My 89-year-old mother, who is fit and healthy, receives the full age pension and is moving in with us. She should get about $600,000 from selling her home and is keen to give this to her two grandchildren in equal shares while she is still alive. She is concerned that they may be priced out of the housing market forever. She has no other assets. Would there be any tax consequences of this transaction, and would her age pension be affected?
Let’s assume that the sale proceeds from the house are $580,000 (after costs), and she gives $5000 each to the children now, plus an interest-free loan of $10,000 to be forgiven in July next year. This would mean that her assessable assets would be $570,000 this financial year, and $560,000 in July next year after the loan is forgiven.
Credit:Simon Letch
The result is an age pension this financial year of $718.50 a fortnight, which would be a reduction of $249 a fortnight, or $6474 a year (though it would rise again in July next year after the loan is forgiven).
The remaining gift of $560,000 would be held as a deemed asset for five years and then cease to exist, after which time she should revert to the full age pension.
In short, it is going to cost about $32,000 in lost pension over the next five years to make the gift.
All she needs to do is keep at least $32,000 in hand for expenses and gift the balance immediately.
My wife has a share portfolio with an unrealised capital loss of about $60,000. She has stage-four cancer, with about 12 months’ prognosis of death. I also have a share portfolio, but it has unrealised capital gains exceeding $60,000. Is there any way that I can arrange our tax affairs so that the $60,000 in capital losses does not die with her?
If the shares are sold before her death, the capital losses would die with her but, if she has shares now where some have a capital gain and some have a capital loss, she could sell sufficient now that would enable any gains to be offset against the losses.
If the remaining shares were left to you, you would pick up her cost base, which would mean if the value now is less than the cost base, you could use the losses against some of your own unrealised capital gains.
Gifting rules and their impact on the age pension
Source: Philippines Alive
