National Seniors members often ask us how much they can give to their grandkids to buy a car, put down a home deposit or pay off their HECS debts.  

In theory, someone can gift as much as they like. But, it can have consequences for you financially. 

Why? Because gifting impacts pension entitlements. So, before you open your cheque book, there are a few things you will want to get your head around, including gifting limits, tax implications and the potential effect on your pension entitlements. 

Gifts can come in different forms, however, a gift in the finance world is defined as selling or handing over an asset with the expectation of either getting less than its market value or nothing in return. 

According to Services Australia, some examples of gifts are: 

• Gifting money for the purposes of a loan like a home loan.  
• Selling or transferring an asset that is now less than its original value, such as a car or property. 
• Depositing money into a trust fund that neither you nor your partner can control.  
• Paying tuition fees for your grandchildren. 

There are a few situations which would not qualify as 'gifting', such as the transfer of funds between a couple or the act of paying off a loan. 

If you are receiving the Age Pension or other benefits from the government, there is a limit to the amount you can gift your children. 

Whether you are a single person or a couple, the permitted amount is $10,000 in cash and assets over one financial year or $30,000 in cash and assets over five financial years. This is commonly known as the $10k and $30k rule or a ‘gifting free area’. 

If you are planning on gifting money, you will need to let Centrelink know within 14 days of when the money transfer occurred.

When you gift money to your children, the amount you give is classified as your allowable disposable income. Any amount that exceeds the gifting limit is then recorded as a deprived asset, which according to the Australian government means you have parted with an asset for less than its value. 

If you have gone over the allowable gifting limit, Centrelink will: 

• Include the amount in your asset test. This is a test that decides whether you qualify for the Age Pension and determines the rate it will be paid at.  

• Apply deeming and include the amount in your asset test. Deeming is a set of rules Centrelink uses to work out your income based on the financial assets you own. 

One potential downfall of deeming is that these rules assume the rate of income your assets earn, regardless of whether they do or do not meet that assumption. 

If Centrelink believes you may be earning an income on your gifts, it may negatively impact your future payments. 

While over-gifting can negatively impact your payments, gifting within the limits has the potential to improve your payments. 

Gifting can be a great way to reduce your assets and earn a slightly higher Age Pension.  

In any circumstance, it is best to consult with a financial advisor or accountant first before you start gifting money to your children. These professionals can give you a more tailored answer based on your circumstances.  

The short answer? No.  

According to the Australian Taxation Office (ATO), monetary gifts given out of love by relatives do not make up part of their assessable income and therefore does not have to be declared. However, if the money is stored in a savings account which earns interest, the interest will need to be declared.   

Shares and cryptocurrency are known as capital assets, just like property. 

If you have been gifted shares or cryptocurrency, you: 

• Only pay tax on any income produced by the shares or cryptocurrency. 

• may be liable for Capital Gains Tax when/if you dispose of the shares or cryptocurrency later. 

If you have gifted someone shares or cryptocurrency, you may be liable for Capital Gains Tax since you have disposed of a capital asset. 

If you inherit shares or cryptocurrency, you: 

• Do not pay tax at the time of receiving them. 
• Are liable to pay tax on any income produced by them. 
• May be liable for Capital Gains Tax when/if you dispose of the shares or cryptocurrency later.   

You can find out more about the Capital Gains Tax consequences of disposing of capital assets at the ATO Community website.

Before you or your partner make a gift, contact Centrelink to check if it will change your payment. 

Centrelink also has a free Financial Information Service to help you make informed decisions about your finances. 

With many older people wanting to help the next generation to get ahead in life, these gifting limits seem unreasonable. 

At National Seniors, we believe pension gifting limits should rise to encourage people to contribute to younger generations – especially those struggling to get into the housing market.

In our 2022 Budget submission to the Commonwealth Government, we recommended the gifting limits increase to reflect inflation, and then be indexed annually. 

For further reading: Services Australia, The West, Mozo, National Seniors Federal Budget Submission