Q - MY husband is on a part pension. I am four years off pension age and support myself with my savings. My query concerns my independence of financial action as he is now a pensioner. I understand the pension assets test is based on our combined assets but not how it affects my spending in relation to his pension. From my personal account I would like to give our son $50,000 as a lump sum. I understand the annual $10,000 gift rule and $30,000 cap over five years for pensioners. Would my husband be financially penalised by my action?
A - AS a couple, your combined assets are taken into account when your husband's pension is being assessed. By giving away money today, your husband's pension should not be affected. Your funds are already being assessed and would be subject to deeming.
If your goal is to give your son $50,000, I suggest you give $10,000 before June 30, 2020, and loan him $40,000. Just after June 30, forgive $10,000 of the debt, leaving a loan balance of $30,000. On July 1, 2021, forgive a further $10,000 to reduce the loan to $20,000. If your husband is asset tested, which appears likely, each gift will increase his pension. Once you have given, or forgiven, a total of $30,000 the balance of $20,000 will be held as a deprived asset until five years from just before June 30, 2020. After five years the sum will cease to exist for Centrelink purposes. If your son is in a relationship, it would be worthwhile to take advice as to what documentation it might be appropriate to prepare.
Q - ARE inheritances subject to the deeming rules?
A - THE deeming rules apply to financial assets such as cash in the bank, managed funds and shares. If you received an inheritance, and it fell under the category of a financial asset, it would be subject to deeming.
If it was an asset such as real estate, it is not subject to deeming. Keep in mind that the deeming rates only affect pensioners assessed under the income test.