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Don’t wait for life to happen – Week 4: Becoming a grandparent

After you’ve worked hard to give your kids the best start in life, what better reward could there be than seeing them have children of their own? As a proud grandparent, you’ll want to make sure the little ones, as well as your own children, are looked after financially when you’re gone — and that’s why estate planning is so important.

With the right financial strategy, you’ll be able to pass your wealth down to future generations. The first step is to create a Will, which specifies how you want your assets to be divided and distributed after you pass away. Having a proper Will can also help avoid disputes between your beneficiaries when the time comes.

Remember, your estate includes most things that you own — so it’s worth taking stock of all your valuable assets, and updating your Will regularly to reflect any changes in your financial or family circumstances. You might also choose to grant Enduring Power of Attorney to a trusted family member, so they can manage your affairs if you become mentally incapacitated.

But there are a few things that aren’t automatically considered part of your estate, such as your super and life insurance. You should consider whether make to make a binding nomination to a beneficiary or beneficiaries including to your estate if you would like those assets to be distributed in accordance with your Will. Some assets you own jointly with someone else may automatically pass to that person upon your death.


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Don’t wait for life to happen – Week 3: Getting a wealth boost

Government super announcements

There are going to be times in your life when some unexpected cash comes your way — like a bonus or maybe an inheritance. You may not know when it will happen, but if it does, you’ll want to be prepared so you can make the most of your windfall and avoid frittering it away.

One way to invest the money wisely is to make a personal contribution to your super, taking into consideration any contribution caps (the Government has proposed (not yet legislated) reducing these caps to $25,000 a year from 1 July 2017). Or, if your newfound wealth is in the form of a pay rise, you might consider putting a bit extra into super each paycheque through salary sacrificing. You can contribute up to $30,000 a year (or $35,000 if you’re 50 or older) from your pre-tax earnings(this cap includes compulsory super guarantee paid by your employer) — plus you could even save on tax, as these types of super contributions are usually taxed at the low rate of 15% rather than at your marginal tax rate.

If you come into money, there are other ways to invest as well, such as shares, managed funds, term deposits, and bonds. Each of these is likely to give you a better long-term return than a savings account, but the most suitable investment options for you will depend on your financial situation and goals. Your financial adviser can steer you in the right direction.


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Don’t wait for life to happen – Week 2: Buying property

Whether you’re hunting for your first home, in the market for an investment unit, or helping your kids out with a place of their own, buying property is always a big financial decision — so plan it carefully before jumping in.

 

And with real estate prices soaring across Australia and the median house now valued at over $700,000 nationally,4 you need to work out exactly how much you can afford to spend, long before you start picking out wallpaper.

The last thing you want is to be faced with is mortgage stress for decades to come. That’s why it’s important to think carefully from the outset about how your mortgage repayment plan will fit into your overall financial strategy.

Next, you’ll need to save for a deposit, as most lenders expect you to pay 20% of a property’s value upfront. If you can’t afford that much, you might have to pay for lenders mortgage insurance as well, which can add thousands of dollars to the cost of your loan.

You’ll also want to consider which type of home loan is best for your financial situation —for example, a fixed or variable interest rate loan. Choosing a fixed interest rate can make it easier to budget your repayments, but it also means you won’t reap the benefits if interest rates drop.

 

4 Domain Group, Domain house pricing report, June 2015


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Don’t wait for life to happen – Week 1: Starting a family

dont-wait-for-life-to-happen-starting-a-family

Having a child is one of life’s great gifts. But let’s not forget how expensive kids can be, especially with the rising costs of education.

In fact, putting your child through private education from pre-school to Year 12 could cost you as much as $400,000.1 And even with a public school education, you could still end up paying over $60,000 per child during their school years, when you take into account things like uniforms, tech essentials, and extracurricular activities.2

It’s a good idea to get into the habit of regularly putting money aside, so you can stay on top of school fees and other expenses. The sooner you start, the longer your money will have to grow — and for potentially higher returns, you might even consider investing the money rather than simply putting it in a savings account.

