I am currently on benefit through Centrelink and have recently received a small inheritance from an Estate of $20,000. I’m concerned that this will affect my payments. Do I have to disclose the inheritance to Centrelink? And do I have to pay tax on the $20,000?
Do I have to disclose the inheritance to Centrelink?
Yes, you have to disclose your $20,000 inheritance to Centrelink within fourteen days of being able to access your inheritance.
The impact of the inheritance on your Centrelink benefit will depend on the type of benefit you are receiving from Centrelink and whether you are subject to the asset and/or income test.
Under the Centrelink income test some lump sum payments are excluded from the income test. Lump sum payments are payments that are one-off payments and not reasonably predictable. Under this rule a lump sum inheritance payment is exempt from the income test.
However, the manner in which you use the lump sum payment may cause it to be counted as income or an increase in your assets by Centrelink.
According to Centrelink if you put the money towards your house or mortgage then it will not affect your Centrelink benefits. However, if you put the money in your bank account or you use to purchase non-exempt assets such as a holiday home then it will count towards the income and/or asset test.
To ensure that your inheritance does not have an adverse effect on your Centrelink benefits then you need to be very careful about what you do with your inheritance.
Do I have to pay tax on my $20,000 inheritance?
In Australia there is no ‘death duty’ or other similar taxes that will apply to your inheritance.
So, if you receive your inheritance as a $20,000 lump sum payment, you will not have to pay tax on this inheritance.
However, if you receive the $20,000 as ‘income’ from the Estate (such as rental income from an investment property) then these amounts will need to be included in your tax return. Also, if your inheritance consisted of ownership of real estate there may be capital gains tax implications in the event that you wish to sell the property.
What should I do?
Receiving an inheritance is a good thing. You just need to make sure that you are fully aware of the impact that it can have on your Centrelink benefits before you decide how to deal with your inheritance. A good Wills and Estate lawyer can explain the different methods of using or applying your inheritance to ensure that you receive the benefit.
Graeme Heckenberg is an expert Wills & Estates lawyer and will be able to guide you on the impact of receiving an inheritance, and the effects it can have on your Centrelink benefits, as well as any tax implications. If you are living on the Northern Beaches and surrounding Peninsula and need expert advice, call The Northern Beaches Lawyer today for an appointment close to home. Call today on, 02 9221 0341.
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