Many Australians choose to give money to family members. Parents may help with a house deposit, grandparents may assist with school fees, or family members may step in during tough times. These decisions usually come from the heart, not from spreadsheets.
While generosity is admirable, financial gifts can have long-term consequences. They can affect tax, Centrelink benefits, aged care costs, estate planning and even family relationships. Before handing over money, it’s worth thinking through a few key points.
Is it really a gift or actually a loan?
If you expect the money to be paid back one day, it is not a gift, it’s a loan. This matters more than many people realise. Informal loans between family members can cause serious conflict if circumstances change.
If the money is a loan, it should be clearly documented. This helps protect both sides and avoids misunderstandings later on.
Does who you give it to matter?
Australia doesn’t have a gift tax, and the person receiving the money usually doesn’t pay tax just because they received it. However, the relationship between you and the recipient still matters.
Gifts to spouses or de facto partners are often treated as part of a shared pool of assets, even if the money is held in only one person’s name. This means the gift may still be considered part of your assets if the relationship ends or if one partner passes away. This is especially important in second marriages or blended families, where gifts can unintentionally affect what children from previous relationships receive.
Gifts to adult children
Helping adult children is very common, but it can create issues later if not handled carefully. If gifts are not clearly recorded or explained in your estate plan, they can lead to disputes after your death.
Some family members may see earlier gifts as “early inheritances” and feel they were treated unfairly. What feels fair varies from family to family, but unclear decisions often cause tension and lasting damage to relationships.
Tax implications
As mentioned, there’s no ‘gift tax’ in Australia, but tax can still apply in other ways. If you sell assets such as shares or property to fund a gift, capital gains tax may apply. Even transferring assets directly, without liquidating, can trigger CGT. They’re often treated as if the asset was sold at market value.
Once the recipient owns the asset, any future income (such as rent, dividends or capital gains) is taxed in their hands. This may be beneficial if they are on a lower tax rate, but it can also affect their own tax position and government benefits.
Assets inherited after you pass away are subject to different rules to gifting, while you’re alive. Speak to one of our advisers for more information on this.
Centrelink and aged care impacts
If you receive Centrelink payments like the Age Pension, gifting rules apply. You can gift up to $10,000 per year, or $30,000 over five years, without affecting your benefits. Anything above this is still counted as your asset for five years.
Similar rules apply to aged care. Gifts made in the last five years may still be counted when calculating aged care fees, even if the money is gone.
Protect your own financial security
Helping others should never put your own financial wellbeing at risk. This is especially important in retirement, when income is limited.
Before making a large gift, make sure your retirement is fully funded, your emergency savings are healthy, and you can cope with unexpected changes to your health or finances.
Don’t forget to ask for advice
And of course, reach out to your financial adviser if you’re planning to give a financial gift to a loved one, we will walk you through all the considerations you need take into account.