YOUR QUESTIONS

MEANS TEST TIME LIMIT

By InvestSMART · 6 May 2012

By InvestSMART ·
6 May 2012

Comments

MEANS TEST TIME LIMIT

In a recent column on the subject of gifting by pensioners, would you please explain further "this will be dropped in a year's time", referring to gifting children more than $30,000 over five years, the excess being counted by the means test. We had not heard of any changes to this and can find no reference to it anywhere online, nor could Centrelink give us any information. B.L.

There are no changes announced with regard to the gifting rules. The letter mentioned some pensioners who had gifted a large amount to their children four years ago and the answer noted that amounts in excess of the gifting limits ($10,000 a year and $30,000 over a five-year period) are counted by the Centrelink means tests for up to five years. Thus their gift would be dropped from their tests in one year's time.

BALANCE KEY TO TRANQUILLITY

I would like to know if it is OK to keep some savings in an online account ($100,000), or should I add some to my super fund to avoid being taxed? S.B.

It's generally not a good idea to do something purely for tax reasons. Superannuation is a useful tax shelter but the money is locked away. You need to balance your priorities and, if you are young, you need to consider your need to buy a home, a car, travel around the world and so forth. At the same time you need to save for your retirement and a good rule of thumb is to arrange for 15 per cent of gross salary to go into a low-cost super fund from the start of your working life. In a nutshell, plan to lead a pleasant life and retire with $1 million in super savings!

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.

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Frequently Asked Questions about this Article…

What are Centrelink's gifting rules and the current limits I should know about?

Centrelink treats cash gifts above set limits as assessable for the pension means test. The current informal limits are $10,000 per financial year and $30,000 over any rolling five-year period; amounts above those limits are counted by the means test.

How long will a gift be counted in my Centrelink means test?

Amounts in excess of the gifting limits are counted by Centrelink's means test for up to five years after the gift is made. Once five years have passed, that excess no longer counts toward the test.

If I gifted a large sum to my children four years ago, when will it stop affecting my pension means test?

If the gift exceeded the limits and was made four years ago, Centrelink will continue to count the excess for one more year. After the fifth anniversary of the gift it should be dropped from the means test.

Have the gifting rules or time limits recently changed?

No changes to the gifting rules were announced in the article. The existing approach — counting excess gifts for up to five years — remains in place.

Can I reduce my assessable assets for the pension by gifting money to family?

Gifting can reduce your assessable assets, but only up to the permitted limits. Any amount above $10,000 a year or $30,000 over five years will be counted by the means test for up to five years, so gifting to qualify for a pension may not have an immediate or permanent effect.

Should I move $100,000 from an online savings account into superannuation just to avoid tax?

You shouldn't make a decision purely for tax reasons. Super can be a useful tax shelter, but funds are locked away until retirement. Balance your short- and medium-term goals (buying a home, a car, travel) against retirement savings needs before rolling large sums into super.

How much should I aim to put into super each year to retire comfortably?

A practical rule of thumb mentioned is to arrange for about 15% of your gross salary to go into a low‑cost super fund from the start of your working life. The article suggests aiming to retire with around $1 million in super savings as a broad target.

Where can I get more help or ask questions about pensions, gifting and disputes?

For questions to the columnist, you can write to Personal Investment, PO Box 3001, Tamarama NSW 2026. For helplines mentioned in the article: Financial Ombudsman on 1300 780 808 and the pensions helpline on 13 23 00.