What’s more, with rising rents and costs of living, there’s a good chance your kids will depend on you financially well into their adulthood. In Australia, at least 1 in 4 young people aged between 18 and 34 live with their parents3 — so it’s worth keeping this in mind when you’re planning for your family’s future.

 

1 Australian Scholarships Group, How much can you expect to pay for your child’s schooling? 2016.

2 Australian Scholarships Group, How much can you expect to pay for your child’s schooling? 2016.

3 Domain Group, Domain house pricing report, June 2015


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Don’t wait for life to happen

With a good financial plan in place, you’re already well positioned for a rewarding financial future. What’s more, it means you’ll be better prepared for major life events when they arise. As JFK once said, ‘there is nothing more certain and unchanging than uncertainty and change.’ In other words, none of us knows what the future holds.

But that doesn’t mean you should leave things to chance, especially when it comes to your finances. Of course, everyone’s financial journey is different, but here are some major life events that many of us can prepare for in advance. And even if some of these milestones are already behind you, the next generations can benefit from your guidance and experience, and the lessons you’ve learned along the way.

Stay tuned for our 5 part series covering Starting a family, Buying property, Getting a wealth boost, Becoming a grandparent and Retiring


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Government super announcements

Government super announcements

Non-concessional contributions cap: 500K lifetime cap replaced by new annual cap

The Government has announced that the 2016-17 Federal Budget proposal to introduce a lifetime non-concessional cap of $500,000 will not go ahead. In its place, the Government has proposed the introduction of an annual non-concessional contributions cap of $100,000 per year.

New annual non-concessional cap

From 1 July 2017, the Government has proposed lowering the annual non‑concessional contributions cap from $180,000 to $100,000. In addition, individuals with a balance of more than $1.6 million will no longer be eligible to make non‑concessional contributions.

The bring forward rule where individuals under age 65 are eligible to bring forward 3 years of non‑concessional contributions will still be available.

The $1.6 million threshold will be based on an individual’s balance as at 30 June of the previous year. Individuals with balances close to $1.6 million will only be able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million.

Transitional arrangements will apply. Where the non-concessional bring forward has been triggered but not fully used before 1 July 2017, the remaining bring forward amount will be reassessed on 1 July 2017 to reflect the new annual caps.  It may, therefore, be beneficial to take advantage of the $540,000 non-concessional cap this financial year as it will be reduced from next financial year.

Other proposed changes

In the Government’s media release, it was also announced that they will not proceed with the proposal to remove the work test requirement for contributions for those aged 65 to 74.  Individuals between 65 and 74 will be eligible to make annual non-concessional contributions of $100,000 if they meet the work test, but will not be able to access the bring-forward provision.

In addition, the commencement date of the proposed catch-up concessional superannuation contributions will be deferred by 12 months to 1 July 2018.

Contact us to find out how this may affect you.

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Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

How to expand your travel horizons on a tight budget

Insight Financial Partners - Expanding travel horizons

If you love to travel, don’t let the exchange rate stop you from experiencing the amazing adventures the world has to offer

When planning an overseas holiday, the exchange rate can seem like a hurdle for many travellers. But it doesn’t have to be – fabulous holidays are still possible without breaking the bank. Indeed, you may have a better experience than you’d ever imagined.

Elizabeth Wallace, founder of Itineraries Travel Consultants, says an easy way to slash the travel budget is to choose amazing direct-flight destinations – Japan, New Zealand and South Africa fit the bill.For those who still want a wallet-friendly trip to Paris, London, Rome or other favoured cities, she recommends budget airport hotels for stopovers or overnight stays (save more expensive hotels for when it counts), pre-ordering all-inclusive passes to access top attractions and public transport; and taking advantage of fun, free activities such as self-guided walks in Europe.¹

For those who still want a wallet-friendly trip to Paris, London, Rome or other favoured cities, she recommends budget airport hotels for stopovers or overnight stays (save more expensive hotels for when it counts), pre-ordering all-inclusive passes to access top attractions and public transport; and taking advantage of fun, free activities such as self-guided walks in Europe.¹

Book early

It pays to be smart during every step of the travel-planning process, according to Janice Lee Fang, TripAdvisor’s Director of Communications Asia Pacific.

