Helping Your Adult Children Without Losing Your Age Pension

Many Australian retirees quietly help their adult children or grandchildren financially — contributing to a house deposit, paying off debts, or lending money during a difficult period. While the intention is generous, these decisions can have unintended consequences if you’re receiving, or planning to apply for, the Age Pension.

Centrelink has strict rules around gifting and deprivation, and misunderstanding them can reduce or even stop your pension. This article explains how the rules work, common traps to avoid, and smarter ways to help family without putting your retirement income at risk.

Why Helping Family Can Affect Your Age Pension

The Age Pension is means tested. This means Centrelink looks at:

• The assets you own, and

• The income you receive (including deemed income from financial assets)

When you give money or assets away, Centrelink may still treat you as if you still own them — even though the money is gone. This is known as deprivation.

What Centrelink Considers a “Gift”

A gift isn’t just a birthday present or a few hundred dollars here and there. Centrelink may treat the following as gifts:

• Giving cash to your children or grandchildren

• Transferring money to help with a house deposit

• Forgiving a loan you previously made

• Selling an asset for less than its market value

• Transferring assets into someone else’s name

If you can’t prove the money will be repaid under a formal loan arrangement, Centrelink generally treats it as a gift.

The Gifting Limits Explained Simply

Centrelink allows you to gift up to:

• $10,000 per financial year, and

• $30,000 over a rolling five‑year period

These limits apply per person or per couple, not per recipient.

What happens if you exceed the limit?

Any amount above the gifting limit is assessed as a deprived asset for up to five years. This means:

• It still counts under the assets test, and

• It is still subject to deeming under the income test

Even though you no longer have access to the money.

Common Real‑Life Scenarios That Cause Problems

Helping with a House Deposit

Parents often transfer large sums to help their children enter the property market. If this exceeds the gifting limit, the excess continues to be counted as your asset for five years.

Paying Off a Child’s Debt

Using your savings to clear a child’s credit card, tax debt, or mortgage can trigger deprivation rules if not structured correctly.

“It’s Just Temporary” Transfers

Centrelink looks at what actually happened, not what was intended. If money is transferred without a formal loan agreement and repayments, it is usually treated as a gift.

How Gifting Affects Your Pension Payment

Even small changes can make a noticeable difference.

• Under the assets test, deprived assets can reduce your pension or push you over the threshold.

• Under the income test, deprived assets are deemed to earn income, which may reduce your fortnightly payment.

In some cases, people lose eligibility entirely — and are surprised when Centrelink later reassesses their pension.

What Happens After the Five-Year Deprivation Period

The good news is that deprivation does not last forever.

Once the five-year deprivation period ends, the gifted amount:

• Is removed from your assessed assets, and

• Is no longer deemed as income by Centrelink

This means your Age Pension can increase or be restored at that point, assuming no other changes to your circumstances.

Why timing matters

Because the deprivation clock starts from the date the gift is made, some people choose to provide larger financial help earlier, before they are close to Age Pension age.

If you are willing to accept that the gift may affect your future pension for up to five years, it can be far less harmful to do this well before reaching Age Pension age.

For many Australians, this means that if substantial help is planned, it may be better to do it before around age 62, so that the five-year period has largely (or fully) expired by the time you are eligible for the Age Pension.

This is not about avoiding the rules — it’s about understanding them and planning ahead.

Smarter Ways to Help Family Without Hurting Your Pension

Helping family doesn’t always mean handing over cash. Depending on your situation, alternatives may include:

• Structuring assistance as a formal loan with documentation

• Staying within the gifting limits and spreading assistance over time

• Providing non‑financial support instead

• Getting advice before transferring money

The key is understanding the rules before acting — Centrelink decisions are difficult to reverse once money has moved.

When to Get Help

If you’re receiving the Age Pension, or planning to apply soon, it’s important to check how helping family could affect your entitlement before making any transfers.

A short conversation now can prevent years of reduced payments later.

Final Thoughts

Wanting to support your children or grandchildren is completely natural. But when Age Pension rules are involved, generosity without planning can come at a high cost.

Understanding gifting limits, deprivation rules, and timing can help you protect both your family and your retirement income.

If you’re unsure, getting clarity early can make all the difference.