Lyla Lindsey
Hiding money from the government in Australia is typically done to improve one's Age Pension position or to avoid paying taxes. The Australian Taxation Office (ATO) defines the hidden economy as businesses or individuals that deliberately hide income to avoid paying the right amount of tax or superannuation, which they mainly do by not recording or reporting all of their cash or electronic transactions. There are several ways to legally hide money, such as giving away a maximum of $10,000 in one financial year or transferring income or assets to another person. Additionally, individuals may seek to hide money from Centrelink, the government agency that handles social security payments, to maximize their benefit entitlements.
| Characteristics | Values |
|---|---|
| Hiding money from the government in Australia is often associated with | Maximising Age Pension benefits |
| Legal ways to hide money | Giving away a maximum of $10,000 in a financial year or up to $30,000 within a 5-year period |
| "Hiding" money in a younger spouse's superannuation fund | |
| Spending money on long-term beneficial assets | |
| Ways to hide money, legality unclear | Transferring money to a child's account |
| Non-concessional cash contributions to superannuation | |
| Holding onto shares for 12 months to reduce tax | |
| Illegal ways to hide money | Using cash to avoid recording or reporting transactions |
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What You'll Learn
Hiding money from Centrelink
While the term "'hiding money' may bring to mind illegal activity, there are legitimate strategies to preserve or enhance your eligibility for a Centrelink benefit. It is important to remember that defrauding a government body is never a good idea and can result in severe penalties. Here are some ways to hide money from Centrelink:
Superannuation
Superannuation in the accumulation phase is not assessed until you reach pension age. By adding money to the superannuation fund of a younger spouse, you can benefit from an increased pension payment. However, there are restrictions around adding and accessing money from superannuation, so it is important to discuss this strategy with a qualified financial adviser.
Gifting
You are allowed to gift up to $10,000 per year and a maximum of $30,000 in any rolling five-year period. If you exceed these limits, you will be assessed as if you still have the money or asset.
Prepaid Funeral
Prepaid funerals and funeral bonds up to $15,500 are not assessed by Centrelink. Purchasing one of these may assist in improving your benefit.
Spend it
Centrelink does not assess your primary residence, so spending money on home renovations and maintenance could help improve your Centrelink payment. Spending money on other items such as clothes or holidays may also be beneficial. However, it is important to remember that spending your own money will not directly result in receiving Centrelink benefits, and it is generally better to preserve your wealth.
Credit Cards
In normal circumstances, Centrelink does not assess credit cards for the income or asset test. However, if you have a positive balance (i.e., you have made repayments greater than what is owed), the excess amount may be assessed as a financial asset.
It is always recommended to seek professional financial advice and carefully consider the potential consequences before attempting to hide money from Centrelink.
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Legally hiding assets
In Australia, legally hiding assets is often done to improve one's Age Pension position. Here are some strategies that can help you achieve this:
Spouse Superannuation:
If there is an age difference between you and your partner, you can "hide" money in your younger spouse's superannuation fund. This strategy works if your partner is several years away from reaching the Age Pension age. The balance in their superannuation will be fully exempt from any tests until they become eligible for the Age Pension. However, this requires careful planning and knowledge of superannuation rules and limits to avoid any complications.
Giving Away Money:
You can give away a maximum of $10,000 in one financial year or up to $30,000 within a five-year period. This can be done by selling an investment, transferring your income, or giving away an asset to another person or entity for less than its value or for free. Any amount above these limits will be treated as a deprived asset and will be subject to the Income and Asset Test for the next five years.
Share Ownership:
If you own shares, understanding the tax implications is crucial. The tax treatment of shares depends on when they were purchased. If they were acquired before 20 September 1985, the share price on the date of inheritance or transfer is considered. If purchased after that date, you will need to determine the original purchase price. When you sell the shares, the difference between the purchase price and the selling price is considered a capital gain, which may be subject to tax.
Spending with Long-Term Benefits:
When spending your money, consider investments or purchases that will provide long-term benefits and improve your Age Pension eligibility. For example, investing in a principal place of residence or giving money to your children for their education or first home can be beneficial.
It is important to remember that legally hiding assets often involves complex strategies and specific rules. Seeking professional advice from financial planners or accountants is recommended to ensure you comply with the law and make informed decisions.
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Using a younger spouse's superannuation fund
If there is an age difference between you and your spouse, and you are approaching the Age Pension age while your partner is several years away, one strategy is to ""hide" money in your younger spouse's superannuation fund. Until your younger partner becomes eligible to apply for an Age Pension based on age, the balance of the superannuation fund will be fully exempt from any test.