For example, she says travellers can often save significantly if they book a hotel in popular northern hemisphere destinations within four months of a winter trip (June to August).

Bypassing expensive hotels can also cut your costs and increase your fun. At a B&B or inn, you often get personalised service and home-made breakfasts at affordable rates. Your hosts may also direct you to great value eateries and entertainment.

Apartments can also be a winner, too, especially for families. “Not only are they generally cheaper than a hotel room of similar quality, apartments in big cities give you the opportunity to save on meals and sundry charges such as laundry,” Fang says.²

Of course, online accommodation sites make it easy to find cheaper accommodation, but TripAdvisor suggests you read multiple reviews and don’t base your decision on just one or two comments, check out photos of the accommodation, and find out if there is any payment protection for your holiday rental.²

Live like a local

Wallace says live as the locals do, and save. Consider taking public transport and use your water bottle rather than paying exorbitant fees for drinks. And think about having your main meal in the middle of the day. “The set meals for lunch are usually much cheaper than restaurant meals at night,” Wallace says.

She also advises visiting markets to experience the cuisine of a city, and to eat like the locals.¹

And make sure you try some unique, affordable experiences – book a treehouse online or head to a milonga – a local tango house – to watch regular dancers in Buenos Aires rather than the expensive professional shows.

There are some amazing travel experiences that don’t cost an arm and a leg. Consider some alternative travel experiences, be adventurous and come home with some riveting new travel tales to tell.

¹ These comments are drawn from an exclusive interview with Elizabeth Wallace.
² These comments are drawn from an exclusive interview with Janice Lee Fang.

Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Smart budgeting

Insight Financial Partners - Smart Budgeting

Smart budgeting is a crucial component of long-term financial success for people of all ages, even if you are financially stable and hold healthy reserves of assets and wealth.

Like many others, you may be avoiding making a budget, despite realising this tool is the best way to take control of your finances and keep you on track to achieving your life goals. It pays off, however, to regularly review your budget with the help of your financial adviser so you can benefit from your hard work, grow your investments – and avoid any financial shocks.

Sarah Riegelhuth, author of Get Rich Slow, says too many people ignore budgets, or fail to follow them. “For a lot of people, being ‘on a budget’ has a negative connotation,” she says.¹ And while it can be difficult, sticking to a budget has its rewards.

A budget for the ages

To bring rigour to your budget planning, decide why you want to boost your wealth. Setting a realistic goal – such as buying a house if you are in your thirties or forties, building your share portfolio and/or super balance as a pre-retiree, or funding travel or aged care needs in retirement – keeps you accountable and enhances your chance of success.

Armed with a goal, you then need to ensure that your budget accurately lists all your income, including your salary and any investment dividends or pensions, and truly reflects your spending habits. This is where it can get confronting. You need to outline all regular payments such as mortgage and rental costs, food, entertainment, phone and power bills, plus transport expenses. Check your bank and credit card statements, bills and receipts to get a clear picture of all your expenses.

The trick, according to Riegelhuth, is remembering irregular fees such as annual insurance premiums or quarterly water bills, while building in a buffer for unexpected costs such as property and car repairs. “You have to have a fudge factor,” she says.¹

Let your bank accounts manage your money

After splitting your income into key areas such as savings and fixed and discretionary spending, you should set up your bank accounts to manage your budget process and automate payments and savings where possible.

Riegelhuth says a simple, even obvious, way is to open a high-interest savings account, a ‘cash hub’, where you can regularly deposit all your income.

Then set up an automatic transfer of all the money you need for the week into a separate spending account. This will help you to stay within your budget. “It’s great because it simplifies things and automates everything,” Riegelhuth says.¹

Cut costs – and reap the rewards

Your financial adviser can help you write and review your budget; it’s sticking to it that’s the difficult part. To help you continue to reduce your cost of living, think about measures such as doing home loan and credit card health checks at least once a year to ensure you are getting the best deal. Shop around for more cost-effective energy suppliers and phone plans. Apply for a credit card (with a low rate, of course) to pay for things that could be deductible at tax time, while also allowing you to direct debit and never forget to pay a bill on time. And consider using cash only for discretionary spending (it’s often easier to say no to a purchase if you have to physically hand over hard currency). Online budget planners such as Count’s budget calculator mybudgetcounts.com.au) and ASIC’s www.moneysmart.gov.au can make it easier to determine what you’re spending your hard-earned money on.

