How to hide money from Centrelink – Legally

Not a day goes by when I am not asked some form of question about how best to structure (hide) money to protect and improve a Centrelink benefit.

The question usually stems from the sale of a house, receipt of an inheritance or some other impetus.    

Whilst the term “hiding money” brings thoughts of illegal activity to mind, there are legitimate strategies available to you to preserve or enhance your eligibility for a Centrelink benefit.

The most effective strategy is adding money to superannuation.   Superannuation in accumulation phase is not assessed until you reach Age Pension age (this varies depending on your year of birth).  By adding money to the superannuation fund of a younger member of a couple, the older partner can benefit from an increased Age Pension payment. 

A similar strategy can be implemented for someone who retires before reaching Age Pension age and needs support from Centrelink.  There are restrictions around adding and accessing money from superannuation, therefore the strategy should be discussed with an appropriately qualified financial adviser before making any changes.

Other less generous yet effective strategies include:

  • Gifting – you are able to gift $10,000 pa and a maximum of $30,000 in any rolling 5-year period.  If you exceed these gifting limits in any way, you will be assessed as though you still have the money or asset. 
  • Prepaid funeral – prepaid funerals and funeral bonds up to the value of $13,250 are not assessed by Centrelink.  Buying one of these may assist in improving your benefit.
  • Spend it – Your home is not assessed by Centrelink therefore spending money on renovations and maintenance could help improve your Centrelink payment.  Spending money on things such as clothes or a holiday may also be helpful.  However, this is not something we recommend for clients because spending a dollar of your own money won’t result in you receiving a dollar from Centrelink.  Financially speaking, it is much better to preserve your wealth rather than whittle it away and rely on Centrelink.

I think it is also important to discuss the “elephant in the room”.  Hiding money under your bed is not a viable strategy.  Firstly, the cost of living is rising and if your money sits idle, your money is effectively losing value (purchasing power).  In addition, as people grow older and develop dementia, hidden money is often forgotten about.  Most importantly, if not declared, hiding money is fraudulent and can result in having to repay money received and criminal charges.  We’ve seen it many times before.

The strategies and advice mentioned above is of general nature only.  We strongly recommend you chat to someone who is appropriately qualified to discuss these matters and apply them to your personal circumstances.  If implemented incorrectly you could be in a worse off position.

8 Comments

  1. Jyoti Eagles on October 4, 2019 at 7:36 pm

    I am 68 and receive a pension. I own my home (value $300,000) and have no super. My mother just died and I will inherit about $150,000. It is in shares which she has had for some time. Will I have to pay capital gains if I sell them now ? I heard that if I hold on to them fir 12 months the tax is halved. Is this true? Will Centrelink make me sell them to live on? How long can I have the money or shares before it effects me as I want to move into another house?

    • The Muirfield Team on October 25, 2019 at 8:51 am

      Hi Jyoti

      There are quite a few things in play here. If your mother purchased the shares prior to 20 September 1985, you are deemed to have purchased them at the share price on date of death. If she purchased them after 20 September 1985, you will need to work out what she paid. When you eventually sell them, the difference between the purchase price and what you sell them for is a capital gain. This may be taxed. I suggest you consult an accountant to work out the tax implications.

      Under no circumstances can Centrelink or the the Government compel you to sell your shares, they simply include them in their assessment for determining your Age Pension.

      If you would like more information, please do not hesitate calling the office on 03 5224 2700

      All the best

      Courtney

  2. kerry walker on November 1, 2019 at 4:38 pm

    If I have shares and sell them to put into my superannuation will I still have to pay capital gains tax?

    • The Muirfield Team on November 19, 2019 at 8:42 pm

      Hi Kerry

      Yes, you may well need to pay capital gains tax if you sell your shares regardless of the fact you added the proceeds to superannuation.

      You should consult your Accountant regarding this matter.

      All the best

      Courtney

  3. Pete Roper on November 6, 2019 at 11:24 am

    Just a small point but, as I understand it, if I buy a $50,000 new car I still have to declare its value within my assets BUT it is now a “fire sale” value which could be as low as $40,000 immediately after I have left the show-room.
    Also can you confirm that if I pre-pay an overseas trip for say $30,000, then my assets immediately drop by that sum when the payment is made?
    Pete

    • The Muirfield Team on November 19, 2019 at 8:47 pm

      Hi Peter

      You are correct in both instances. It’s important to ensure you place a reasonable value on your new car. Centrelink online valuation tools to ensure your estimation is reasonable.

      All the best

      Courtney Robinson

  4. Bill Evans on November 18, 2019 at 1:18 pm

    I’m single, 64 years old, own my own home, have approx. $550K in assets and I live on north coast of NSW.

    My family live in the ACT and after the recent fires, I am thinking of relocating to be closer to them. My home on the north coast is valued around $300k and a modest home in Canberra will cost me around $500k so I would have to use around $200-$250k (with stamp duty/moving costs etc) of my current assets to relocate.

    Under current Centrelink rules, will I be able to apply for a part-pension after reducing my assets to relocate? I note that Centrelink ‘gifting’ rules apply for 5 years prior to applying for pension.

    I would be grateful for your advice.

    Thanks

    Bill

    • The Muirfield Team on November 19, 2019 at 8:51 pm

      Hi Bill

      As you’ve noted the home is not assessed when determining your eligibility for a benefit. If you use your personal savings to buy a more expensive home them you may become eligible for an Age Pension. I suggest you call our office on 03 5224 2700 to discuss your personal circumstances in more detail.

      All the best

      Courtney Robinson.

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