Giving your family part of their inheritance early to help them buy a home, start a business or pay for education is popular among many parents and grandparents but if you're doing it to qualify for the age pension, then you could be in for a shock.

Michael Hutton, an accountant with HLB Mann Judd, says that your generosity will not go unnoticed by Centrelink. "The rules on bequests and qualification for people on the age pension are quite clear," he warns.

Not only could you fail to qualify for the pension, you might also deprive yourself of valuable retirement income.

"It's a pretty gutsy call [to give away assets] and ask your kids to support you in retirement," Hutton says.

A RetireInvest financial planner, Rod Dunn, says he still comes across people who have given away $50,000 in an attempt to qualify for the pension without having first checked the rules that apply to gifting.

Under the deprivation provisions of the Social Security Act, singles and couples can gift up to $10,000 in cash or assets each financial year, up to a limit of $30,000 in any five-year period, to effectively reduce their asset base.

The good news is that the asset limits that determine eligibility for the pension were increased from July 1.

Single home owners can now hold assets, excluding the family home, of up to $171,750 and still be entitled to a full age pension or up to $540,250 for a part pension. Non-home owners can have assets of up to $296,250 for the full pension or $664,750 for a part pension.

For couples, the asset limits are $243,500 for a full pension ($856,500 for a part pension) for home owners and $368,000 ($981,000) for non-home owners. The pension reduces by $1.50 for every $1000 above these limits.

The deprivation provisions are so-called because gifting is seen as depriving yourself of assets or the income they provide. Any gifts above the limits are assessed as if they were invested for five years at relevant deeming rates. At present, deeming rates of interest are 4 per cent for the first $39,400 of total financial investments held by a single pensioner and the first $65,400 held by couples. For investments above these amounts the rate is 6 per cent.

The five-year limit also applies to the period before you receive the pension. This is to discourage people from disposing of assets before they retire, so they can scrape in under the social security assets test and qualify for a part pension and other social security benefits.

Dunn says a person who is $10,000 to $20,000 over the assets limit has a few tools at their disposal. They can gift assets, renovate their home, take a trip overseas or put money into a funeral bond.

"You can put $10,250 into a funeral bond and it's exempt from the assets test. A couple can purchase two individually owned funeral bonds of up to $10,250 each. However, if the funeral bond is owned jointly by a couple, they will be restricted to $10,250.

"If you're $50,000 or $80,000 over the [assets] threshold, then you pretty much have to bide your time until you progressively exhaust your resources, then apply for the pension," Dunn says.

Of course, if you're wealthy and not in need of the age pension, then you can give away as much as you like with impunity. Donations to charity are also considered gifts and subject to the same annual limits. But if you are not concerned about outliving your capital and you make sizeable annual income tax payments, Hutton says making charitable donations during your lifetime can generate significant tax deductions that would be lost with donations left in a will.

Anyone considering gifting substantial amounts of cash or assets to gain access to a modest fortnightly pension should take into account the time it will take them to recoup the money they give away. What's more, in order to earn a little extra a fortnight, you would forgo potential investment income on your assets.

Under the income test, singles can earn $138 a fortnight before their pension is reduced by 40c in every dollar earned, while a couple can earn $240 a fortnight before they each lose 20c in the dollar.

Hutton says there's a lot of confusion among parents and grandparents in retirement about social security and the tax implications of gifting.

One common myth is that you can transfer ownership of a holiday home or other property to a child for nothing or a nominal sum and avoid paying capital gains tax and stamp duty on the transaction.

"There's nothing to stop you transferring an asset to your children for a nominal sum but in these circumstances stamp duty and capital gains tax are payable on the market value of the asset," Hutton says.

These days super is a major asset for many retirees but Hutton says that after the recent drop in super balances, more people may find they are entitled to the age pension after all.

"It could be worthwhile for self-funded retirees to check the impact of equity and property market losses on their investable assets, as they may now qualify for a small pension which brings a number of other attractive benefits, such as health-care support and reduced rates," he says.