Monitor and review your budget

As a rule of thumb, it is a good idea to redo your budget every six to 12 months to make sure it still reflects your current income and spending. If you get a promotion, for example, you should refresh your budget to factor in a pay hike.

Similarly, losing a job, buying homeware items or having a baby can change your financial settings. Budgets can and should evolve as you mature. Pre-retirees may want to ramp up their superannuation contributions as they near the end of their career, while retirees typically like to spend more on travel. Your financial adviser can help you map out and review your financial plan.

How to cope when things go wrong

Don’t panic if your budget is under pressure, with outlays and debts suddenly seeming to be on the rise. If you have been reasonably disciplined for months or years, it should be relatively easy to recover. Ideally, in preparation for this scenario, Riegelhuth recommends setting aside three months’ worth of net income as a buffer in the event of an emergency. If that is not an option to fall back on, you may be able to consolidate debt or refinance into a low-fee, low-interest product; set aside a weekly amount for discretionary spending to help limit impulse buys; and generally track your spending to restore financial discipline.¹

Boost your income

Of course, cutting costs is not the only way to respond to a crisis or balance the budget. Seeking a pay rise or selling some investments are viable ways to increase your cash-flow. If you have sufficient retirement savings, you may also be able to use a transition-to-retirement pension while you are working full-time to increase your income. Retirees may also consider annuities that can give them a regular, secure income.

Play it smart with financial products, too. For instance, many financially independent people have multiple term deposits – and staggering their maturity dates can provide a regular income stream during the year while at the same time optimising returns.

Again, speak to your financial adviser to identify investment options that seek additional sources of income that could either be used for day-to- day-spending, or reinvested to further grow your nest egg.

Perhaps more than anything, the key to budgeting success is to stop procrastinating and put in place a long-term plan that can move with the times as you mature. Riegelhuth has no doubt that it can be life-changing. As she says: “It’s so empowering.”¹

Need some help? Contact your financial adviser to discuss your desired financial outcomes.

¹ These comments are drawn from an exclusive interview with Sarah Riegelhuth.

Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Happy new (financial) year

Insight Financial Partners - Happy new financial year

As you prepare for the new financial year, taking action using these simple tips can help you make sure your finances are on the right track for the year ahead.

Regardless of your financial standing or the stage of life you’re in, conducting regular financial health checks is a smart way of fine-tuning your life goals and creating wealth – and there is no better time than the end of the financial year to do it. Reviewing your finances with the help of your financial adviser can give you clarity on all your money matters, while also helping to identify any specific areas you should focus on in the next 12 months. Here is a list of checks that can set you on the path to a smoother financial year ahead.

Reset your goals

Things change in life and work – and your financial plans need to reflect this. Perhaps you want to ramp up your savings, change your investment strategy or pay particular attention to cutting your debt this financial year. Start your health check by rethinking your short and long-term goals. Make them specific, but realistic – and write them down so you have extra motivation to see them become a reality. Work closely with your financial adviser during this process to get the best outcomes for your lifestyle and financial circumstances.

Redraft your budget

Perhaps you bought a new car, some new shares or will start to pay higher costs for child care in the coming year. These types of triggers can have an impact on your finances and they need to be factored in to ensure your budget works well for you. It’s obvious, but make sure you update your budget to reflect all your income, including any investment dividends or pensions and outline all your regular payments. Use this opportunity to review your bills and spending, identifying any non-essential costs that you could cut down on.

