Are You Losing Pension by Helping Your Kids? (Weddings, Bills & Inheritance)

Helping your children or grandchildren financially is a generous instinct. But if you are already receiving the Age Pension—or intend to apply within the next five years—you need to tread carefully.

In our previous posts, we covered how helping kids with property affects your pension. But what about other forms of support, like paying for a wedding, covering education costs, or redirecting an inheritance?

In this guide, we break down how Centrelink views these non-property gifts and how to avoid the "deprivation" traps that could reduce or stop your payments.

The Golden Rule: Understanding Centrelink’s Gifting Limits

Before looking at specific scenarios, you must understand the foundation: Centrelink’s Gifting and Deprivation Rules.

To discourage people from giving away assets just to qualify for a higher pension, Centrelink enforces strict limits on how much you can give away without penalty.

The "Gifting Free" Areas:

• $10,000 per financial year.
• Maximum of $30,000 over a rolling five-financial-year period.

Crucial Note: These limits are the same whether you are single or a couple. Couples do not get double the threshold.

What Happens If You Exceed the Limit?

Any amount over these limits is treated as a "Deprived Asset."

• Assets Test: The excess amount is added back to your assessable assets for five years (even though you no longer have the money).
• Income Test: The excess amount is "deemed" to be earning income, which is added to your assessable income for five years.

This double whammy can reduce your pension or cut you off entirely, along with your Pensioner Concession Card.

Scenario 1: Paying for a Child’s Wedding

Many parents want to help fund their child's big day. However, how you pay makes a massive difference to Centrelink.

• The Trap (Cash Gift): If you simply transfer $20,000 cash to your child to use for the wedding, the Gifting Rules apply. Since this exceeds the $10,000 annual limit, the extra $10,000 becomes a deprived asset for five years.
• The Safe Way (Hosting): If you pay service providers directly (e.g., the venue or catering) and you are hosting and attending the wedding, Centrelink generally does not treat this as a gift. In this scenario, you are considered to be receiving "fair value" because you are hosting and enjoying the occasion with family.

Scenario 2: Paying Education, Travel, or Bills

Whether it’s school fees, a holiday, or utility bills for your adult children or grandchildren, the rule is generally strict.

The General Rule: Payment of an expense for another person is regarded as a gift. If these payments exceed your gifting free area ($10k/year), deprivation rules apply.

The "Granny Flat" Exception: If you live with your adult child (e.g., in a granny flat or spare room) and you contribute to household bills or maintenance, this may not be a gift. However, it is vital to document these arrangements to prove that these payments are for your share of living costs (rent/board), not a gift.

Scenario 3: Inheritance and Wills (The "Surviving Spouse" Trap)

This is a common issue that catches many retirees off guard.

The Scenario: Dave and Jill are a couple with $750,000 in assets. As a couple, they qualify for a part-pension. Dave passes away and leaves everything to Jill. Suddenly, Jill is assessed as a single homeowner. The asset cutoff for singles is much lower (approx. $359,500 less than for couples). With $750,000 in assets, Jill loses her Age Pension and concession card.

The Failed Fix: Jill asks the executor to "redirect" Dave’s share of the inheritance directly to the kids so she can keep her pension.
Centrelink’s Ruling: Once you are a beneficiary, any attempt to redirect, waive, or give away that inheritance is treated as a GIFT. The amount is counted as Jill's asset for five years anyway.

The Solution: This highlights the importance of Estate Planning. If Dave had structured his will to leave a portion of assets directly to the children (rather than everything to Jill), Jill might have retained her pension eligibility.

Scenario 4: Special Disability Trusts (The Exemption)

There is one major exception where Centrelink allows you to give more.

If you have a family member with a severe disability, you can contribute to a Special Disability Trust. Eligible family members can access a combined gifting concession of up to $500,000.

• These gifts are exempt from asset deprivation rules.
• They are not included in your income or assets tests.

Note: These trusts are complex and strictly regulated, so professional advice is mandatory.

Scenario 5: Family Trusts

Even if you don't have a Special Disability Trust, simply being involved with a standard Family Trust can impact your pension. Centrelink looks for "control" or "benefits."

Watch out for:

• Past Distributions: If you received trust income in the past (even years ago), Centrelink may continue to attribute trust assets to you.
• Perceived Influence: If your child asks you for advice on distributions, Centrelink may view this as you having "influence."
• Control Roles: If you are a Trustee or Appointor of your child's trust, Centrelink may count the trust's assets as yours under the means test.

Final Thoughts

Generosity is wonderful, but it shouldn't come at the cost of your own retirement security. Whether it's a wedding, a will, or a trust, the "five-year rule" is always ticking.

Disclaimer: This information is general in nature. Centrelink rules are complex and subject to change. Always seek professional financial advice before making large financial decisions.