Financial year end gifting

Financial year end gifting

By Christine Hopper

Gifting can be a pleasure for both the donor and the gift recipient. Gifts generally reduce the asset base of the donor. Some gifts also reduce the ‘assets’ of a Centrelink or DVA Pensioner. The ATO allows for gifts to some charitable causes to be deducted from your ‘taxable income’. Careful attention to the effective date of any gift could maximise the donor’s ‘benefit’ from gifting.

Financial year end gifting to be banked before Monday 30 June

For your charitable gift to count for the 2013/14 financial year, your payment must show up in the bank account of the charity no later than Monday 30 June. Thus to have your receipt dated Monday 30 June, your payment would need to be banked before the close of business on Friday 27 June.

If you use internet banking then your payment needs to be processed early enough for it to be recorded as a ‘deductible gift’ no later than Monday 30 June. Whilst you might pay electronically, the charity might have a manual recording system for ‘deductible gifts’ and issuing receipts. Early payment allows time for the paperwork to recognise your gift before the Monday 30 June cut-off.

Financial year end gifting for DVA and Centrelink Pensioners 30 June

The gifting year for DVA and Centrelink Pensioners is the Commonwealth government financial year, that is, 1 July to the next 30 June.

Centrelink and DVA Pensioners may gift up to $10,000 per financial year to a maximum of $30,000 over any five year period without incurring a penalty.  Any amounts gifted in excess of these limits is counted as an additional ‘financial asset’ of the Pensioner for five years after the date of the ‘excess gift’.

Pensioners need to be careful about the dates on which gifts are actually paid to avoid accidently making ‘excess gifts’.

Beware that mailing a cheque to a family member or favourite charity might not debit your bank account by the Monday 30 June cut-off.  Remember that the younger generation might not be familiar with the process for banking a cheque and older folks do not get to the bank every day.  Hence there is a risk that your gift cheque might not be presented for several weeks after you mailed it.

Before you send out great gifts this June, maybe check when your gifts for June 2013 were actually debited to your account. Maybe some did not show up until July 2013 and are being counted by Centrelink or DVA as 2013/14 gifts.

Update Centrelink or DVA about your financial year end gifting

Pensioners might not care about their charitable gifts being ‘deductible’ for income tax purposes. But pensioners do want to have the gifted amount deducted from their ‘assets’ as recorded at Centrelink or DVA.

If you are receiving only a part DSP or Age Pension from Centrelink, or you are not a pensioner but pay an income tested fee for Commonwealth sponsored aged care, then it is in your interests to tell Centrelink about your financial year end gifting.

DVA beneficiaries who receive part Service Pension or Income Support Supplement might have their benefits increased marginally by updating DVA about their financial year end gifting.

Your bank account statement is a simple record of your gift payments that you could show to Centrelink or DVA.

Why be concerned about financial year end gifting?

Centrelink administer the Australian Social Security programs.  Therefore, the Age Pensioners and Disability Support Pensioners must keep Centrelink updated about their income and asset position.

Centrelink also process all means tested fees and charges for Commonwealth regulated residential aged care. Thus you might become a Centrelink client because your spouse had to enter residential aged care.

You can read more about Centrelink gifting rules and how gifting could impact on your eventual aged care fees.

Professional advice before you make substantial gifts could spare you some unintended consequences if you later encounter the Centrelink system.  

Help is available.  Financial Care Services is licensed to provide personal financial advice. Financial Care Services offers professional advice regarding the impact of substantial gifts on your potential Centrelink benefits or aged care fees.

If you would like further confidential, independent and professional advice about Centrelink, aged care entry or financial issues please contact Christine Hopper (03) 9808 0338.

Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations. © 2014 Financial Care Services Pty Ltd. All rights reserved.

To make an appointment for professional advice, call Financial Care Services (03) 9808 0338