Get your debts down

It is important to get a handle on exactly which debts you are currently facing, and those that you know will arise in the coming year. To do this, write down a complete list of where you owe money. This could include any personal loans, credit cards, and home loans – and make sure you detail exactly how much you owe, the minimum repayments and the interest you are paying. Anything that incurs a high interest should be tackled first, which normally covers credit cards and personal loans. By consolidating these debts you may be able to get a lower interest rate, or even take advantage of an interest-free period. Always prioritise paying off any non-tax deductible debt that you have.

Maintain good records

Keeping a close eye on all your financial records will not only make the tax office happy – it also helps you understand your spending habits and any possible deductions. As well as keeping all relevant receipts, another way to do this is to apply for a credit card (with a low rate, of course) that you use strictly to pay for things that could be deductible at tax time so you will be well prepared for next year.

Examine your investment objectives

A sound financial health check should always include a reassessment of your investment objectives. With the help of your financial adviser, you need to determine your short and long-term goals so an investment strategy can be devised to achieve each aim. Positions can shift quickly for a range of reasons, so review your investment portfolio with your financial adviser.

Focus on your tax

It is crucial for you to review any tax deductions while ensuring, where possible, that the deduction can be claimed in the financial year when it has the most impact. This may mean incurring deductible expenses by June 30 this year to reduce your tax payable. Some of the deductible expenses you may wish to bring forward include repairs and other ongoing expenses relating to an investment property, ongoing expenses incurred in running a business; and any eligible self-education expenses. You may have other ongoing expenses which are tax deductible, such as interest on an investment loan or income protection insurance premiums. Or, if your marginal tax rate is expected to be higher next financial year, it may be worth delaying deductible expenses until after June 30.

Take control of your super

Whatever age you are, understanding your superannuation outlook can help you plan ahead. If possible, you could consider making contributions to boost your super. Salary sacrificing some of your pre-tax salary into your super fund can be one of the most tax-efficient ways to invest for retirement. Your financial adviser is best placed to help you, so discuss some of the following considerations with them too:

  • The concessional contribution cap is $30,000 for anyone under age 50, or $35,000 for anyone 50 or over. These caps apply for the 2015‑16 and 2016-17 financial years
  • The caps operate on a use-it-or-lose-it basis; if you wish to boost your super balance, but have not yet fully utilised your concessional cap, consider doing so prior to July 1 to avoid missing out on a potentially valuable tax saving. Note, the Government has proposed reducing the concessional contribution cap to $25,000 from 1 July 2017, so it is even more important to take advantage of the higher caps while they are still available. Make sure you speak to your financial adviser before making any concessional contributions.
  • If you are considering making personal non-concessional contributions, using after-tax money, the current non-concessional contributions cap is $180,000 per year or $540,000 every 3 years under the bring-forward rule. However, you need to be aware that in the 2016 Federal Budget the Government has proposed a change to the non-concessional contributions cap with the introduction of a lifetime non-concessional cap of $500,000, which is proposed to take effect from 3 May 2016. Under this proposal, prior contributions made since 1 July 2007 count towards this cap. Due to the complexity of these rules, it’s important that you discuss the implications with your financial adviser before making any contributions.

Start planning for social security changes

Upcoming assets test changes will apply from 1 January 2017. For many people this could lead to a cut in pension entitlements, which means that strategies to reduce assessable assets under the assets test will be more important than ever. Possible actions could include boosting the super balance of the younger member of a couple, if one is under the age-pension age, buying long-term annuities with a depleting asset value, and making principal home improvements. Stay on top of the area that is relevant to you.

Contact your financial adviser

Any changes you make to improve your financial position can help put you on the path to a more positive future.The start of a new financial year is the perfect time to give yourself the gift of a better financial future. Set aside some time and focus on these important financial checks – and once you’ve taken stock, take advantage of the expertise your financial adviser provides. They are here to help you.

The start of a new financial year is the perfect time to give yourself the gift of a better financial future. Set aside some time and focus on these important financial checks – and once you’ve taken stock, take advantage of the expertise your financial adviser provides. They are here to help you.


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

Gifts that may not keep on giving

Insight Financial Partners - Gifts that may not keep on giving

If you have planned well and feel financially secure for the years ahead, gifting money or assets to family members can be a kind and compelling idea. Just make sure you know how the rules might affect your wealth.

