Rules for giving cash sums to the next generation
I AM 73 and assessed for an age pension under the assets test. How can I legitimately lend money to my children?
You may give $10,000 each financial year with a maximum of $30,000 over five years. Any money given in excess of this amount, or lent, will be treated by Centrelink as a deprived asset and will be subject to deeming for five years.
Given the fact that deeming in itself does not change the status quo, another option may be to make a larger gift now – this will not change your pension, but in five years the deemed asset will no longer be assessed. If you simply lent the money it would be assessed until repaid.
REGARDING the ageing population and the transition of super assets down the family tree, what kind of strategies will be adopted to efficiently pass assets down in superannuation that are tax effective?
I want to make it as easy as possible for my parents.
Most people’s super fund has both taxable and non-taxable components. When a member dies, there is a tax of 17 per cent on any part of the taxable component that is left to a nondependant. A spouse is always a dependant – working or not.
In a situation where a good chunk of the superannuation may be left to a non-dependant it is good estate planning to grant a trusted person an enduring power of attorney with instructions to withdraw the money from super if there are indications that death is imminent.
I AM 64, still at work and earning $25,000 per year. My husband is 74 and is receiving a part pension of $356 a fortnight. I have $700,000 in super and am thinking about withdrawing $400,000 from it when I turn 65 to pay off our children’s mortgage. We own our own home. How would this affect my husband’s pension? Will I have to wait six years to receive my pension and will I even be able to get the pension?
Is it better for me to apply for the pension when I turn 65 and then withdraw $400,000 as a lump sum? How would this affect our pensions?
The money you have in super will not be counted by Centrelink until you reach pensionable age – but obviously would have a big effect on your pension under the assets test once it becomes assessable.
If you give $400,000 away, it will be treated as a deprived asset for five years but will then cease to be counted by Centrelink. Therefore the main difference between giving it away, and holding it is a much bigger pension in five years if the current rules are still applicable then.
Whether you will be eligible for a pension in six years will depend on your financial situation then and the prevailing regulations then.
Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au
If you give $400,000 away it will be treated as a deprived asset for five years but will then cease to be counted by Centrelink