Giving your money away doesn't stop Centrelink counting it.
Most people selling the family home to help their children have no idea this is true. It is the single most expensive thing they don't know.
The plan is usually simple and usually decent. Sell the house, buy something smaller, give the difference to the children while you are alive to see them enjoy it.
What almost nobody is told is that Centrelink does not stop counting money simply because you no longer have it.
Give away a sum above the permitted limits and the excess is treated as though you still own it. It is assessed against you, under both the assets test and the income test, for a set period after the transfer. The money is gone. The assessment is not.
So the cost of a large gift is not the gift. It is the gift, plus whatever happens to your pension for years afterwards, at exactly the point your savings have just been reduced.
The money is gone. The assessment is not.
That is the mechanism. What follows are the four questions worth answering before anyone signs anything — and, just as importantly, who is actually qualified to answer each one.
Question 1 — Is it a gift, or is it something you owe?
Ask this one first, because it changes everything after it.
Money moving from a parent to a child looks the same whatever the reason. Legally, it is not.
A voluntary gift is one thing. Settling a genuine entitlement or claim against an estate is another — particularly where one person inherited and others did not, or where a will did not provide for someone who might reasonably have expected it.
Same money, same people, same intention. Not the same transaction, and potentially not treated the same way.
If you are passing money to someone because you feel they should have received it from an estate and didn't, do not assume it is a gift until somebody qualified has looked at it.
Ask a solicitorQuestion 2 — What does it do to your pension, and for how long?
Not "will it affect it". By how much, and until when.
There are limits on what can be given away before the excess is counted against you. Above those limits, the amount is assessed for a defined period from the date of the transfer.
The figures change with indexation and the rules are not intuitive, so there is no point quoting them here — and I am not licensed to apply them to your circumstances in any case.
What matters is that you get the actual number, for your actual situation, in writing, before the house sells. Not an estimate from a friend, and not a guess from a search result.
Ask Services Australia, or a licensed financial adviserServices Australia runs a Financial Information Service. It is free, it is independent, and it exists precisely for this. They are not selling anything, which makes them the most straightforward place to start.
Question 3 — What are you left with, and is it enough?
The number that matters is the one at the end.
Sale price, minus the new home, minus the gift, minus agent fees, legal costs, stamp duty and moving. Then subtract whatever the pension does or doesn't do afterwards.
What remains has to cover the rest of your life, including any care you may eventually need — and by then the money you gave away is not recoverable.
People are very good at working out the first three numbers and rarely work out the fourth.
Ask a licensed financial adviserQuestion 4 — If you decide to wait, does your will actually do it?
Deferring is a reasonable answer. It is not automatically a safe one.
Plenty of people, once they understand the cost, decide the children can wait until they are gone. That solves the immediate problem and creates a different one.
It only works if your will genuinely provides for the people you have in mind, and if those people are able to take under it. Stepchildren, in particular, are not always in the position people assume they are.
An intention that lives only in a conversation is not a plan. A will is cheap to review now and impossible to fix later.
Ask a solicitorWhat's the accountant's part in this?
Narrower than people expect, and worth being clear about.
The tax position on the sale itself is mine. How and when you came to own the property, whether it was your main residence throughout, and whether any part of it was ever rented or used for a business — those decide whether there is a capital gains liability at all, and they are frequently more complicated than they look. A home acquired jointly and later held by one person, for instance, is not always one parcel for tax purposes.
Often the answer is that no tax arises. That is worth knowing early, and it is a genuine answer rather than a reassurance.
What is not mine — and not any accountant's, without the right licence — is whether to make the gift, how to arrange your affairs around the means test, what to do with superannuation, or anything touching your will. Anyone who offers you all of that in one conversation is either licensed for it or should not be offering it.
The order to do this in
Most people ring an accountant first, because selling a house feels like a tax question. On these facts it usually isn't the first question.
Solicitor first, if there is an estate in the background or if the money is going to someone other than your own children. That determines what kind of transaction you are even having.
Then the Financial Information Service or a licensed adviser, for the pension consequences and what you are left with.
Then your accountant, for the tax position on the sale.
And nothing gets signed, promised or transferred until the first two have answered.
There is no deadline on any of this. The mistakes happen at speed, not at leisure.