Navigating the financial waters of retirement could be tricky, especially when it comes to managing assets and achieving the maximum Age Pension benefit.

Many seniors look for ways to support their children or grandchildren financially, as they consider an early inheritance.

However, the act of gifting can have unintended consequences on pension entitlements, which is why it's crucial to understand the rules and strategies involved.


The Centrelink conundrum could arise when seniors give substantial amounts of money to their children or grandchildren.

Under current regulations, large financial gifts could affect the Age Pension through income and asset tests.

These tests could reduce the pension amount you are entitled to receive in the future.

Many people ask: why could this happen?


Centrelink has gifting rules that allow family members to give away only up to $10,000 per financial year.

Over five years, a family member could only give a maximum of $30,000 without affecting the pension.

However, a clever strategy recently gained traction among savvy seniors and their family members.

The granny flat arrangement has been a simple yet effective arrangement among families.

Instead of handing over cash, seniors could contribute funds towards building a granny flat on their children's property.


This investment not only provides people a place to live; it could also circumvent the usual gifting rules that often lead to pension reduction.

Financial adviser Noah Capozza from Link Wealth Group pointed out that Centrelink applies a 'reasonableness test' when assessing granny flat arrangements.

Capozza meant that if the amount seniors contribute towards the granny flat is considered reasonable, it may not be counted as a gift.

Therefore, families could potentially transfer a significant sum—anywhere from $100,000 to $800,000—without affecting pension payments.

While the granny flat arrangement has its pros, it also comes with complexities.

Legal and financial advice are still essential to ensure that the arrangement is set up correctly and in line with Centrelink's guidelines.


Suzanne Jones, head of estate planning at Coote Family Lawyers, cautioned that without proper planning, these arrangements could still have financial implications, particularly for seniors who need to enter aged care within five years.

The trend towards granny flat arrangements has surged, as search engine terms related to granny flats and units increased by over 50 per cent in 2024.

More Australians are now exploring this option as a way to maintain their pension while providing substantial support to their families.

Before making any decisions, it's essential to do research.

Consider the long-term implications, not just for your pension but also for your living arrangements and family relationships.

A granny flat agreement should be put in writing with full terms and conditions of your right to live on the property to protect all parties involved.

If you're contemplating giving an early inheritance or are curious about how a granny flat arrangement could work for you, it's wise to seek professional advice from licenced financial experts.
Have you considered a granny flat arrangement with your family? Have you had experience with managing your assets to optimise your pension? Share your stories and tips in the comments below.