Limitation and Exemptions on Centrelink/DVA Gifting Rules
You’re feeling generous, so you decided to give an asset to a family member as a gift. Before gifting assets that have enormous value, you must understand the impact the act can have on your Centrelink/DVA entitlements.
When you make a gift, the value of your assessable assets is reduced. This, in turn, helps increase your Centrelink/DVA payment, since the benefits you’ll receive are based on the result of the assets test and the income test.
There are gifting and deprivation rules set to prevent you from giving away assets exceeding a certain level to improve your pension and allowance benefits. They’re set in place to avoid either the giver or the receiver from abusing the scheme.
Annually, you’re only allowed to gift up to $10,000. The limit within a 5-year rolling period is $30,000.
This limit applies to individuals and to couples as a combined total. This means that if you gift $10,000 this year, you can only gift up to $20,000 over the next 5 years to avoid flagging asset deprivation.
Gifting more than the prescribed limit will trigger the application of a deprived asset for the exceeding amount. The deprived asset will be included in your asset tests and income tests for the next 5 years from the date the gift was made. When you apply for Centrelink/DVA payment, the amount gifted and the deprive assets will be considered in the final computation of your benefits benefit.
There are exempted gifting acts that can be made without triggering the provisions for asset deprivation. These are:
- Asset transfer between couples
It’s quite common to see an individual of pension age withdrawing from their super to contribute to their partner’s super who hasn’t reach pension age yet.
- Gifts made through a Special Disability Trust
The principal beneficiary of the trust is exempted from assets test up to an amount of $681,750. Exempted gifting concession made by eligible family members is also increased to $500,000.
- Assets paid for ‘granny flat’ interest
This refers to the payment to live in a specific property that belongs to someone else for the rest of your lifetime.
If you’ve been gifted interest in a deceased estate, the gifting rules will still apply if:
- You give away your right in the deceased estate with little to no consideration;
- You direct the executor to distribute your interest in the deceased estate with little to no consideration; or,
- You give away your interest to a third party after the estate has been finalised under your name.
Even without a will, the gifting rules will still apply to the abovementioned conditions.
Gifts from Couples
In the case wherein a couple gives an asset, and then one of them happens to pass away after the gifting process, the assessment of gifting rules will depend on who owned the asset prior to the occurrence of death.
If the asset was owned by the deceased partner, the surviving partner doesn’t have to worry about the negative effects of asset deprivation. If the asset was jointly owned by the couple, half of the asset’s value will be subjected to gifting rules. But if the asset was originally owned by the surviving partner, the full value of the asset will be subjected to gifting rules.
Gifting your assets to family members and friends can be of great help to them. But in exchange, you’ll lose the ability to generate income from the asset. Also, the increase in Centrelink/DVA payments you’ll earn will probably be lesser in value compared to the asset you gave away.
Before you make a gift, ensure you’re financially stable that you’ll be able to live adequately without any help from the asset you want to give. Make sure you also understand the repercussions of gifting beyond the value set by Centrelink/DVA.