While there is now no requirement to enter into extensive gifting programmes in order to transfer assets from personal ownership into a family trust, the abolition of gift duty on 1 October 2011 has created other implications which clients need to consider before disposing of their assets. In particular, section 147(a) of the Social Security Act 1964 provides that where a person applies for a means assessment, in relation to determining eligibility for residential subsidies, and that person has “directly or indirectly deprived himself or herself of any income or property”, that person can be assessed as if the deprivation had not occurred.
Deprivation, as it relates to property, includes gifts in excess of $6,000 per year in a five year period before an application for a residential care subsidy is made and any gifts that exceed $27,000 in any 12 month period prior to the five year period. The appropriateness or otherwise of forgiving debts or otherwise making gifts will depend on the circumstances of each individual. It is important to seek legal advice before either transferring assets to a trust, entering into a gifting programme or making any outright gifts to the value of those assets.