My name is Wally David. I'm a proud husband and father and I advise people on money for a living. I've been doing this money thing for over a decade and have a keen passion for educating people on their options by simplifying information into everyday language and cutting to the chase. I try and avoid fancy words and jargon, and present information in a way that helps you make smart decisions with your hard-earned.
So, your Great-Aunt Thelma has passed away and with no kids of her own, she has kindly left you some funds in her Will. Or, maybe you want to withdraw $20,000 from your super so that you can finally update the kitchen at home. But do you need to advise Centrelink? And will it affect your pension?
The short answer is – it depends! If you've followed my material for long enough, you would know that there is rarely a one-size-fits-all answer with these types of questions.
Lump sum payments and Centrelink Let's start with the easy part.
1. Do you need to notify Centrelink?
If you receive a lump sum of more than $2,000, they want to know about it within 14 days so that they can adjust your payment, if required.
2. How is the lump sum payment assessed?
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3. Does it matter how you use the money?
This is where is gets a little tricky.
If you spend the funds on items that are not normally assessed by Centrelink, such as repairs and/or improvements around your home, you should be in the clear. By that I mean that these should not change the value of your assets that are assessed. However, you still need to let our friends at Centrelink know about the payment and how you used the money.
Alternatively, if you use the cash to splurge on a new caravan or speed-boat, this will be considered an asset and it may affect your rate of payment.
Investing the lump sum into the stock market or other financial investments will also be assessed, both as an asset and under the deeming rules for income. If you're thinking about adding to your property empire with the proceeds, different rules apply again.
And finally, if the intention is to gift some funds to the grand-kids, this can also alter your payment. For more information on gifting.
4. What lump sums get treated as income?
I've touched on some of the more common sources of lump sum payments. But there are certain types of payments that can be considered as income with potentially a greater impact on your pension. Some examples include distributions from a family trust or private company, or any bonuses you receive from the boss at work.