Gifting Rules: How Giving Kids $20k Affects Your Pension for 5 Years
Centrelink lets you give away up to $10,000 in a single financial year and no more than $30,000 across any rolling five financial years without it touching your Age Pension. Gift more than that and the excess becomes a "deprived asset" — Centrelink keeps counting it in your assets test, and deems it for income, for 5 years from the date of the gift. So if you hand your kids $20,000, $10,000 is fine and $10,000 follows you around for five years.
The two gifting free limits, in plain English
Australia's social security system doesn't ban you from being generous — it just stops you from giving away your money to qualify for (or boost) the Age Pension. The mechanism is the deprivation rule, also called the gifting rule. There are two limits working at the same time, and you have to clear both:
- $10,000 per financial year. You can give away up to $10,000 in a single financial year (1 July – 30 June) with no effect on your pension.
- $30,000 over a rolling 5 financial years. Across the current financial year plus the previous four, your total gifts can't exceed $30,000.
These figures are set in legislation and have not changed since 1 July 2002 — they are not indexed, so don't expect them to rise with inflation. They are the same for a single person and for a couple combined (a couple shares one $10,000 / $30,000 allowance, not one each). Source: DSS Social Security Guide 4.1.10 and Services Australia — How much you can gift.
The $30,000 cap stops you from "spreading" a big gift across years to dodge the annual limit. Giving $10,000 every year for five years looks fine under the annual test, but in year four you'd breach the $30,000 rolling cap. The rolling test always catches the cumulative giveaway — so in practice your gifting headroom is roughly $10,000 a year, but no more than $30,000 every five years.
Worked example: Barbara gifts $20,000 to her two children
Meet Barbara. She's 68, single, and receives a part Age Pension. In September 2026 she gives each of her two adult children $10,000 — $20,000 in total in the one financial year (2026–27). She has made no other gifts in the previous four years.
Step 1 — Apply the $10,000 annual free limit. Of her $20,000, the first $10,000 is within the annual free area. That portion is ignored completely.
Step 2 — Identify the excess. $20,000 gifted − $10,000 free area = $10,000 over the limit. Because her five-year total ($20,000) is still under $30,000, only the annual breach bites here. The $10,000 excess becomes a deprived asset.
Step 3 — Centrelink keeps assessing the $10,000 for 5 years. Even though the money is gone, Centrelink treats Barbara as if she still owns that $10,000 until September 2031. It counts toward her assets test, and it is also deemed under the income test (i.e. assumed to earn a return).
Step 4 — Work out the actual pension hit. Barbara is assessed under the assets test. Under the pension taper, every $1,000 of assessable assets above the threshold reduces the fortnightly pension by $3 (the standard $3-per-$1,000 taper). So her retained $10,000 deprived asset reduces her pension by roughly $30 per fortnight ≈ $780 per year — for up to five years. That's about $3,900 of foregone pension across the period, on top of giving away the $20,000 itself.
The fix she could have used: give $10,000 this financial year and the other $10,000 after 1 July (the next financial year). Both gifts sit inside the annual free area and inside the $30,000 five-year cap — zero pension impact.
| What Barbara did | Free amount | Deprived (assessed 5 yrs) | Approx. pension effect |
|---|---|---|---|
| Gave $20,000 in one financial year | $10,000 | $10,000 | ~$30/fortnight for 5 years |
| Split: $10,000 now + $10,000 after 1 July | $20,000 | $0 | Nil |
The $3-per-$1,000 fortnightly taper and the asset thresholds are set by Services Australia and are indexed periodically. Confirm the current taper and thresholds on Services Australia — Assets test for Age Pension before relying on the dollar figures above; the gifting limits ($10k / $30k) themselves are fixed.
What counts as a "gift" — and what doesn't
Many people assume "gifting" only means handing over cash. Centrelink's definition is broader: it captures any time you dispose of an asset without receiving its full market value in return. Common traps:
- Cash gifts. The obvious one — birthday money, a deposit for a child's home, a wedding contribution.
- Selling an asset for less than it's worth. Selling your $400,000 home to your daughter for $300,000 is a $100,000 gift. So is selling a car or shares below market value.
- Forgiving a loan. If you lent your son $40,000 and later say "forget it," you've gifted $40,000 the day you forgive it.
