Understanding the Impact of Inheritance on Centrelink Benefits

Understanding the Impact of Inheritance on Centrelink Benefits

Receiving an inheritance can affect your entitlement to Centrelink benefits, such as the Age Pension, Child Care Subsidy, Family Tax Benefit, Disability Support Pension, Carer Allowance, Carer Payment Austudy, JobSeeker, or Rent Assistance, because it can alter your income and assets profile. It’s important to understand how these changes can impact your eligibility and the amount you receive from Centrelink.

Timely and accurate reporting of an inheritance is also important to ensure compliance with Centrelink’s policies and to avoid having to repay the benefits and any associated penalties.

What Constitutes Inheritance?

Inheritance can include any assets, money, or property you receive from someone who has passed away. This not only encompasses cash inheritances but also real estate, shares, vehicles, and other items of value. Even if these assets are not immediately converted into cash, they must still be reported to Centrelink as they can affect your financial assessment.

Reporting Requirements for Centrelink Recipients

Pension and Centrelink recipients are required to report any changes to their financial situation, including receiving an inheritance, within 14 days. This is because an inheritance can affect your asset and income tests, potentially altering your benefit amount. Failing to report within the required timeframe can lead to overpayments, which you will be required to repay, and possible penalties.

How to Report Inheritance to Centrelink

Reporting an inheritance to Centrelink can be done through several channels:

  • Online: Log in to your myGov account, access your Centrelink account, and use the ‘Update Details’ section to report changes.
  • Phone: Call the Centrelink reporting line and speak to a representative who can assist with the update.
  • In Person: Visit your local Centrelink office to report the inheritance directly to a staff member.

When reporting, be prepared to provide details about the inheritance, such as the type and value of assets received. It’s also wise to keep any documentation related to the inheritance for your records and potential verification by Centrelink.

The Impact of Inheritance on Your Centrelink Benefits

Receiving an inheritance can have a significant impact on your Centrelink benefits, as it may alter your financial profile. This change primarily affects your benefits through Centrelink’s income and assets tests, potentially reducing or even stopping your payments. It’s imperative to understand and anticipate these effects to manage your finances effectively and ensure you remain within the compliance framework set out by Centrelink.

Managing Large Inheritances

Handling a substantial inheritance requires strategic planning and financial advice to mitigate potential impacts on Centrelink benefits and to ensure the inheritance can support you into the future in lieu of any Centrelink benefits. It’s advisable to seek professional financial advice to explore options that align with Centrelink regulations, such as investing in exempt assets or using the funds for immediate, non-discretionary expenses. Professional advice and thoughtful management can help preserve your eligibility for benefits while optimising the financial potential of your inheritance.

Centrelink Asset Test and Inheritance

The Centrelink asset test evaluates your assets’ total value to determine your eligibility for benefits. Receiving an inheritance increases your asset base, potentially affecting your Centrelink payments. It’s crucial to understand how your inheritance will be classified under Centrelink’s asset test and to report it accurately. Some assets may be exempt or have different implications for your benefits, so familiarising yourself with these details can aid in maintaining your financial stability while navigating Centrelink requirements.

Centrelink Income Test and Inheritance

Inheritance may also be scrutinised under Centrelink’s income test, depending on how the inheritance is used or invested. For example, if inherited funds are invested, any income generated from these investments will be assessed under the income test and could affect your payment rate. It’s important to report any changes to your income as a result of an inheritance to ensure your Centrelink payments are accurately calculated.

Legal and Financial Advice for Centrelink Recipients

Navigating the implications of receiving an inheritance while on Centrelink can be complex. Seeking legal and financial advice is highly recommended to understand the full scope of your obligations and options. A professional can provide tailored advice on managing your inheritance in a way that minimises its impact on your Centrelink benefits and helps plan for your financial future effectively.

Avoiding Common Mistakes When Reporting Inheritance

A key aspect of managing inheritance as a Centrelink recipient is ensuring accurate and timely reporting. Common mistakes include underreporting the value of inherited assets, delaying the reporting process, and misunderstanding how different types of inherited assets affect Centrelink benefits. To avoid these pitfalls, confirm the value of your inheritance with a professional — such as your accountant or lawyer — and report it within the required 14-day period.

Liability limited by a scheme approved under Professional Standards Legislation.

Disclaimer: the information in this article relates to NSW law as at the date it was written and is general information only. It does not constitute legal advice and should not be relied upon as legal advice. It may contain information or links to sources which are no longer current. If you have a question or legal issue, we recommend you contact a lawyer and obtain legal advice that takes into account your specific facts, circumstances, needs and objectives.

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