However, it is best to plan this strategy well in advance. While there are ways to ""reshuffle" superannuation money between partners, you need to be aware of the rules and limits regarding superannuation funds. For instance, you need to be married or in a de facto relationship with your partner to make super contributions on their behalf, and both of you must be Australian residents. Additionally, if you are making after-tax contributions to your partner's super, they need to be under 75 years old. It is important to consider your debt levels, financial circumstances, contribution caps, and tax issues before adding to your partner's superannuation fund.
You can contribute to your spouse's superannuation fund by splitting up to 85% of your before-tax super contributions. This is called a 'contributions-splitting super benefit' and is treated as a rollover to your spouse rather than a new contribution. It is important to note that you must give your fund notice of your intent to claim a deduction before applying to split the contributions. Additionally, the fund has the discretion to allow or not allow the request.
While this strategy can help you legally hide your assets, there are some considerations to keep in mind. Firstly, the money in the superannuation fund will be in a 15% superannuation tax environment, as opposed to a tax-free pension environment. Secondly, the money will be ""preserved" within the superannuation fund, and you will only be able to access it when your spouse meets the conditions of release. Therefore, it is crucial to ensure you have sufficient emergency funds and continue to benefit from maximised Age Pension.
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Giving away a maximum of $10,000 per year
If you are looking to hide money from the government in Australia, one strategy is to give away a maximum of $10,000 per financial year, or up to $30,000 within a five-year period. This method is known as "gifting" and is a way to legally hide your assets and improve your Age Pension position. It is important to note that this strategy should be carefully considered, as you will not be able to access or benefit from this money in the future.
When giving away money, it is essential to do so in a way that provides long-term benefits. For example, you could give money to a younger spouse or partner to "hide" it in their superannuation fund. This strategy works if there is an age difference between you and your partner, and they are not yet eligible for the Age Pension. By transferring money to them, you can reduce your assessable assets and improve your eligibility for the Age Pension.
Additionally, when giving away money, be mindful of the limits and the potential for asset deprivation. If you give away more than $10,000 in a year, the excess amount will be treated as a deprived asset. This means that it will be counted under the Income and Asset Test for a period of five years, as if you still possess that asset. Proper planning is crucial to avoid breaching superannuation rules and limits.
It is worth noting that while giving away money can help reduce your assessable assets, it may not always be the best financial decision. Spending your own money will not directly result in receiving government benefits. Instead, consider investing in a funeral bond or spending on necessary home renovations or maintenance, as your home is not typically assessed by Centrelink.
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Tax implications of selling shares
When you sell shares, the profit you make is considered a capital gain and is treated as taxable income. The tax you pay on this income is known as Capital Gains Tax (CGT). The amount of CGT you need to pay depends on the timing and size of your profit. If you sell your shares within 12 months of purchasing them, the net gain is added to your taxable income for the year, and you will be taxed at your marginal rate. However, if you hold onto the shares for more than 12 months, you are eligible for a 50% discount on the CGT. This discount effectively halves the net gain reported on your tax return.
It is important to note that the Australian Tax Office (ATO) treats share trading activities constituting a business differently. In this case, gains and losses are treated as ordinary income and expenses, and the 50% CGT discount does not apply.
In addition to capital gains, dividends are another type of income from shares. Dividends are regular payments made by companies to shareholders from their profits. There are two types of dividends: franked and unfranked. Franked dividends come with franking credits, which reduce the amount of tax owed by refunding some of the tax paid by the company. This ensures that company profits are not double-taxed. On the other hand, unfranked dividends are distributed without franking credits, typically because the company hasn't paid Australian corporate tax on those profits. When you receive unfranked dividends, you must include the full amount in your assessable income and pay tax at your marginal rate without any credits to offset it.
To calculate your CGT liability and ensure compliance with tax laws when selling shares, it is recommended to consult an accountant or seek advice from the Australian Taxation Office.
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Frequently asked questions
It is illegal to hide money from the government in Australia. However, you can legally hide your assets to improve your Age Pension position.
Here are some legal ways to hide your assets:
- Give away a maximum of $10,000 in one financial year, up to $30,000 within a period of 5 years.
- If there is an age difference between you and your spouse, and you are arriving at the Age Pension age, you can "hide" money in your younger spouse's superannuation fund.
- Consult an accountant to understand the tax implications of selling shares.
The Australian Taxation Office (ATO) defines the cash economy as businesses that deliberately hide income from cash or electronic transactions to avoid paying taxes or superannuation obligations. The ATO has identified the cash economy as a major tax integrity risk and has a dedicated team to address it.
The ATO receives referrals from various sources, including its Tax Evasion Reporting Centre, other business lines, ministerial correspondence, and government agencies. They also undertake data matching using their data and third-party sources, such as merchant data and online retailing sites.
Consult a financial advisor or accountant to understand your options and the potential implications. They can provide personalised advice based on your circumstances.
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