- Giving up control of a trust or company. Transferring shares or units in a family trust or company for less than full market value is treated as a gift of the foregone value.
What is not caught: paying for goods or services you actually receive (e.g. paying a tradesperson, buying gifts you keep using yourself, or paying your own aged-care or medical costs), and reasonable everyday spending. Source: Services Australia — What gifts we include in income and assets tests.
You must tell Centrelink about a gift within 14 days. Not reporting it doesn't make it disappear — if discovered later, it can trigger a debt and back-payment recovery. Report gifts through your myGov account or by calling the Older Australians line.
How the deprived amount is assessed for 5 years
Once an amount is "deprived," it sits on your record for 5 years from the date of the gift — not five years from when you started the pension, and not the financial year, but the actual gift date. During that window the excess is treated under both the assets test and the income test:
- Assets test: the deprived amount is added to your assessable assets as if you still held it.
- Income test (deeming): the same amount is treated as a financial asset and deemed to earn income at Centrelink's deeming rates, even though it earns you nothing.
Whichever test produces the lower pension is the one that applies to you overall — so a deprived asset can hurt through assets, income, or both. After the fifth anniversary of the gift, the amount drops off your record entirely. Source: DSS Social Security Guide 4.1.1 — General provisions of deprivation.
Strategy: timing gifts before claiming vs after
A common question is whether gifting before you reach Age Pension age helps you dodge the rule. It usually doesn't.
Gifting before you claim
The 5-year deprivation clock runs regardless of whether you're on a pension yet. Centrelink looks back at gifts made in the five years before you claim. So a $25,000 gift two years before you apply is still partly assessable when your pension starts — it doesn't "wash out" just because you weren't a pensioner when you gave it.
Gifting after you claim
The same $10,000 / $30,000 limits apply. The practical advantage of gifting after you're already on the pension is simply that you can see your exact position and stay inside the annual free area each year.
The sensible approach
- Stagger across financial years. $10,000 before 30 June and $10,000 on or after 1 July uses two annual free areas — but watch the $30,000 five-year cap.
- Front-load 5+ years before claiming only if you truly won't need pension support sooner — and remember anything inside the last five years is still counted.
- Get advice before large transfers. Selling property under value, restructuring a trust, or forgiving large loans can also have capital gains tax and aged-care fee consequences that dwarf the pension question.
- You can gift $10,000 per financial year and up to $30,000 over any rolling 5 financial years with no pension impact.
- Gift $20,000 in one year and $10,000 becomes a deprived asset, assessed for 5 years from the gift date.
- A deprived amount is counted under the assets test AND deemed under the income test for the full 5 years.
- "Gifting" includes selling assets under value, forgiving loans, and giving up trust/company control — not just cash.
- Gifting before you claim doesn't escape the rule — Centrelink looks back 5 years.
- Report every gift to Centrelink within 14 days.
Frequently asked questions
Can a couple each gift $10,000, so $20,000 a year is safe?
No. A couple shares a single gifting allowance — $10,000 per financial year and $30,000 over five years combined, not per person. Giving away $20,000 as a couple in one year creates a $10,000 deprived asset.
What happens after 5 years — does the deprived amount disappear?
Yes. On the fifth anniversary of the gift date, the deprived amount drops off both the assets and income tests entirely. From that point it no longer affects your pension.
Does paying for my grandchildren's school fees count as gifting?
Generally yes, if you pay an amount over the free limit without receiving anything of equal value in return. Paying for a service you personally use (like your own care) is not a gift, but paying someone else's expenses usually is.
If I forgive a $50,000 loan to my son, how is it treated?
Forgiving the loan is a gift of $50,000 on the day you forgive it. $10,000 is within the annual free area and $40,000 becomes a deprived asset, assessed under the assets test and deemed for income for 5 years (subject to the $30,000 five-year cap interaction).
Do I have to tell Centrelink about gifts under $10,000?
Yes. You should report all gifts within 14 days even if they're within the free limit, because Centrelink tracks your rolling five-year total to apply the $30,000 cap correctly.
Will gifting before I retire help me qualify sooner?
Not within five years of claiming. Centrelink reviews gifts made in the five years before your claim, so recent gifts are still assessable. Only gifts made more than five years before you claim fall fully outside the rule.
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