Losing a loved one is never easy and receiving an inheritance during such a time can add both comfort and complexity. If you are receiving the Age Pension, it is important to understand how an inheritance may affect your entitlements.
Understanding the Age Pension
The Age Pension is a government payment designed to provide financial support to eligible Australians aged 67 years and older. Eligibility is determined through means testing, which considers both your income and assets.
How an Inheritance Affects Your Pension
Centrelink assesses inheritances under both the income and assets tests, which can impact your pension payments.
The effect of an inheritance depends on the size of the inheritance, your existing assets and how your wealth is structured. A small inheritance may not affect your pension, but a larger sum could reduce your payment or, in some cases, result in the loss of the Age Pension entirely.
Planning in advance is crucial to manage the financial impact effectively.
Reporting an Inheritance
Centrelink requires you to report changes in your financial situation within 14 days of receiving it.
Failure to report can lead to:
- Overpayments which must be repaid
- Penalties for late reporting
- Fraud charges if changes are deliberately concealed
You must notify Centrelink of any significant changes to your financial situation or personal circumstances, including receiving an inheritance, changes to income or assets, or changes in living arrangements.
You can report your inheritance in the following ways:
- Online: Sign in to your myGov account linked to Centrelink, or use the Express Plus Centrelink mobile app
- Phone: Call the Older Australians line on 132 300
- In Person: Visit your nearest Services Australia office
Always report the inheritance within 14 days of receipt, even if you do not have a scheduled reporting date.
Planning for Your Inheritance
Receiving an inheritance requires careful financial planning. Depending on your situation, options may include:
- Paying off debt, such as your mortgage
- Home improvements or maintenance
- Personal expenses or a holiday
- Investing or saving for future needs
You should consider both your financial situation and pension eligibility, which is why seeking professional financial advice is highly recommended before or immediately after receiving an inheritance.
Common Mistakes to Avoid
- Delays in finalising the deceased estate can postpone Centrelink reporting and may complicate your financial planning.
- Gifting the inheritance to others may still impact your pension under Centrelink’s deprivation rules.
- Not seeking financial or legal guidance can lead to unintended consequences, such as pension reduction or tax issues.
We can assist you in managing a deceased estate, handling your inheritance, and even notifying Centrelink on your behalf. However, it’s important to seek financial advice to fully understand how an inheritance may affect your Age Pension. Professional guidance ensures you make informed decisions and avoid unintended financial consequences.
The information provided in this article is general advice only. Given that each situation is unique, we recommend that you contact our wills and estates planning team if you have any questions about the information contained in this article. Our team can be contacted on (03) 9311 8911.
