Inherited Money While on Centrelink? What Happens to Your Payment

Let's be direct: an inheritance is counted as your asset from the date you receive it — not the date someone passes away, and not the date the will is read. The relevant date is when the money or asset is actually in your hands (or your bank account, or transferred to your name).

This matters because probate can take months or even years. During that waiting period, Centrelink doesn't count the inheritance because you don't have access to it yet. But the moment it lands in your account or you take ownership of an inherited property, you must report it.

If you inherit a property rather than cash, Centrelink will assess the property's market value as an asset. If it's an investment property generating rent, the rental income is also assessed under the income test. If you're not sure of the value, Centrelink may accept a recent council rates valuation as a starting point, but they can request a formal valuation.

Once the inherited money sits in your bank account or is invested, it's subject to deeming. Centrelink doesn't look at the actual interest or returns you earn — they assume your financial assets earn income at set rates:

Current deeming rates (March 2026):

Singles: 0.25% on the first $60,400, then 2.25% on amounts above that.
Couples: 0.25% on the first $100,200 (combined), then 2.25% on amounts above that.

So if you're a single pensioner with $50,000 in financial assets and you inherit $200,000, your total deemed financial assets become $250,000. The deemed income would be: ($60,400 x 0.25%) + ($189,600 x 2.25%) = $151 + $4,266 = $4,417 per year, or $170.04 per fortnight.

Under the pension income test, you can earn $204 per fortnight (single) before your pension reduces. So in this example, the deemed income alone wouldn't reduce your pension. But combined with any other income you have, it could push you over the free area.

This is the number one mistake people make. They inherit $100,000, panic about losing their pension, and give it to their kids. This doesn't work.

Centrelink's gifting rules are strict: you can gift up to $10,000 in a single financial year and no more than $30,000 over a rolling 5-year period. Any amount you gift above these limits is still counted as your asset (a "deprived asset") for 5 full years from the date you gave it away.

So if you inherit $100,000 and give $80,000 to your daughter, Centrelink will still count $70,000 as your asset ($80,000 minus the $10,000 annual allowance) for the next 5 years. You've given the money away but your pension is still reduced — the worst of both worlds.

The gifting rules apply to cash, property, shares, and any other asset you dispose of for less than its market value. This includes selling your car to a family member for $1 when it's worth $15,000. Centrelink will assess the difference ($14,999) as a deprived asset.

You must report the inheritance to Centrelink within 14 days of receiving it. You can report through your Centrelink online account, the Express Plus app, or by calling your payment line.

What you'll need to provide:

- The date you received the money or asset
- The amount of cash received
- Details of any non-cash assets (property, shares, valuables) including estimated value
- Where you've deposited or invested the funds

If the inheritance is being distributed in stages (e.g., partial distributions from a trust), report each distribution as you receive it. If you're an executor or beneficiary of an estate that hasn't been finalised, you don't need to report until you actually receive your share.

Don't delay reporting. If Centrelink later discovers you received an inheritance and didn't report it, they will raise an overpayment debt for every dollar they overpaid you from the date you should have reported. They add a 10% recovery fee on top.

While you can't dodge the rules, there are legitimate strategies to consider:

Pay off your home loan. Your principal home is exempt from the asset test. Using inheritance money to pay off a mortgage or make renovations reduces your assessable assets while improving your living situation.

Prepay funeral expenses. Prepaid funeral bonds up to $15,250 (March 2026 threshold) per person are exempt from the asset test. This is a legitimate way to set aside funds that won't affect your pension.

Pay off debts. Using the inheritance to clear debts (credit cards, car loans, personal loans) reduces your assessable assets and your ongoing expenses. The money is gone, so it can't be counted.

Spend on exempt assets. Your home, necessary home modifications, and your car (up to a reasonable value) are generally exempt or partially exempt. A new car or home improvements can be smart uses of an inheritance if you need them.

Get financial advice. A Centrelink Financial Information Service (FIS) officer can provide free guidance on how an inheritance will affect your specific situation. Call 132 300 and ask for a FIS appointment — it's free and confidential.