2017, the rate at which the Age Pension reduces will increase from $1.50 to $3 per fortnight.
The current cut off point to receiving a part Age Pension for a couple who own their home is Assessable assets less than $1,178,500. ($793,750 for a single). For a non- home owner couple, the threshold is $1,330,000. ($945,250 for a single).
After 1 January 2017, a couple who own their home, will be ineligible for a part Age Pension if their Assessable assets are greater than $816,000. ($542,500 for a single). For a non- home owner couple the threshold will be $1,016,000. ($742,500 for a single).
If the $70,000 that is still being assessed (as a result of the $80,000 gift to your daughter) will exclude you from receiving the age pension, there are a range of options available to reduce your assessed assets; you could consider renovating or upgrading the family home as the family home is assets test exempt. You could spend money on a holiday. Purchase a funeral bond up to $12,500 per person or pre-pay your funeral and cemetery plot.
Alternatively you could wait for the 5 years from the date of gifting to expire and then re-apply for the Age Pension.