Whether it’s transferring a holiday house to your children or giving money to pay for your grandchild’s education, gifting can be a rewarding experience for both the giver and the recipient.

However, what seems like a simple gesture sometimes comes with a catch. This generous act may be subject to Centrelink Rules that can have an impact on your pension and allowance entitlements.

The rules of gifting

Centrelink gifting rules apply to any gifts made in the five years before receiving a government pension or allowance, such as the Age Pension. If you are a self-funded retiree, it may be the case that no rules apply to how you gift your money or assets. But from the point at which you are five years from potentially receiving a pension, gifting must comply with Centrelink rules.

You can gift up to $10,000 each financial year, and up to a maximum of $30,000 over five years, and gifting within these limits could reduce your total assets and therefore potentially increase your Age Pension payments. You are required to inform Centrelink about any gifts or transfers within 14 days of when they have occurred. If you exceed this maximum amount, it will affect the calculation of your pension entitlements.

Consider the following case study. A retired couple wishes to gift $70,000 to their daughter and son-in-law for a house deposit. As this amount exceeds the annual maximum allowance by $60,000 (the gift amount of $70,000 minus the maximum annual allowance of $10,000), $60,000 will continue to be assessed as the couple’s financial asset for next five years. It will also be deemed to earn interest at the current deeming rates, which are the assumed rates of return Centrelink applies to your financial investments. In the case of our retired couple, the $60,000 financial asset is deemed to earn income at 1.75% per annum (assuming there are no other financial investments).

Gifting bricks and mortar

With housing affordability an ongoing concern, many parents wish to help their children buy their first home, or a larger home. This may be done by gifting the deposit for a house, transferring a property to a family member or selling them a house for less than market value.

It is worth noting that selling them a house for less than its market value may still be considered gifting. Furthermore it may bring other financial costs such as stamp duty and capital gains tax.

Consider our retired couple again. Rather than gifting $70,000 to their daughter, they decide to sell their investment property to her for $400,000, which is $100,000 less than its market value. Because the sale price is significantly lower than the market price of the property, the couple did not receive adequate financial considerations, the deprivation has occurred and the excessive gifting amount of $90,000 (the property’s undervalue of $100,000 minus the maximum annual allowance of $10,000) will be assessed as a deprived asset for the 5 years from the date of the gift, and will be subject to the income deeming provisions, currently at a rate of 1.75% for the first $80,600, and 3.25% for the remaining $19,400 (assuming there are no other financial investments). As the couple bought the house after 20 September 1985 the sales subject to capital gains tax, calculated at the property’s market value rather than sale amount. The stamp duty paid by their children will also be based on the market value of the house.

Tax on gifting

There is no specific ‘gift tax’ in Australia, but if the benefactor invests the money they receive then they will be liable for tax on any income it earns. Suppose our generous retired couple wishes to give $30,000 over three years to their grandson to help with his education. The gift is not taxed as income, however if it is invested in their grandson’s name, any income that is generated from the investment will be taxed. Special taxation rules apply to Australian residents under the age of 18 who generate ‘unearned income’ and money generated from investments in their name may be taxed.

To avoid this, the couple may consider holding the funds in a trust for their grandson. As trustees, the couple would be responsible for the funds, which would be assessed against their Age Pension. Note that trust distribution paid to minors are still taxed at higher rates.

Securing your own financial future

Passing on wealth to family members is a generous gift, however it’s important to discuss with your financial adviser your own lifestyle needs in retirement before deciding how much to gift.

The pension asset limit is currently $205,500 in assets (excluding your home) for a full Age Pension for a single person and $291,500 in assets (excluding their home) for a couple. Your pension rate reduces by $1.50 a fortnight for every $1000 over the asset limit. This reduction will double from 1 January 2017 when your pension will be reduced by $3 per fortnight for every $1000 of assets you own over the full pension limit.

Gifting is an act of goodwill that comes with limitations. It may have an impact on your quality of life after retirement, so please seek advice from your financial adviser.

Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Count is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.


Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.

Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.

This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.