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Gifting

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					Gifting

Before you make a gift, you should carefully consider the effect it may have on your financial security. You should also check the effect on social security entitlements. This factsheet explains the social security treatment of making a gift.

What happens if I gift more than the gifting free area?
Any gift or number of gifts whose total value is greater than the allowable gifting amount or free area will be assessed as a “deprived asset” for five years from the date of gift and will be subject to the income deeming provisions—see the Deeming factsheet. This may change if a gift is returned. Gifting (disposal) of assests worth more then the allowable amount or free area is known as “deprivation”.

What is gifting?
“Gifting” is the term often used when you or your partner: • gift or dispose of assets, including transferring assets for less than their market value, and • do not receive adequate consideration for the gift or transfer (in the form of money, goods or services).

What is the allowable gifting amount or free area?
The allowable gifting (disposal) amount or free area for a single person or a couple is $10 000 in each financial year or $30 000 in any five consecutive financial years.

Can I gift any amount of money or assets that I like?
You or your partner can gift or transfer assets to any value you choose at any time. However, the rate of your pension or allowance may be affected if you gift assets worth more than the allowable gifting amount or “gifting free area”. Centrelink assesses gifts that you make to see how they directly or indirectly reduce the assets available for your personal use and whether they exceed the “gifting free area”. You must tell Centrelink about any gifts or transfers within 14 days of when they have occurred.

$30 000 rule
The $30 000 rule applies where gifts have been made over several years. The $10 000 rule is applied first and the total of gifts made in a financial year that exceed $10 000 would be assessed as a deprived asset. The $30 000 rule only applies to the amount of the allowable gifting amount ($10 000) used in each financial year. The free area used is accumulated over the maximum period of five financial years. Once the $30 000 limit is reached, any subsequent gifts are assessed as deprived assets for five years. Any amount that is assessed as a deprived asset does not count toward the $30 000 limit.

FIS012.0809 (page 1 of 3)

www.centrelink.gov.au

Example: Julie gifts $10 000 each financial year. • 2002–03 $10 000 within limit • 2003–04 $10 000 within limit • 2004–05 $10 000 within limit • 2005–06 $10 000 deprived asset • 2006–07 $10 000 deprived asset • 2007–08 $10 000 within limit Julie has reached the $30 000 in a five-year gifting free area in 2004–05. The gifts in the following two years will be treated as deprived assets. In year 2007–08, the $30 000 in a five-year period rule does not apply. In the previous four financial years, Julie has gifted $40 000, but $20 000 of this amount has been assessed as deprived assets reducing the used free area to $20 000.

Gifts made before claiming
The gifting rules apply to any gifts made in the five years before receiving a pension or allowance.

Income
If you or your partner give away income or refuse to accept an increase in your income, and do not receive adequate consideration, the deprived income may be maintained indefinitely in the pension or allowance assessment from the date of deprivation. Example: Frank receives a superannuation pension of $6000 per year. He decides to forgo an increase of $1000 per year to his superannuation pension because he does not want his Age Pension to be reduced. This is deprivation of income and the increase of $1000 per year would be assessed and would affect his rate of Age Pension indefinitely.

Examples where gifting has occurred
• You own a house valued at $380 000 and sell it to your daughter for only $200 000. • You bought a car for your daughter as a present. • You are donating 10 per cent of your wages to your church. • You forgive a loan. • You are required to repay your son’s business loan because you were a guarantor. • You put money into a family trust that you (and your partner) do not control.

Other scenarios
If you transfer your shares or units in a fixed trust or private company, and do not receive full market value for the transferred assets you may be considered to have made a gift. If you relinquish control of a private trust or company after 1 January 2002, you will be considered to have gifted all the assets held by the trust or company.

Examples where gifting has not occurred
• You own a house valued at $380 000 but sell it for $350 000 on the open market because this was the best offer to date and you did not believe waiting for a higher offer was advisable—you have received fair consideration. • You have a debt that you do not have the capacity to repay so you transfer a car worth about the same to wipe out the debt—the removal of the liability is fair consideration. • You put money into a family trust that you (and your partner) control.

FIS012.0809 (page 2 of 3)

Gifting

For more information
Financial Information Service Planning for or needing help in retirement Financial Information Service seminar bookings Looking for work Parent or guardian To Speak to Centrelink in languages other than English 13 2300

Disclaimer
The information contained in this publication is intended only as a guide to payments and services. It is your responsibility to decide if you wish to apply for a payment and to make an application, with regard to your particular circumstances. This information is accurate as at September 2008. If you use this publication after that date, please check with us that the details are current.

13 6357 13 2850 13 6150

13 1202

TTY* enquiries Freecall™ 1800 810 586 *TTY is only for people who are deaf or have a hearing or speech impairment. A TTY phone is required to use this service. Go to our website at www.centrelink.gov.au Check the “we speak your language” link on Centrelink’s website for information in languages other than English. Note: calls from your home phone to Centrelink “13” numbers from anywhere in Australia are charged at a fixed rate. That rate may vary from the price of a local call and may also vary between telephone service providers. Calls to “1800” numbers from your home phone are free. Calls from public and mobile phones may be timed and charged at a higher rate.

FIS012.0809 (page 3 of 3)


				
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