How to gift to your family without impacting your pension

How to gift to your family without impacting your pension

Here are some ideas on how to help your children and grandchildren through their challenging financial years.

Does it surprise you to know that up to 86% of Australian parents provide financial assistance to their adult children? Recent research suggests that many young adults and families receive financial assistance from their parents.

There is no doubt it is difficult to watch your children and grandchildren struggle with the stress of financial pressure.

If providing financial assistance to a family member is something you are considering, it is best to seek advice from a qualified financial advisor before you make a commitment.

What is gifting?

Gifting occurs when a person chooses to give away money, or other assets, to another person without expecting any form of repayment. The generous act of gifting can make a huge difference to the lives of others.

If you do choose to assist your children through their financial challenges, it is important to know how to do so without impacting your pension.

How might gifting impact my pension payments?

The rate of income support payment you receive may be affected if your assets are given away and the amount assessed as gifted is more than the allowable gifting amount. If you are unsure about how gifting will affect your Age Pension, you should discuss your individual circumstances with Human Services by calling 13 2300.

How much can you gift without affecting your pension?

According to the Department of Human Services the following rules apply:

A single person has a gifting free area of $10,000 per financial year, limited to $30,000 per 5 financial years.

A couple has a total combined gifting free area of $10,000 per financial year, limited to $30,000 per 5 financial years.

If the total of gifts made in a financial year exceeds $10,000, the excess will be assessed as a deprived asset. This is called the $10,000 rule.

A maximum of $30,000 can be gifted over a rolling period of 5 financial years, but must not exceed $10,000 in any 1 year to avoid deprivation. Only $30,000 of gifting in a 5-year period can be exempted. This is called the $30,000 rule.

Source: https://www.humanservices.gov.au/customer/enablers/gifting

How to provide financial help for your family

If you have made the decision to provide financial assistance to your children or grandchildren there are many ways you can make a difference.

Make weekly automatic transfers

You could contact your bank and establish a weekly automatic transfer of cash directly from your bank account to another. You can set a budget that ensures you remain safely within the allowable threshold for gifting. This method of gifting allows your children the freedom to choose how they will use the funds you provide.

Contribute cash toward holiday savings

Many young families cannot afford the luxury of a holiday. We all know how important holiday time is for making memories and enjoying a slower pace of life. You could choose to make a one-off contribution towards a much-needed break, or you might choose to commit to contributing towards an annual getaway for your children and grandchildren to enjoy.

Buy a 'family' caravan or boat

If you love to travel, or enjoy engaging in active pursuits like hiking, camping, fishing and water skiing, you might consider purchasing a caravan or a boat and allowing your children to make use of it without cost. This option has the added advantage of providing you with a nifty little getaway for use outside of school holidays!

Pay for regular fruit and vegetable deliveries

Paying for regular deliveries of fruit and vegetables is a practical way of ensuring your financial assistance is of benefit in the daily lives of your children and grandchildren. This option supports health and wellbeing and eases the burden of having to get to shops. This is a wonderful way of ensuring there is always food in the house.

Can you think of some other ways you could offer financial assistance to your children and grandchildren?

For free advice, and to help you understand how assisting a family member financially can affect your pension, you can contact the Financial Information Service (FIS) on 132 300.

Disclaimer

The information contained in this article is for general guidance only. No person should act or refrain from acting based on such information. Appropriate professional advice should be sought based upon your circumstances. 

Main image: canva.com

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