A common refrain in planning for retirement can be, ‘Will I qualify for the age pension when I retire?’
In many cases, in pursuit of a full pension, it is not a quest to maximise an income stream, but sometimes to simply secure just $1.00 of pension, enough to activate the collateral benefits that come with it, such as the Pensioner Concession Card and cheaper pharmaceuticals.
The more sophisticated question can be, ‘What can I do now to help me qualify for the age pension when I retire?’ Regrettably, in some cases, in anticipation of retirement, and usually without financial advice (‘cause it costs money), and realising they could be knocked out of qualifying because of their assets, some people decide to ‘downsize’ their assets.
This can often lead them to crude solutions – gifting assets to their children as an early inheritance, or even to a family trust, for example. This can expose them to the old adage, ‘Ignorance of the law is no excuse’.
Within the biblical dimensions of the Social Security laws are provisions about what is known as ‘Deprivation’. It means what it says – depriving ourselves, i.e., disposing, of things, such as assets, including money. Essentially, if you gift an asset to anyone (not just children), then the law will deem that you still have it, even though you don’t, for 5 years. I call it the ‘Clayton’s Gift’ – the gift you give when you don’t give a gift.
There is a minor exemption to the rule which allows you to gift up to $10,000.00 per year, or $30,000.00 in aggregate over 5 years, which will not be deemed to be deprived. There is also an exemption for ‘granny flat’ arrangements that comes with some specific requirements that are a trap for the unwary, unwise or ‘unadvised’ if not strictly complied with.
Perhaps the most recent, poignant example of this deprivation oversight by some people was an elderly woman in Western Australia. She was receiving a full age pension. Then, as good fate would have it, at the age of 102, she won $200,000.00 in lotto. Through her eyes with no apparent way of reaping the pleasures of her good fortune, and believing her future presence on earth was short, she promptly donated it to charity.
Shortly after, her good luck and beneficence came back to haunt her.
Centrelink became aware of her philanthropy and advised her she had ‘deprived’ herself of the money and, as such, it deemed she still had the money. They promptly reduced her age pension to a significantly lower amount.
In the denouement of her life, she was reduced to penury by her admirable, but misguided, generosity.
Good deeds don’t go unpunished in the world of pensions.
