Gifting assets during retirement

You have made it to retirement and feel comfortable about your financial situation – congratulations!

Perhaps you’re even feeling overly generous or looking to spread your wealth to make the lives of younger family members easier during the busiest days of their lives.

But before you go gifting assets, there are some considerations you should make as a retiree – particularly if you are entitled to some age pension payments or hold a Commonwealth Seniors Health Card.

First Financial Principal James Wrigley finds clients in the retired age group are often interested to better understand the rules of gifting during retirement and the implications the practice may have on their entitlements and overall finances.

“One question we get often is about gift tax, or how much gift tax you will pay, but the good news is there is no gift tax in Australia,” James says.

“If you decide to give your daughter your old car, for example, you can do so without tax implications, but there are costs with transferring registration and the like.

Depending on what you’re giving away, you may also have stamp duty or capital gains tax (CGT) implications, so these are to be considered, whereas if your children were to inherit your assets they would pay no CGT or stamp duty.”

First of all we should clarify what a ‘gift’ is.

According to Services Australia, it’s a gift if both of these apply:

1. You sell or transfer an income or asset, and
2. You get less than its value or nothing in return.

Services Australia deems that it’s not a gift if both of these apply:

1. You sell or transfer an income or asset, and
2. You get money, goods or services to the same value.

Services Australia calls it ‘adequate consideration’ when you get money, goods or services to the same value.

James says the ultimate outcome in retirement is to set yourself up to have the flexibility of your own money to fund your lifestyle, with the age pension a ‘back up plan.’

“But the general sentiment that comes across regularly in our client base is that people feel that they have worked all of their lives paying tax and got nothing back for it in the end – so they want to hold onto age pension entitlements they may be getting,” he says.

“The bit that gets lost is that you have received benefits of paying tax, such as healthcare, education and emergency services to things like roads and other public services.

You are better off having the flexibility of having your own money to spend when you want and in any form you want rather than be reliant on a fortnightly age pension entitlement anyway – it isn’t enough and if you can avoid being on it, you’re better off.”

To see where your tax dollars go, you can read more about the Australian Government Expenditure.

If you do receive age pension payments and hold a low-income health care card or Commonwealth Seniors Health Card, there are limits to the amount of money you can give before it impacts your entitlements.

James says you have a duty to report these gifts to Centrelink and there is a chance they could request to see your bank statements at any time while you are receiving a benefit.

“There is a $10,000 annual limit that applies to assets gifted during a financial year and $30,000 five-year limit that applies to assets gifted during the current financial year and the previous four financial years,” James says.

“If you don’t want to move into the territory of impacting your age pension or health care card entitlements but you want to give gifts to others, you either have to stay within these limits or consider planning ahead by giving money or assets away five years before retirement.”

At First Financial it is our passion to help Australians to retire when and how they choose, with confidence and certainty.

Each client’s unique circumstances and attitude form the foundation for tailor-made plans.

From Self Managed Super Funds to Superannuation fund advice and even aged care advisory services, our team has the knowledge and experience to detail the best practice for you and your personal financial needs.

Whether you are in retirement, or 10, 20 or 30 years away, our team can help you make decisions about your assets and income sources and assist you to meet your retirement goals.

Contact us for an obligation free consultation today.